Utility Week

UTILITY WEEK | 22ND - 28TH FEBRUARY 2019 | 19 This week Mitsubishi buys 20% stake in Ovo Energy Ovo will use investment to fund development of EV charging technology and overseas expansion Ovo Energy, the UK's seventh largest energy provider with more than 1.5 million custom- ers, plans to expand with a £200 million cash injection from Mitsubishi Corporation. With Mitsubishi buying a 20 per cent stake in Ovo, which was founded in 2009, the deal values the challenger supplier at around £1 billion. The "strategic investment" will be used to support Ovo's expansion into new markets across Europe and Asia Pacific and to develop the company's electric vehi- cle (EV) charging and energy storage technology. Ovo has also announced the launch of an "intel- ligent" energy technology division, Kaluza, to develop and manage so'ware and hardware to support the inte- gration of EVs and dynamic battery storage on the grid. Commenting on the deal, Jonathan White, UK head of infrastructure at KPMG, said: "The UK's retail energy market remains ripe for disruption. Ovo Energy has played a major role in leading change in the sector and built a significant challenger position. Significantly, investments like this are not pure-play retail ones. The supply of household energy is now intrinsically tied to trends that will shape the future of the UK economy, like mobility infrastructure and low-carbon energy sources. This makes it highly likely there will be further deal-flow in this space." Mitsubishi Corporation's power solution division has approximately 6,200MW of energy assets under manage- ment and operation worldwide. KP ENERGY Ofgem urged to fund hydrogen in RIIO2 A government adviser has called on Ofgem to step up heating decarbonisation by using the RIIO2 price controls to begin funding the conversion of gas networks to run on hydrogen. Charlotte Morgan, energy and infrastructure partner at law firm Linklaters, told the Westminster Forum conference on carbon capture use and storage (CCUS) earlier this month that the regu- lated asset base model could prove an effective mechanism for financing the switch. But she added that the move requires a "clear political statement" from the Department for Business, Energy and Industrial Strategy (BEIS) that it wants to take this route for decarbonising heating. Will Lochhead, head of the CCUS policy team at BEIS, said the government is examining incentives to bring forward carbon capture technology and is looking at how existing infrastructure can be reused to transport and store CO2. ENERGY UK suspends EU ETS allowance auctions The government has announced it is no longer auctioning or issuing any new EU Emissions Trading System (ETS) allow- ances until further notice. In fresh guidance, BEIS said emissions from 1 January 2019 on will not be covered by the carbon pricing mechanism if the UK leaves the EU without a withdrawal agreement. BEIS said generators cur- rently participating in the scheme should continue to comply with its regulations on monitoring, reporting and verify- ing greenhouse gases. In the event of a no-deal Brexit, these rules will underpin a new fixed- rate carbon tax that will come into effect on 1 April 2019. GAS Profit crackdown hits gas credit ratings The credit ratings of the four gas distribution networks (GDNs) in Great Britain are likely to come under pressure as Ofgem clamps down on profits, ratings agency Moody's has warned. The regulator has proposed lowering the baseline profit allowance to 2.64 per cent for the RIIO GD2 price control starting in 2021. The figure for 2018/19 is 4.59 per cent. Moody's said GDNs could expect to see their nominal returns fall by 30 per cent and real returns by 25 per cent. Moody's said Wales & West Utilities is likely to be hit hard- est, due to high borrowing costs. A tranche of WWU loans set to mature in 2021 has already been downgraded from Baa1 to Baa2. Finance & Investment Stock watch 15.5 15.0 14.5 14.0 13.5 13.0 EDF SHARE PRICE, FIVE DAY 29 Jan 6 Feb 14 Feb EDF SHARE PRICE, ONE MONTH EDF shares have fallen sharply despite the company reporting a rise in both sales and EBITDA (earnings, before interest, tax, depreciation and amortisation) in its 2018 financial year results. From a starting point of €14.87 at the end of trading on 14 February, they dropped 5 per cent to €14.12 over the morning of 15 February, when the announcement was made, and have continued to decline since. As we went to press, they were trading at just €13.62. 15.5 15.0 14.5 14.0 13.5 13.0 14 Feb 15 Feb 18 Feb 19 Feb euros euros Ovo will use cash for its EV charging technology

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