The brand value of the world’s 500 biggest companies, listed in the Brand Finance Global 500 2020 ranking, could fall by an estimated US$909 billion as a result of the Coronavirus outbreak.
Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories – limited impact (0% brand value loss), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the severity of enterprise value loss observed for the sector in the period between January and March 2020.
Brand Finance has calculated that the utilities sector is likely to suffer limited impact as a result of the COVID-19 pandemic, with a 0% expected brand value change. The sector is largely sheltered as a result of the very nature of its operations with these brands providing an essential service to the global population, thus demand should not falter considerably. This, paired with the regulated structure of the sector and longer-term contracts, should ensure these brands have access to adequate supplies and equipment to continue operations. Nevertheless, utilities brands could still encounter problems with their supply chains and with weakened demand in the commercial and industrial segments.
Richard Haigh, Managing Director, Brand Finance, commented:
“The utilities sector is one of the few that should escape the far-reaching damage of the COVID-19 pandemic as the global population continues to rely on its services. This does not mean though that utilities brands are not facing their own battles, from increased concern around their operations, to the global shift towards clean energy. We are already witnessing some brands embrace this change with the introduction of their own clean energy goals, which will no doubt fare them favourably in the long run.”
State Grid powers ahead
China’s State Grid has retained the title of the world’s most valuable utilities brand for the third consecutive year, according to the Brand Finance Utilities 50 2020 report, after recording a 11% brand value increase to US$57.0 billion. Supplying power to over 1.1 billion people and covering 88% of Chinese national territory, State Grid is the largest utilities brand in the world. Its sheer size and dominance are reflected by the significant gap ahead of EDF (down 2% to US$11.9 billion) in second and Enel (up 14% to US$11.8 billion) in third.
The brand is increasing its focus on CSR initiatives, through funding charities and committing to poverty alleviation. State Grid has also supported China’s push to become a greener, more environmentally friendly nation, with a clear target to be the advocate and leader of Ubiquitous Electric Internet of Things.
The five further Chinese utilities brands in the ranking are performing similarly as solidly, with ENN (up 40% to US$2.1 billion) and Datang Power (up 36% to US$1.9 billion) as the third and fifth fastest growing brands in the ranking respectively.
US brands dominate
The US dominates with 20 brands claiming a position in the Brand Finance Utilities 50 2020 ranking, including three new entrants: Republic Services in 46th (brand value US$1.3 billion); Calpine in 48th (brand value US$1.3 billion); and AES Corporation in 49th (brand value US$1.1 billion). American utilities brands often operate on a regional level in contrast to their European counterparts, which have a more consolidated model. This is reflected by only 14 European brands featuring in the ranking.
Volatility in European market
While the impact from Covid-19 on European utilities may be limited, it will be vital for these brands to continue to reliably provide supply security. While the market has seen significant M&A activity in the last few years, this is likely to see a slowdown given the economic uncertainty in the global economy.
Several brands are also concurrently seeing changes to their top management with CEOs stepping down, including Engie’s (up 7% to US$11.1 billion), Fortum’s and Centrica’s – adding to the uncertain operating environment.
All three German brands in the ranking are the fastest falling this year: EnBW (down 19% to US$1.4 billion); Innogy (down 17% to US$4.5 billion); and E.ON (down 11% to US$3.0 billion).
All three brands’ forecast revenues are lower than in previous years, thus damaging their brand values. As with other utilities brands throughout the EU, EnBW, Innogy and E.ON are negotiating the EU’s decarbonisation efforts, which have led to brands abandoning or reducing their nuclear and coal arms for clean energy sources – potentially causing a drop in forecast revenue. EnBW doubled its offshore wind capacity in Europe in 2019, however, and has set its sights on expanding its wind operations on both coasts of the US, a key market for the sector.
KEPCO is world’s strongest utilities brand
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, customer familiarity, staff satisfaction, and corporate reputation. Alongside revenue forecasts, brand strength is a crucial driver of brand value. According to these criteria, KEPCO (up 11% to US$7.5 billion) is the world’s strongest utilities brand with a Brand Strength Index (BSI) score of 87.4 out of 100 and a corresponding AAA brand strength rating.
KEPCO prides itself on being one of the world’s leading brands in spearheading the shift and expansion towards the use of safe and clean energy, in its bid to reduce carbon emissions and tackle the global climate change issue. The South Korean brand has strived towards its CSR initiatives as part of its wider goal to become a sustainable global utility brand and has been recognised internationally for its efforts.