Utility Week

UTILITY WEEK | 25TH - 31ST JANUARY 2019 | 15 This week Eon's acquisition of Innogy 'is on track' Deal to combine network and supply activities of two companies set to go ahead despite hurdles Eon's proposed acquisition of Innogy is "on track" and will make the company Europe's largest energy supplier, accord- ing to a report published by S&P Global Ratings. The analysis also says that the business risk profile of the combined entity will be stronger than those of its predecessors and Eon's other large European peers. Once Eon combines its network and supply activi- ties with those of Innogy, the company is expected to have a regulated asset base of about €37 billion in 2020. This will generate 70 to 75 per cent of its earnings before interest, tax, depreciation and amortisation (Ebitda) and the new entity will serve about 50 million customers. The final rating will "depend on the deal's comple- tion" as well as its ultimate capital structure and finan- cial policy, but the ratings agency "sees more upside potential than downside risk". "On the first closing date – most likely in the second half of 2019 – Eon will receive RWE's 76.8 per cent stake in Innogy in return for a 16.67 per cent stake in Eon (valued at about €3.4 billion)," says the report. S&P adds that the collapsed merger between SSE and Npower, of which Innogy is the parent company, is not expected to halt the Eon/Innogy deal. Concerns were raised about job losses aer reports that Npower staff were told before Christmas that they would be working for Eon upon completion of the com- plex wider European asset swap deal. However, Eon told Utility Week that "no decisions" have been made. AJ ELECTRICITY Price cap allowance may be removed Ofgem has said it will remove the price cap allowance for capacity market payments unless it has "sufficient confi- dence" they will be collected from suppliers. The regulator issued the update aer the capacity market was suspended last year aer a shock ruling by the Euro- pean Court of Justice. Judges overturned a 2014 decision by the European Commission to approve the scheme under state aid rules, bringing all payments and auctions to a halt. The cap on default tariffs includes an allowance for capac- ity market payments. In an open letter to stakeholders, Ofgem said the level of the price cap for the second period of the scheme – from 1 April to 30 September – will be set on 7 February. If, by then, suppliers appear unlikely to be required to make capacity market payments during that period, Ofgem will only include an allowance for administrative costs. ENERGY CCC to consider a universal carbon tax An economy-wide carbon tax could play an "important part" in the UK's growing efforts to cut emissions, the chief executive of the Committee on Climate Change (CCC) has told MPs. Chris Stark, giving evidence to the House of Commons Sci- ence and Technology Commit- tee for its probe into the clean growth strategy, said he is "glad" Dieter Helm recommended the policy in his cost of energy review for the government. Helm's proposal to replace existing green subsidies with a single universal carbon tax met widespread opposition. But Stark said the idea will have to be given a "full airing" as part of a wider review of taxation trig- gered by the UK's transition to a low-carbon economy. ENERGY Call for business energy price cap A price comparison service has called for a "retail price cap" to protect businesses. Phil Foster, chief executive of Love Energy Savings, said small businesses are "suffering" because they are overcharged by third party companies. Britain's 5.7 million small and medium sized enterprises could be spending £5.7 billion too much on their energy bills, he said. "We need a price cap, but in retail rather than on the wholesale price… The typical wholesale unit price is around 13.5p, and on average a third party will add something along the lines of 2p on top." The deal covers network and supply activities Finance & Investment Stock watch 360 340 320 300 280 TESLA SHARE PRICE, FIVE DAY 28 Dec 3 Jan 8 Jan 11 Jan 16 Jan TESLA SHARE PRICE, ONE MONTH Tesla shares took a nosedive last Friday aer chief executive Elon Musk revealed plans to cut the company's headcount by 7 per cent as it seeks to drive down production costs for the Model 3. Within hours of the announcement, the share price dropped almost 10 per cent to $315. In an email to employees, Musk said the move was partly motivated by the looming withdrawal of a tax credit in the US for electric vehicle purchases. 360 340 320 300 280 16 Jan 17 Jan 18 Jan 22 Jan dollars dollars

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