INTERVIEW
TGR Research Client :
M. Frédéric Bordes
Financière ACG
Paris
Expert :
M. Thierry Guillet
Compagnie Générale d’Electricité
Development Director
Paris
INTERVIEW :
Q. TGR Research Client :
Hello. We’re trying to diversify our investments in renewable energy resources in France. To do this, we would like to get your views on a number of issues that we think are important.
Many companies offer significant portfolios of wind energy projects currently under development. To what extent are these likely to see the light of day and how far should they be considered valuable prospects?
A. TGR Network Expert :
We know that a project typically takes between 3 and 5 years to develop. The time factor is an absolutely fundamental aspect of any project analysis. Moreover, an average of 60% of applications for planning permission in our industry are successful so this factor needs to be borne in mind to get a more accurate picture of the portfolio’s feasibility.
Finally, the establishment of wind-power development zones (ZDE or Zones de Développement de l’Eolien) in France since 2007 clearly requires a more detailed analysis of portfolios, as this measure is likely to cause the 60% return I mentioned earlier to drop to 50%. This is a very personal view. It’s based on the various projects and portfolios that I’ve analysed in recent years. So, in my opinion, this portfolio should be reasonably valued at between €150K and €200K / MW.
Q. TGR Research Client :
Project costs are around €1.2-€1.3 MM / MW. Do these figures ring true to you ?
A. TGR Network Expert :
No. Clearly, these are costs from 2 to 3 years ago, maybe even before that. Today, given the increase in the sale price of developed projects (€200-€300/Kw)and, more importantly, the increase in the price of turbines (+30% approximately in 2 years), the costs for a completed project are more likely to be between €1.5 and €1.6 MM / MW. But the fact remains that it’s difficult as well as ambitious nowadays to try to achieve lower costs. Those who tell you that it’s possible are promising too much for my liking. Then again, this is very much a personal assessment.
Q. TGR Research Client :
Based on your experience, are all the wind-power development projects in France profitable ?
A. TGR Network Expert :
It’s very hard to say. The legislator doesn’t take account of the expected profitability of a project in order to authorize it. So there are no certainties here. With the July 2006 tariff, France is placed somewhere in the mid-range of European tariffs, with substantial wind resource in some regions (e.g. the southeast, the northwest). So you could say that the present tariff allows a satisfactory return on investment for projects with the right level of wind resource, i.e. over 2,200 h/year approximately as a P50 average. That’s the wind level below which a project is unlikely to be sufficiently profitable (< 6% ROE). Furthermore, it’s worth noting that, over the past 3 years, the actual wind in France has been below the forecasts. They’ve been reaching on average the figures estimated in P75 energy production values. I’m not in a position to say whether this is about climate change but if this phenomenon were to be confirmed, we’ll have to be prepared for more upheavals in the forecasts.
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TGR Research Client :
Mlle Sophie Saunier
Myriadis Private Equity
Geneva
Expert :
Mme Anne Dupré
Hotels Chain International
Director of Marketing and Web Marketing Development
INTERVIEW :
Q. TGR Research Client :
We’re planning to invest in the tourism industry, specifically in its online segment. For this reason, we would like to check current and future trends in the e-tourism market, particularly in terms of distribution, services and prospects.
First of all, we’d like to find out more about key figures in the sector.
A. TGR Network Expert :
We can certainly see that the online market should reach 42% between now and 2008. Strong margins of growth, in Europe and Asia in particular, are clearly to be expected from what I see.
I think that, in general terms, this large share of the business is divided between producers like Club Med and intermediaries like Expedia. Club Med, for example, is very much in favour of direct sales to avoid the layers of commissioning or infrastructure. Besides, when you consider that two-thirds of travellers in Europe today use the Internet either to get information or make bookings, you can well imagine the impact of these commissions on the gross margin.
At any rate, from what I see happening on the ground, it seems obvious to me that everyone wants to have a direct link to the end customer during the sale. This is going to be a key factor for the future, I’m convinced of it. If you want proof of this, you only have to look at the loyalty programmes developing among distributors who want to secure customer loyalty and maintain this link.
