Utility Week

UTILITY WEEK | 11TH - 17TH OCTOBER 2019 | 21 Operations & Assets Event Utility Week members evening, London, 1 October 2019 H ow do foreign investors view the increasingly volatile UK market and what is their approach to the utilities sector? This was the question posed to two of the country's leading utilities analysts at the inaugural Utility Week members' networking evening. Dominic Nash and Peter Crampton of Barclays addressed a handpicked audience of Utility Week subscribers at London's Soho Hotel. They joined the bank's analyst team from Macquarie at the end of last year, and said economists typically take a negative stance on the industry. But uncertainty in the global economy has led to a more positive outlook. Nash pointed to the material underper- formance of UK utilities compared with their„ global peer group and highlighted four„ key concerns mentioned by global investors: Brexit, nationalisation, the percep- tions of the UK government, and the regula- tory regime. On Brexit, he said the impact on utili- ties was no diˆ erent to that on any other UK sector, but the increased uncertainty has been one of the factors in the under- performance compared with overseas coun- terparts. Investors are relatively agnostic on the actual outcome of Brexit, he pointed out, saying it„ was the uncertainty that was really spooking„them. Nationalisation is a topic that won't go away, even if Labour stays in opposition, he insisted. The argument against it is widely understood – as are the protections for inves- tors – but given a choice between investing in UK utilities or those in continental Europe, it could be the deciding factor, Nash said. There is also a sense that both the govern- ment and the regulator are keen to rein in companies, Nash added, pointing out that price caps are rarely signs of encouragement for global investors. The pair also talked about the changes in perceptions of renewable energy in the UK and said that the latest rock-bottom prices for oˆ shore wind in the contracts for diˆ er- ence auction had been noticed worldwide. Nash said SSE's exploration of building an oˆ shore wind farm on a merchant basis could be a game changer for the industry. Both analysts stressed that there were encouraging signs that utilities were will- ing to adapt their business models to new ways of working. The restructures at Eon, RWE and SSE with the aim of specialising in particular areas was an attractive one for investors, they said. More interesting devel- opments are to come in this area, Crampton predicted, with EDF starting to talk about whether it could separate out parts of its existing business. Attendance at member events is exclusively available to Utility Week subscribers. To nd out more about the bene ts of becoming a member, please contact: JoNikiforov@fav-house.com What do investors want? Last week Utility Week members gathered for the fi rst of a series of exclusive networking events, where they were given the inside track on the perception of the UK market from abroad. The impact of Brexit on utilities is no diff erent to that on any other UK sector, but increased uncertainty has been a factor in underperformance. Dominic Nash, Barclays There are signs that utilities are willing to adapt their business models to new ways of working. More interesting developments are to come in this area. Peter Crampton, Barclays

• Cover