Utilities companies


    Utilities companies are companies which offer essential utilities such as electricity, gas, water and sewage treatment, including the large integrated energy suppliers.

    Whether utilities are privately or publically provided (or a combination of the two) differs from country to country, but activity in the sector is usually regulated by dedicated bodies or commissions.

    How do utilities companies operate?

    These companies have to maintain complex infrastructures in order to provide utilities to their customers. This is extremely expensive to do and because of this, they are often operating with a significant amount of debt.

    This debt means that any interest rate changes will have a direct impact on company performance. If interest rates rise, debt payments will increase and leave the companies with less capital to re-invest. However, if interest rates fall, then debt payments will decrease and the utilities companies will be better off.

    How does demand for utilities change with the economic cycle?

    Utilities companies are generally considered to be defensive (or ‘non-cyclical’) companies, meaning that demand for utilities is fairly consistent regardless of whether the economy is in a boom or bust phase. In tough economic times, people may decide not to buy a new car or not to go on holiday, but they will still need power and water.

    This stability can make utilities companies attractive to investors looking for a relatively safe investment as part of an investment portfolio.

    Where can you find information about utilities companies?

    You can monitor the financial press to find out the latest information about utilities companies.