S&P Global Ratings has today published the latest edition of Infrastructure Finance Outlook, the newsletter bringing together in-depth sector analysis and research from across the Infrastructure practice.
This edition focuses on the energy transition and the growing importance of ESG, as well as how the COVID-19 pandemic has accelerated existing trends in the sector. The economic disruption caused by the pandemic is also likely to prompt a new cycle of sustainable infrastructure investment, especially now that the outcome of the US election has become clear.
Read the full newsletter here.
The COVID-19 pandemic has had a profound impact on the energy sector. Writing in Euractiv, Simon Redmond and Elena Anankina, Senior Directors at S&P Global Ratings, analyse the contrasting effects of the outbreak on the oil and natural gas sectors, and the implications for the wider energy transition.
Oil has suffered the most pronounced short-term impact of all energy sources, with demand falling by over 20 million barrels a day in March and April 2020 alone. On the other hand, gas has remained relatively resilient to the immediate impacts of the pandemic.
The downside for gas, rather, is expected to be longer term: its role as a “bridge fuel” is set to be shortened by an expedited transition to renewables. And, while oil demand has taken a short-term hit, its long term trajectory is set to be largely unchanged. The full article, in Euractiv, can be found here.
A lack of economic diversification, coupled with a sometimes-lower availability of external funding sources, means that a decreased oil and gas prices and shifting investor appetite could contribute to deteriorated creditworthiness for some GCC banks. That’s according to S&P Global Ratings, in its recent report mini-series exploring the credit risks that the transition towards cleaner energy sources could have on the GCC’s banks and overall economy.
While GCC economies have somewhat diversified away from oil since 2012, S&P Global Ratings’ hypothetical long-run stress test suggests that the average rating of a Gulf sovereign could fall by two notches from ‘BBB+’ to ‘BBB-’ if oil prices fall below US$40 by 2040, highlighting that the current pace of economic and fiscal diversification is insufficient to counter the decline in oil prices.
Following outreach by Moorgate-Finn, the research was covered by Trade Arabia, ZAWYA, AMEInfo, and The Peninsula Qatar.
In September 2018, now-outgoing California Governor Jerry Brown signed SB100: a mandate to keep California on a path to deriving 100% of its power from clean sources by 2045. In an article for Utility Dive, S&P Global Ratings’ Michael Ferguson explains how this may mean significant credit implications for the state’s power generators.
Undeniably, SB100 is a boon for renewable energy assets in California. But it’s a mistake to consider these benefits to be mutually interchangeable — instead some assets stand to benefit more than others.
Ferguson writes: “While SB100 will naturally benefit existing solar and wind power, less obvious is by how much and when. Both asset types represent most renewable installations in the Golden State. Yet they are by no means immune from risk.”
Read the article here.
On the recent November ballot, Colorado’s citizens voted against measures that would have changed the nature of the state’s oil and gas development. Before the vote’s defeat, S&P Global Ratings published a report outlining the possible risks for energy exploration and production (E&P) companies, should the proposal be made law.
Proposition 112 would have required that E&P companies extend well setbacks (the permissible distance between a wellhead and surrounding structures) from 500 feet to 2,500 feet. This distance would have, in effect, rendered 85% of the state unusable for oil and gas drilling. By some estimates, this could have decreased the state’s GDP by some US$26 billion annually by 2030.
Michael Grande, director, S&P Global Ratings, said: “Passage of Proposition 112 is clearly a credit negative for the energy companies we rate, and it will affect some companies more than others.”
Following Moorgate’s outreach, Upstream (behind a paywall), Oil Voice, and Oil Gas Journal covered the news.