Utility Week

UTILITY WEEK | 1ST - 7TH MARCH 2019 | 15 This week Energy price cap 'to hit' profit at Centrica CEO says 'three principal differences' mean uncertainty is ahead for the British Gas owner Centrica, the owner of British Gas, said it expects the default price cap to affect profits for this year as it delivered "mixed" financial results for 2018. The firm reported that it shed 742,000 UK energy supply accounts in its preliminary results published on 21 February. Centrica group chief execu- tive Iain Conn said: "As we enter 2019 the year is a little bit uncertain and it's a little bit different to what we imagined a year ago." He said this is due to "three principal differences". "There's firstly the price cap in the UK energy market and the impact of this has been higher than we had expected a year ago. Particularly with a one-off increase in the first period, which we are challenging. "The second thing is our exploration and production volumes were disappointing last year and are going to continue to be in the lower half of their planned range. "Thirdly, we've got some nuclear power station out- ages at the moment and we don't know when they're going to come back." Centrica revealed its adjusted gross margin was up 5 per cent while earnings before interest, tax, deprecia- tion and amortisation (Ebitda) were up by 15 per cent. Its adjusted operating cash flow was up 9 per cent at £2.2 billion, within the targeted £2.1-£2.3 billion range. Group net debt was £2.6 billion. Centrica's adjusted operating profit was up 12 per cent to £1.4 billion, with higher commodity prices and strong gas production benefiting exploration and production. AJ ELECTRICITY National Grid seeks to end credit facility Electricity system operator (ESO) National Grid has sought to remove its obligation to provide suppliers with up to £6 million of unsecured credit to cover their liabilities for transmission and balancing charges. The ESO says the current arrangements effectively leave consumers to pick up the bill for unpaid network charges if suppliers go bust. Under the terms of the Con- nection and Use of System Code (CUSC), suppliers are entitled to receive up to £100,000 of credit per month from the ESO for up to five years. But the ESO says the overall value of these loans has "grown exponentially" as more and more suppliers have entered the market. It has therefore proposed a modifica- tion called CMP311 to remove the credit facility from the CUSC. The proposal document also notes that on 1 April 2019 the ESO will become a legally separate entity from the rest of National Grid. The modification was due to be presented to the CUSC panel on 25 February. WATER Severn Trent starts £60m pump station Severn Trent has switched on its new £60 million terminal pump- ing station at Crankley Point in Newark, Nottinghamshire. The station was constructed in partnership with BNM Alli- ance, a construction partnership between Barhale and North Midland Construction. Severn Trent project leader Tim Sawyer said the pump sta- tion has been designed to cope with the storm water produced during extreme weather, mean- ing customers will be protected from the "horrible conse- quences" of sewer flooding. Severn Trent claims the sta- tion is helping to protect around 100 homes from sewer flooding. ELECTRICITY UKPN to hold £12m flexibility auction UK Power Networks (UKPN) has announced plans to hold a £12 million auction to procure flexibility services in the South East and East of England. The services will be used to manage local network con- straints during periods of peak demand and thereby avoid the need for more expensive upgrades to the power grid. The distribution network operator (DNO) is looking to buy flexibility services at 28 loca- tions from winter 2019 onwards. The auction will be held on the online platform Piclo Flex and will take place in late March. Potential bidders have until 12 March to register. Conn: cap impact 'higher than we had expected' Finance & Investment Stock watch 170 160 150 140 130 120 CENTRICA SHARE PRICE, FIVE DAY May 2018 Sep 2018 Jan 2019 CENTRICA SHARE PRICE, ONE YEAR Centrica shares took a nosedive last Thursday aer the company revealed it had lost nearly three- quarters of a million customer accounts over the course of 2018 and warned that the price cap on default tariffs would cut into this year's profits. From a previous close of 138p, the share price fell more than 11 per cent to 122p as trading opened on the morning of 21 February. 140 130 120 110 21 Feb 22 Feb 25 Feb 26 Feb pence pence

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