The main part of Powergen’s UK business is energy trading, in which the company is able to maximise value from its generation assets. By being able to switch from gas to coal for generation, Powergen has reduced the effect of gas price rises. At the end of 2000, Powergen’s UK wholly-owned generation capacity was 17.8 GW.
The company’s retail business now includes the marketing of electricity, gas, telecommunications and other services to domestic and business customers. East Midlands Electricity (EME) was acquired in 1998. Combined heat and power (CHP) has continued to be a growth area for Powergen with the current portfolio being over 484 MW.Regarding renewable energy, Powergen Renewables is a joint venture with Abbott Group – a company with experience in the oil/gas business. Powergen Renewables has interests in 14 wind farms with a total installed capacity of over 78 MW. Current and Future Developments In order to provide flexibility in its generation business and to focus on core aspects of the whole electricity business, Powergen has been selling assets.
In January 2001, the 2,000 MW coal-fired Cottam power station was sold to London Electricity for 398m. This follows the sale of Rye House Power Station to Scottish Power in December 2000 and the sale of its metering business to Siemens in April 2000.In overseas markets, Powergen announced the decision to sell its German and Hungarian assets, as well as the sale of its Australian assets. Powergen’s CHP business has been adversely affected by the New Electricity Trading Arrangements (NETA) and in April 2001, this business was put up for sale and in December 2001, it was announced that ABB was interested in acquiring Powergen’s CHP business.
The company’s intention is to continue to develop its UK integrated energy strategy, making use of its variety of generation plant. At November 2001 there were over 3.4 million accounts. Globally, Powergen is now focusing on the UK and US markets.On 9th April 2001, E.ON AG of Germany announced a cash offer that by November 2001 was worth ï¿½10bn including debts. The acquisition of Powergen by E.ON was approved by Powergen shareholders in April 2002.
This acquisition will make E.ON a leading utility with operations in 19 countries and 30 million electricity and gas customers. Powergen is now part of a global company with activities in Europe and the US.Powergen is developing its gas supply and trading operations in the UK to complement its electricity supply business. Financial Results In the year ending 31st December 2000, Powergen made a pre-tax profit of 468m on sales of The UK industry has undergone a major structural change during the past decade and the market is now fully open to competition. The Utilities Act 2000 increases provision for the protection of consumer interests, a move that is supported by the regulatory requirement to separate distribution from supply activities. A new body, Energywatch, has been formed specifically to protect consumer interests and to give a forum for their concerns.
There is a market trend towards multi-utility companies with gas and, perhaps water or telecommunications activities as well as electricity.3. Physical environment The UK has good reserves of primary fuels which are used for the generation of electricity, mainly gas and coal. Although coal is not used as much as it used to be, the UK does have reserves which could be used if there were a shortfall in other forms of energy. There are substantial reserves of gas under the North Sea, although these will eventually decline and will need to be replaced by imports.4. Political and Legal factors Since privatisation of the UK electricity industry in 1990, there have been far reaching changes. Under the Electricity Act 1989 a new market structure was established: Ownership was transferred from state to private Employees were transferred to the new owners A competitive market situation was established Independent regulation was introduced.
The UK electricity industry was fundamentally changed by the 1989 Electricity, Act, which liberalised the market and established its present competitive structure. In 1999, the regulatory responsibilities of Offer (electricity) and Ofgas (gas) were merged to form the Office of Gas and Electricity Markets (Ofgem), and whose main tasks are to facilitate full competition amongst supply companies, operate a licensing system, advise on technical and quality issues, to monitor prices and address consumer issues.Further basic changes to the legal and regulatory framework of the electricity market were introduced through the Utilities Act 2000. This Act established a unified Gas and Electricity Markets Authority (GEMA) supported by Ofgem. The main function of GEMA is to protect the interests of consumers by promoting effective competition. A further consequence of the Utilities Act is the Formation of Energywatch, the Gas and Electricity Consumers Council (which replaces the Gas Consumer Committee and the Electricity Consumers Committee).
Energywatch is independent of the regulatory scheme and its main functions are to represent the views of consumers, provide advice and information regarding consumer matters to ministers and other interested parties. Under the terms of the Utilities Act, Energywatch has powers to investigate consumer matters. The Utilities Act 2000 also introduced standard licence conditions and the separation of distribution and supply aspects of the industry to ensure that customers have real choice of supplier.
New Electricity Trading Arrangements (NETA) were also introduced as a result of the Utilities Act. 5. Science and Technology. Technological developments affect marketing in two basic ways: new products and new processes. The faster pace of technological change creates both obstacles and opportunities that companies need to adjust to (Mccarthy et al, 1994).The UK electricity industry will be more dependent on imported gas in the future and the use of the Internet for energy marketing and transactions is increasing.Technically, one of the major trends is the move towards gas as a prime source of energy for power generation. This provides a cleaner and more efficient fuel than coal or oil.
Although until recently, gas has had a distinct advantage as a cost-effective energy source.6. Socio-cultural factors There has been a marked reduction in the number of employees in the UK electricity industry since privatisation. In 1989/1990, there were 150,548 employees at privatisation, a total which had reduced to 104,961 in 1994/1995. During the next 5 years, there was a further massive reduction in number to reach 59,563 in 2000/2001. Over the decade 1989/1990 to 1999/2000 the numbers had reduced to 42% of the total at the beginning of this 10-year period.
This reduction has been the result of management efficiencies, savings resulting from companies moving towards multi-utility operations and outsourcing. 1. Demographics trends are those concerning the human population in terms of various factors including size, density, location, gender, race, occupation, age and generations and household incomes. Demography is a very important environmental factor that affects marketers and influences the direction of an organization’s marketing strategy (Kotler et al, 2001).