Q. TGR Research Client :
What, for you, is badly managed distribution?
A. TGR Network Expert :
Distribution that gives rise to commissioning is worthwhile in order to reach markets that are either saturated or awkward to penetrate. On the other hand, it’s more profitable to maintain sole ownership of these sums to promote your services in more dispersed, less complex markets. Distribution is badly managed once it no longer follows these rules.
Q. TGR Research Client :
In terms of services, we hear a lot of talk about dynamic packaging. Do you think this is going to take off? Who are the main players in France, in your opinion?
A. TGR Network Expert :
I think that online sales of this type of product are still quite modest. I also think that there are very few French players in the market. Go Voyages is possibly one of them. Its global strategy has been the result of a white-label development to extend its market reach in terms of the volume of web traffic. The package that combines airfare plus hotel still involves delivering net rates below the market price for consumers.
To my mind, there’s no point in developing this kind of activity if it doesn’t fall within the framework of a more global product, one that really stands out from the rest. We see every day that the current battle revolves around the search for value-added content for the customer. Local contents and services linking up to the real world: that’s what will make all the difference in the future. You’ll see...
Q. TGR Research Client :
And where does the Web 2.0 fit into all this ?
A. TGR Network Expert :
It’s attractive for the producers who want to enhance their databases. It can be more widespread among distributors who don’t take risks vis-à-vis the products sold. In this way, it improves their sales thanks to an openness that people perceive as well-informed independence.
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TGR Research Client:
M. Nelson Tong
World Media Finance Company
Paris
Expert :
M. Nils Demathieu
Neumann Network International
Development Director
Paris
INTERVIEW :
Q. TGR Research Client :
How are people who usually rent DVDs reacting to Video On Demand (VOD)?
A. TGR Network Expert :
That’s where you see things changing. People who traditionally rent DVDs have to adjust to new practices.
For example, the VIDEO FUTUR group, which combines Cinebank, Video Futur and Video Pilote, is currently planning its answer to VOD. This new service will be known as MOOVYPLAY. The project, which is confidential at the moment, will be trialled in 30 stores from September. It will be launched nationwide from the beginning of 2008.
So it’s going to tell us a lot about how the market actors are developing.
Q. TGR Research Client :
In your view, why isn’t the VOD market growing more rapidly?
A. TGR Network Expert :
I think there are several factors to be considered but let’s say that two in particular stand out.
The first is due to the change in mentality. A few decades ago, the theory was that it took a generation, or about 25 years, for something to become customary practice. You can clearly see that it takes a lot less time nowadays. The iPod, for example, has seen an extraordinary boom in less than 5 years. But traditional television consumption is very well established in people’s habits and interactivity is a brake that shouldn’t be obscured.
The other main reason relates to the content itself. To broadcast content online – and this is true for music as well as TV and cinema – you have to ensure that you’ve got the copyright owners’ prior consent. They themselves then have to check things out, which is no small matter when there are several co-producer partners... This is particularly true of programmes that were made a few years ago, at a time when these rights just didn’t exist... This topic is actually right at the core of my business and I’m extremely well placed to confirm that these ‘processes’ are highly complex and very slow to implement.
Q. TGR Research Client :
Let’s take a look now at mobile media consumption. What’s your view of this specific sector?
A. TGR Network Expert :
Media consumption via mobile phone is booming right now. In the early years of the decade, the ring-tone phenomenon opened up the market. The “Crazy Frog” example speaks for itself. The ring tone, developed in Germany originally, became an international hit in more than 20 countries.
Now, the second phase is about to be completed. This time, it’s video. Sales of 3G terminals are rising rapidly and they’ll be in general use in the very near future.
One indicator highlights this change: Nielsen, the audience-ratings measurement company, is launching Nielsen Wireless to measure media consumption via mobile phone.
This service will supply information about the most popular media among mobile users to operators, but also to advertising agencies and entertainment companies. It will be launched first in the US in July and then in Europe in September.