Energy Sector Shrinks as Zombie Companies Decline 13% in 2022

Energy Powerhouses Trim Their Zombie Roster by 13%

Kearney’s latest deep‑dip into the world’s big‑name firms shows that the energy sector cracked a 13 % drop in what the OECD calls “zombie companies.” Those are the firms that can’t cover interest costs with operating profit for a straight three years. In 2021, the energy world was holding back at 3.9%, but 2022 slipped to 3.4% – a tidy dip that even beats the global trend.

What’s the crunch, again?

Global average: 5% rise in zombie firms across all industries.
Energy sector: 13% drop in zombie share.
Electricity suppliers: biggest swing – down roughly 45%.

Why the good news for energy?

Despite headaches like the Russian aggressions in Ukraine that sent a ripple through supply chains, the energy market’s soaring price tags have actually helped heavily leveraged companies survive. In a world where debt and high fuel costs often doom a company, energy players are riding a price wave that keeps debts in check.

Meet the “zombie” of the corporate world (not the ones in your nightmares)

Think of these firms as the corporate equivalent of that guy who still hides his dead teeth behind a smile. They’re stuck in a rut, drowning in interest payments while barely churning out enough cash to keep the lights on. But the energy sector, with its priced‑in buffers, is putting those “zombies” in the past.

Takeaway for the wider world

While most industries see more of these sluggish players, energy companies appear to be forging ahead. It’s proof that, when the price tag on energy flats up, the debt‑hungry can actually stay afloat.

Heightened vulnerability to interest rate hikes

Energy & Utilities: Zombie Companies and the Rising Tide of Interest Rates

Even after a drop in “zombie” firms in 2022, the sector remains highly vulnerable to the impact of rate hikes. A further climb in interest rates could push the share of struggling companies into the mid‑single digits.

How Much of a Rise?

1.5‑× jump in rates: zombie share climbs to 4.3 % of the industry.
2‑× jump: share nudges up to 4.5 %.
In both cases, a nearly 50 % spike relative to the baseline.

Industry Voices

Nils Kuhlwein, Partner & Managing Director, Restructuring at Kearney:

“It’s no shock that the energy sector is one of the only groups where revivals outnumber new zombie firms. But companies still have to brace for the next rate surges. Profit leverage can give them breathing room to meet debt obligations over the long haul.”

Benedikt Frank, Partner in Energy and Process Industries at Kearney:

“The health of energy and utilities is at the core of Europe’s economy. Kearney’s stress tests are a wake‑up call: leaders must build resilience to keep up with higher rates. At least we’re seeing fewer zombies now—better odds for a stable future.”

Quick Takeaway

For an energy business to survive future rate hikes, the focus must be on robust debt management and continued profitability. The sector’s recent decrease in zombie firms gives a silver lining, but vigilance remains key.