Green has proven to be gold in the coronavirus pandemic, at least when it comes to power generation.

Europe's largest renewable utilities escaped the early stages of the crisis largely unscathed during the first quarter, reporting solid profits and little business impact while some of their dirtier and more diversified competitors suffered.

Although the period included only the first glimpse of nationwide lockdowns, which continued throughout April and into May, Denmark's Ørsted A/S, Spain's Iberdrola SA and other renewable-focused utilities showed greater resilience in their financial performance, although some companies with retail arms and other operations still registered a hit.

"Renewable developers remain more resilient than conventional power generators, especially nuclear and coal, and energy suppliers," Elchin Mammadov, an analyst at Bloomberg Intelligence, said in an email.

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Mammadov said earnings were broadly spared across the sector in the first three months of the year, with "the brunt of the virus impact" set to register during the second quarter due to lower power demand and in 2021 and 2022 as a result of reduced forward prices.

Green resilience

Most of the utilities' wind and solar farms are under long-term contracts with either governments or private off-takers, which is why they "have demonstrated a higher degree of resilience" in the crisis so far, said Pierre Georges, sector lead for EMEA utilities at S&P Global Ratings. Thermal and hydro power plants usually have greater exposure to wholesale prices.

As power demand has dwindled, green generators have also benefited from priority access to the grid in many European countries, which has forced thermal power plants — particularly less efficient coal- or gas-fired units — to switch off first. Combined with growing portfolios and favorable weather conditions in some geographies, this meant many utilities saw higher results from their renewable operations during the first quarter and could continue to do so.

"Our growth has been focused on long-term contracted renewables, wind and solar, at competitive prices, as well as regulated networks," EDP CEO António Mexia said on a May 7 call after the utility reported higher profits that were buoyed by a recovery in hydropower volumes but also increased earnings from its wind and solar farms, excluding the effect of disposals.

"These are businesses which have little exposure to volatility in energy prices and demand," Mexia said.

At Iberdrola, Chairman and CEO Ignacio Galán said secure revenues from regulated networks and investments in wind and solar power will more than make up for lower demand and prices in its generation and supply business during 2020. Ørsted similarly saw a jump in earnings during the first quarter due to higher wind production and increased capacities.

While both utilities confirmed their financial targets for the year, competitors such as Electricité de France SA, Engie SA and Centrica PLC have suspended dividends and canceled earnings guidance as they wait out the financial impact of lower power demand and a spike in bad debts, among other risks.

EDF slashed its nuclear production targets on the back of lower demand expectations and suspended all financial targets for 2020 and 2021. The company, which runs all of the nuclear reactors in France and the U.K., provided little information on a May 14 earnings call about how it will respond to the financial impact.

Meanwhile, Engie is already cutting spending and speeding its exit from less profitable markets as the company's client solutions, supply and power plant businesses are all suffering effects of the pandemic.

Growth outlook

Grid operators are also insulated from most of the negative effects, with utilities such as E.ON SE in Germany and Terna - Rete Elettrica Nazionale Società per Azioni in Italy, as well as integrated groups such as Iberdrola, pointing to mechanisms that will allow them to recoup lost revenues in the coming years.

Neither were renewables entirely spared by the drop in demand and prices. Norwegian state utility Statkraft AS booked large impairments against some of its major wind projects in the Nordics since current market conditions have lowered the wind farms' expected future revenues, for example. But for most green power generators, the effects were negligible.

Ratings' Georges said what may be even more important than their short-term revenue security is that wind and solar operators will also be able to maintain growth for the coming years. Utility executives pointed to the same theme, highlighting how green commitments by the EU, for instance, promise to make renewables a large part of recovery programs.

"It seems likely that many governments will seek to tackle the COVID-19 crisis and the climate crisis at the same time through comprehensive, future-oriented investments in sustainability," Ørsted President and CEO Henrik Poulsen said April 29.

"We will see a temporary decrease in global power consumption during the crisis and a subsequent recession, and we will likely also see some delays to auctions and permits, but it will not materially change the long-term growth of renewable energy," Poulsen said.