Rising Energy Costs and Security

Economic development is dependent on sufficient sources of reasonably priced energy - oil, gas, electricity, coal, and others. The availability of these resources is on the minds of many, from consumers to political leaders to company executives. In the past years, we have been experiencing a substantial rise in energy input prices, however this pattern changed in 2008 with the sector marked by unpredictable and volatile prices especially in respect to oil. Whether it’s the result of simple changes in patterns of supply and demand, or structural shifts in the energy industry, businesses can often feel they have little protection against dramatic fluctuations in the wholesale price of energy, which are quickly reflected in prices for customers. Surprisingly, the results of our twelfth annual CEO survey showed that metals CEOs were less concerned with energy costs that all CEOs surveyed.

Energy is increasingly emerging as a new business opportunity for non-energy companies. Metals companies have always had energy as a cost centre, through their own power generation and third party procurement. Now more are seeing energy production evolve into a profit centre, especially where companies can generate from renewable sources and gain from renewable energy premium. However co-generation of power is a delicate balance between capital cost and the price of energy. Once again, emerging markets, particularly China, which offer the bonus of significantly cheaper power supplies, offer an opportunity for metals companies to manage this issue.

How PwC can help you

PwC has been providing professional services on energy issues form many years and can help you to address this challenging issue. We have a global Energy Utilities & Mining (EU&M) practice that works hand in hand with our global metals team to provide seamless advice on all areas.