World Energy Markets Observatory: Transformation

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Recasting the transformation agenda to enable growth and advance energy transition efforts in the “new normal”

As the energy sector grapples with the effects of the global pandemic, a transformation strategy based on the shift to (energy) services is no longer the most viable growth opportunity. Organizations operating in this so-called “new normal”— one marked by financial pressure, market volatility (which requires increased agility), digital transformation acceleration and the prioritization of energy transition—are required to revise their strategy and positioning to address these new challenges and shifting priorities.

This year’s World Energy Markets Observatory (WEMO), Capgemini’s annual thought leadership and research report that tracks the development and transformation of energy markets around the world, shows a landscape much changed as the most advanced organizations rally around the common priority of energy transition. In this year’s report, we highlight this shift in the transformation strategy through a series of examples, two of which we review here to demonstrate how organizations can transform at speed and at scale in a highly disrupted and volatile environment.

Ørsted: The shift to wind pays off

Ørsted, now a Danish multinational power company (formerly the state-owned Dansk Olie og Naturgas A/S (DONG), is one of the industry’s most prominent reinvention stories. Over the past ten years, the company has divested from its oil and gas roots to become one of the world’s largest offshore wind producers.

Our analysis indicates that Ørsted’s decision paid off financially. In the past 36 months, the company’s market cap more than doubled from less than $20B in November 2017 to more than $50B in July 2020. The company went from being a hyper local national oil company (NOC) to a renewable player with about the same market capitalization as an O&G major, such as BP.

Today we see signs of continued innovation and shifting priorities to enable the organization’s transformation:

  • January 2020: Ørsted opened a United States Innovation
    Hub in Providence, Rhode Island as part of its commitment
    to building an offshore wind industry supply chain in the
  • March 2020: Ørsted announced funding nearly $13 billion
    worth of investments in projects in Taiwan in 2020 amid
  • August 2020: Ørsted divested its Danish power distribution
    business (Radius), residential customer business and city
    light business to SEAS-NVE.

Engie: Shifting business priorities in the COVID era

Another recent example of shifting business priorities comes from Engie, a French multinational electric utility company. Over the course of 2020, the company has made a series of decisions that signal shifting priorities (networks and renewables) and a new growth strategy. Now under the responsibility of renewed management, the organization has taken several bold steps to reorganize and reprioritize in order to embrace sustainability and address many growth challenges.

  • H2 2019: Engie creates Ocean Wind, a joint venture with
    leading renewable operator EDP (Energias de Portugal)
  • January 2020: The company exits the U.K. domestic supply
    market after reaching a deal with Octopus Energy
  • May 2020: The company announces that it is considering
    selling businesses including industrial and nuclear plant
    maintenance specialist, Endel, in order to focus on its most
    profitable or promising segments.
  • August 2020: Engie announces that it will review
    business opportunities with its Scottish construction and
    regeneration business. The company also announces the
    desire to sell its Energy Services unit, which includes Suez
    water and waste management.
  • Q4 2020: The company is expected to sell its shares in
    Environmental Energy Services leader, Suez Environment.

Charting the course: Determining new areas of investment and demonstrating the ability to scale

As companies emerge from the COVID-19 pandemic, their growth strategy will be anchored in the idea of energy transition. In this year’s WEMO we urge companies to think of the transformation journey in three main steps:

1. Strategy: Identify one or more key areas of
investment, aligned with the company’s renewed
sustainable mandate

  • Leverage innovation.
  • Identify ecosystems partners to realize the vision.
  • Invest in critical technologies to accelerate execution
    and facilitate operation, most notably data, platforms
    and artificial intelligence (AI).

2. Divest: Sell off stranded assets and eliminate noncore
activities for the future

  • Formulate a sound divestment strategy.
  • Sell non-core assets to raise cash for green
    energy investments, technology upgrades and
    grid modernization.
  • Embrace – again – operational excellence to
    boost profitability.

3. Scale: Execute at speed and scale in order to lead
the competition

  • Invest across the business and dedicate necessary
    resources, including people, to the cause.
  • Form differentiating partnership agreements to secure
    assets and outpace competition.
  • Demonstrate a scale-up capability.

To learn more about transforming in the wake of COVID-19, download a copy of the 2020 WEMO report or reach out to one of our authors today.

A perspective from our Capgemini expert:
Philippe Vié, Vice President and Sector Head for Energy, Utilities and Chemicals

To review the full findings from the22nd Edition World Energy Markets Observatory, download a copy of the report today. Download Now

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