Utility Week

UTILITY WEEK | 7TH - 13TH DECEMBER 2018 | 13 This week Gearing at SES Water cut to less than 60% Water company says it is in good financial shape but wants to 'support Ofwat's direction of travel' SES Water has said it has "sig- nificantly lowered" its gearing from 77 per cent to below 60 per cent, and published its first "customer-friendly" guide that explains how the company is owned, run and financed. The water company has reduced its gearing – the ratio of its debt to the value of its ordinary equity – "in light of recent concerns from Ofwat about highly geared companies". It said it is the only water company to achieve this to date. In Keeping it Clear, SES Water said gearing was about 58.7 per cent on 31 October 2018. It has achieved this with an equity injection from shareholders that has let it pay back a £30 million bank loan. It has also converted £12.4 million of preference shares into ordinary shares so they "no longer command such a high rate of interest". SES Water said its business plan for 2020 to 2025 indi- cates that borrowings will "rise modestly" but gearing will remain below 65 per cent. Paul Kerr, finance and regulation director at SES Water, said: "This wasn't about increasing our financial resilience – we were already in a good place and have been for many years – but we wanted to support Ofwat's direction of travel. Our simple ownership structure and supportive and responsible shareholders have enabled us to make these changes quickly and easily." The document, which aims to present information about finances and governance to customers in a clear and understandable way, also includes details on how dividend and executive pay decisions are made. KP ENERGY £20m earmarked for carbon capture plan The government has said the UK's first carbon capture, usage and storage (CCUS) plants should be commissioned by the mid-2020s. The ambition is the centre- piece of an action plan for the sector, launched at an interna- tional carbon capture summit in Edinburgh attended by more than 50 international leaders and chief executives. The summit was hosted by the UK with the International Energy Agency. The plan commits the UK to: • set out next year how to enable the first CCUS facility; • invest £20 million to build CCUS plants at industrial sites across the UK; • invest £315 million in decar- bonising industrial sites, including use of CCUS; • begin work to identify existing oil and gas infra- structure that could be trans- formed for CCUS projects. WATER Tideway to tackle 'cost pressures' Cost-saving measures have been introduced at the Thames Tideway Tunnel project, a report from the project's holding com- pany Bazalgette Holdings Group has confirmed. Tideway cited a number of "complex engineering chal- lenges" in its decision to cut costs, while the report said "sev- eral significant cost pressures" had been identified. The challenges have resulted in contingency funds being "substantially eroded". Tideway, with its contractors, has begun to implement cost-saving measures. Total costs for the six months to 30 September were £325.3 million, which brings the total cumulative cost to £1.4 billion. Tideway has denied recent media reports that suggested the cost of the project has soared. ENERGY Pay-upfront tariff threatens safety net Citizens Advice has warned there could be "serious implications" for Ofgem's safety net aer the introduction of a pay-upfront tariff by a small supplier. Eversmart Energy, based in Manchester, introduced its Fam- ily Saver Club tariff in October. It lets customers pay their annual energy bills up front and promises 12 per cent interest on customers' credit balances, or one per cent a month. Concerns have been raised that Ofgem's safety net, which requires suppliers to cover credit balances aer a firm has failed, was not designed to cover the failure of firms where customers may have credit balances run- ning into the thousands. SES Water has published a guide to its finances Finance & Investment Stock watch DRAX SHARE PRICE, FIVE DAY Drax shares dropped 4 per cent on Monday aer the firm announced amended terms for its £702 million deal with Iberdrola to buy Scottish Power's hydro, pumped storage and gas generation assets for £702 million. Following the suspension of the capacity market, both parties have agreed to compensate each other if capacity payments are not made, depending on the profitability of the portfolio. 400 395 390 385 380 29 Nov 30 Nov 3 Dec 4 Dec pence

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