View the full Brand Finance Utilities 50 2019 report here
State Grid, China’s state-owned power company that provides energy to 1.1 billion people, continues to be by far the world’s most valuable brand in the utilities sector, according to the latest report by Brand Finance, the world’s leading independent brand valuation consultancy. Breaking the US$50 billion mark following 25% growth year on year, the brand value of the Beijing-headquartered company totals US$51.3 billion, over four times more than the second-placed EDF.
As well as being the dominant force in its domestic market, State Grid has broadened its presence in external locations while also seeking private investors for its ultra-high voltage grid.
In a sector committed to energy efficiency, innovation, and harnessing big data analytics, growth has been robust throughout the rankings. The top 10 achieved an average brand value growth rate of more than 20%. The sector is consolidating and in 2018, power and utilities mergers totalled some US$127 billion, with around half coming from Europe. The market is also undergoing reforms, from the opening-up of the retail segment to tighter tariff margins to a developing appetite for green energy.
Richard Haigh, Managing Director, Brand Finance, commented:
“With reforms in progress and a growing awareness of the consequences of climate change, the utilities sector could be on the brink of a more aggressive shift towards renewables and sustainable energy sources. Those companies that embrace the change in emphasis and successfully adapt their brand architectures and brand strategies will emerge as the leaders in the industry.”
French brands on the podium
France’s EDF remains the second most valuable utilities brand, rising by 23% to US$12.1 billion. EDF’s CAP 2030 strategy championing low-carbon solutions and energy efficiency highlights the changing dynamics of the sector.
Another French brand to register solid growth, Engie, grew brand value by 23% to US$10.3 billion, getting narrowly ahead of Italy’s Enel and jumping onto the podium in third place. Engie recorded strong commercial performance in 2018 with sales of energy solutions and renewable contracts seeing 9% and 17% growth respectively.
American movers and shakers
The fastest growth in brand value this year was achieved by US-based DTE Energy. Up 63% to US$1.5 billion, the brand climbed 20 places from the bottom of the table to claim a top 30 position. DTE is looking to double its renewable energy capacity by the early 2020s and aims to close its last coal-burning power station by 2040. The company is also offering its customers a mix of energy sources, including wind and solar.
Testament to the dynamic nature of the North American utilities market, six other players from the US have entered the table for the first time this year: Eversource (37th), CenterPoint Energy (41st), WEC Energy Group (42nd), ppl (46th), Entergy (47th), and FirstEnergy (49th).
Closely behind DTE in terms of brand value growth, Japan’s Kansai increased 60% over the past year to US$2.2 billion. The country’s largest privately-owned utility company rose through the ranks from 30th in 2018 to 19th in this year’s report.
Mixed results in Britain
On the opposite end of the growth ladder, two prominent British brands recorded the highest declines in the Brand Finance Utilities 50 ranking. With increased competition in the market, National Grid and British Gas fell by 25% and 20% in brand value since last year. National Grid is currently going through a major transformation process but could be a nationalisation target if the UK government changes. British Gas has been through a cost-cutting programme but is still losing customers at a worrying rate. More positively, however, the most valuable British brand in the study, SSE, improved value by 21% to US$4.4 billion and went up a place, beating Spain’s Iberdrola to 7th rank.
There were very few brands that lost value among the top 50: Veolia (-11%), Vattenfall (-10%), and two Spanish brands – Endesa (-8%) and Naturgy (-5%).
Sturm und Drang in Germany
In Germany, in an attempt to adjust to changing market conditions, companies like RWE and E.ON have been broken-up to create more narrowly-focused brands. E.ON, for example, is concentrating on networks, Innogy on renewable energy, while Uniper on fossil fuels.
Experimenting with asset ownership and rebrands seems to be paying off, as – compared to other European players – German brands are in the ascendancy, with the country’s most valuable utilities brand, Innogy, growing by 32% to US$5.4 billion on the back of improved brand strength, Uniper breaking into top 10, and E.ON and EnBW also rising through the ranks following strong brand value growth by 24% and 22% respectively.
The period of Sturm und Drang in the German utilities market continues, and it will be interesting to see what the planned asset swap between RWE and E.ON will bring for the Innogy brand and whether the market will see more M&A activity in the future.
Richard Haigh, Managing Director, Brand Finance, commented:
“As the deal progresses, the longevity of the Innogy brand is called into question. Although E.ON might be the acquiring party, and therefore the apparent brand choice, our consumer equity research indicates that Innogy is unencumbered by the ill-will towards the more established brands, and so commands higher NPS, Reputation, and Innovation scores.”
Aside from calculating overall brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. Alongside revenue forecasts, brand strength is a crucial driver of brand value.
According to these criteria, South Korea’s KEPCO became the strongest utilities brand this year, with a Brand Strength Index (BSI) score of 85.5 – an increase of 3.3 points that took the brand above Saudi Electricity Company (82.5). KEPCO, the only AAA rated brand in the sector, has made significant investments outside its home market, notably in the Middle East, Europe, and Canada, and has acquired a renewable power plant in the Philippines.
Tenaga Nasional is one to watch
The only entrant from South-East Asia, Tenaga Nasional has stunned with this year’s brand performance and will certainly be a brand to watch in the years to come. As Tenaga is implementing its strategic plan, “Reimagining TNB”, in anticipation of local energy market reforms and decentralisation, its brand value has grown by 53% to US$2.5 billion, while brand strength was up by eight points to 81.1, the highest increase across the top 50.
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 50 most valuable utilities brands are included in the Brand Finance Utilities 50 2019 ranking.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights, more information about the methodology, as well as definitions of key terms are available in the Brand Finance Utilities 50 2019 report.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Brand Finance is a chartered accountancy firm regulated by ICAEW and also the first brand valuation consultancy to join the International Valuation Standards Council (IVSC).
Data compiled for the Brand Finance rankings and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes over 100 reports which rank brands across all sectors and countries.
Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.