Utility Week

UTILITY WEEK | 29TH MARCH - 4TH APRIL 2019 | 13 This week Interserve collapse hits Pennon profits Owner of South West Water says it is 'on track' as infrastructure partner moves into administration Pennon is on track to "meet expectations" in its water and waste businesses despite reveal- ing it will take a £16 million hit aer the collapse of infrastruc- ture partner Interserve. The owner of South West Water said in a trading update that it had previously booked in a £8 million write-down but having monitored Interserve's financial condition the amount has now been doubled. The company said it is "seeking further clarification" on Interserve's situation, aer it moved into pre-pack administration earlier this month. Pennon's waste company Viridor, a client of Interserve, has increased the provision on its £72 million claim against the firm aer delays to the building of a waste-to-energy plant in Glasgow. The claim is against Interserve's construction division, which remained sol- vent while its parent company went into administration. Pennon said: "We will continue to pursue recov- ery of all amounts due from the operating subsidiary Interserve Construction Limited." Pennon noted that its water business continues to "perform strongly", with return on retained earnings expected to be about 12 per cent, an outperformance. South West Water's business plan for PR19 was "fast-tracked" by Ofwat. The company highlighted that despite "unprecedented demand" because of the prolonged dry weather over the summer, operationally its "infrastructure has performed well" with no water restrictions for the 22nd year in a row. KP ENERGY Are subsidy-free renewables viable? Senior figures from the energy and finance industries have declared doubts about the feasi- bility of building "subsidy-free" renewables at scale without revenue stabilisation. Panelists at an event held by Aurora Energy Research questioned the willingness of the private sector to bear the full risks arising from uncertainty about future power prices. Matthew Wright, the UK managing director for Danish renewable developer Orsted, said onshore wind and solar projects are already being built at prices at or below current wholesale market rates. But he said developers and their inves- tors still require some measure of revenue stabilisation to limit their exposure to a future col- lapse in power prices. Carol Gould, head of power and renewables in Europe, the Middle East and Africa for Japa- nese bank MUFG, agreed. "We don't mind subsidy-free… but what we need is some stability in project finances." WATER £9m for trio of treatment works Northumbrian Water is to invest £9 million in three water treat- ment works. The utility firm said it will replace water treatment works at Otterburn, Rochester and Byrness, starting next month. Work will begin at Otterburn first, with Northumbrian Water's supply partner Mott Macdonald Bentley moving on to the site in April. Work will then be carried out at Rochester and Byrness in April 2020. Construction is expected to last up to one year at all three sites. Once they are operating to their full capacity, the works are expected to treat a total of 450,000 litres of water every day. ELECTRICITY SSEN invests £3m in network technology Scottish and Southern Electric- ity Networks (SSEN) says it has invested £3 million to help its network "self-restore" aer faults in the system. The distribution network operator's (DNO's) automated power restoration system detects when and where there is a fault on the network and resolves the issue by either choosing the most suitable alternative cable or alerting engineers in a control room who can restore power. SSEN says this process generally takes less than three minutes. Over the next year the DNO plans to invest a further £7.4 million in the automation system. £16m hit for Pennon's water and waste arms Finance & Investment Stock watch 800 790 780 770 760 PENNON SHARE PRICE, FIVE DAY 22 Mar 19 Mar 14 Mar 11 Mar 6 Mar 1 Mar PENNON SHARE PRICE, ONE MONTH Shares in Pennon Group dropped more than 2 per cent on Monday aer the water company revealed it would take a £16 million hit from the collapse of its infrastructure partner Interserve. The share price initially rose from 781p to 793p in the wake of the announcement before falling to 767p by the end of the day. Pennon is due to publish its annual results in May. 800 790 780 770 760 21 Mar 22 Mar 25 Mar 26 Mar pence pence

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