Are rising energy, costs and inflation worrying Portuguese CEOs?

The escalating conflict in the Middle East is reigniting concerns among the CEOs of Portugal’s leading companies as they watch the effects of the crisis unfold on stock markets, the energy markets and the global economy.

Although fall out from the war in the Middle East is still indirect and limited (for now), several CEOs have admitted that they are concerned about rising energy and logistics costs, and that the volatility of the markets could end up having a negative knock-on effect on Portuguese businesses.

In the case of the energy sector, the EDP CEO, Miguel Stilwell d’Andrade has admitted that the current crisis is causing fresh volatility in global markets but thinks that the direct impact on the energy producer should be residual.

In an interview with Bloomberg TV, the EDP CEO said that the group’s structure acted as a shock absorber against geopolitical shocks.

“We’re witnessing something that is still in its initial phases but we had this in 2022”, he said referring to the energy shocks caused by Russia’s invasion of Ukraine.

Nevertheless, Miguel Stilwell d’Andrade stressed that the Portuguese electricity producing  company is relatively well protected since “more than 90% of our production is renewables (solar and wind) and hydric power and so our exposure to this type of conflict is relatively limited.”

In the case of Galp, the leading Portuguese oil and gas producer, the effects of the crisis would come primarily from logistical disruptions and operational costs.

Galp’s co-CEO, Maria João Carioca admits that the company has already begun preparing for possible future disturbances in international energy markets and trade.

“It is obvious that the longer that this goes on we’ll suffer indirect impacts without even mentioning insurance costs and additional shipping costs,” she said.

Despite the uncertainty, the manager reassures that its petroleum supply is assured and that the company can quickly adjust in terms of the logistical transport of crude, redirecting some shipments to avoid the Straights of Hormuz.

The majority of the company’s crude shipments processed at the Sines refinery comes across the Atlantic from Brazil thereby enabling Galp to avoid areas embroiled in War and tension, with some ships going around South Africa’s Cape of Good Hope.

The president of construction company Mota-Engil, Carlos Mota dos Santos said that the current international situation could put pressure on construction costs in Portugal.

He said that a significant increase in there price of energy and commodities would inevitably impact construction costs and gave the example of the competition for the Oiã-Soure stretch of the Lisbon to Porto TGV high-speed rail link.

Here the base price is €1.6Bn but the construction costs could well exceed this the longer the crisis continues.

Mota-Engil, which has a presence in various oil and gas producing countries like Angola, Nigeria, Mozambique, Brazil and Mexico, also sees some indirect positive benefits from the crisis in that these markets could see an increase in revenues from rising oil and gas prices, which in turn could provide funds for investment projects.

Source: Negócios; Credits: Galp Energia