Interviewing Giuseppe Sangiovanni on the importance of a good deal (& input on the future of the M&A activity in the energy sector)

Giuseppe thank you very much for your time, your presentation at the MAWW convention was very interesting.

 

As the leader of the Energy, Environment & Cleantech industry group how important do you think the IG Reports are in terms of marketing and reaching new clients?

We consider the reports as the key deliverables and marketing elements of the IG, their primary function is to represent the quality of the IG in terms of people, work, knowledge, professionalism.

The quality is in the format and the contents: both are equally important (aesthetics principle: format reflects content) These reports require a lot of work and at the end of the day when they are finally published… …nobody reads them!

 

What do you consider to be the most beneficial aspects of these reports?

We print the reports (hard copies), and bring them to meetings with clients, prospects, partners and counterparts(funds), they look aesthetically pleasing and can be picked up and looked at by prospective clients, rather than just another email with a report that just doesn’t get read.

 

What are the main challenges in producing these reports?

The drafting requires detailed research and analysis of the available information from reliable sources, it also requires gathering information from other IG members on elements related to their countries or experience. I have found that a key challenge was gathering M&A references: tombstones need to be standardized and made easily available, editing requires the cross-checking and support from someone with proficient English skills and last but not least… publishing! The document must be adapted for publishing (layout issues, consistency, pictures…)

 

Can you tell us a bit about your last general report?

Our last report was about the low-carbon energy transition and the traction it will get from the coronavirus crisis.

The coronavirus pandemic is the biggest shock the energy sector has seen since the Second World War, and it could have a devastating impact on demand especially for coal, oil and gas, according to the International Energy Agency (IEA). Energy demand could plunge 6% this year, the largest in 70 years in percentage terms and the largest ever in absolute terms, equivalent to losing the entire energy demand of India.

On Monday 20th of April 2020 for the first time in history, the WTI crude price was negative closing at -$37.63/bbl. The crash was primarily caused by the collapse of demand from lock-down measures implemented around the world and high levels of storage utilisation in the US.

While the economic slowdown could delay investments and projects in renewables and clean technologies, in fact, lockdown measures have been driving a major shift towards low-carbon sources of electricity including wind, solar PV, hydropower and nuclear.  Scope deals will gain momentum vs scale deals in the context of the low-carbon energy transition in particular among oil & gas market players.

 

What does the future of the energy sector look like in terms of M&A

The animal source of viruses such as Covid-19 raises major questions on the role played by interactions between humans and the environment: growing consensus shows that climate change consequences increase the probability of SARS-CoV-2 infecting humans and potentially for other viruses to trigger new pandemics.

A major implication of the crisis will be the acceleration of investments, financing and dealmaking towards low carbon energy transition.

M&A: shifting from deals based on scale economics rationales (scale deals) to deals based on scope orientation. This was already visible before the pandemic with the disruption of old business models and the need for new faster-growing businesses.

Covid-19 had a dramatic downward impact on energy demand and temporarily on CO2 emissions, 1Q20 there was a drop in global energy demand of 3.8% vs 1Q19 and it could lead to a 6% drop in annual energy demand, due to this energy market players are being hit twice, first by lower demand for their products, including oil, gas, coal and electricity, and again by lower prices of these products.

 

Thanks for this interview, Giuseppe.

 

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