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UW April 2021 High Res

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12 | APRIL 2021 | UTILITY WEEK Countdown to COP Interview Countdown to COP: the investor view As part of our campaign highlighting a pan-utilities roadmap to net zero, this month we speak to major investors in utilities to get their view. Charles Tsai at Power Asset Holdings and Michael McNicholas of Omers Infrastructure spoke to James Wallin. T he owner of three of Britain's energy networks has stressed that inves- tors need a clear mechanism to unleash the funding required to progress decarbonisation. Charles Tsai is the chief executive of Power Assets Holdings, which together with its sister company CKI Infrastructure owns Northern Gas Networks (NGN), UK Power Networks (UKPN) and Wales & West Utilities (WWU). Tsai told Utility Week he was keen to commit to more investment in the UK but insisted "we have to know how we will be reimbursed". Asked about the rate of returns for inves- tors in the regulated energy sector in this country, Tsai said: "To be frank, we are investors and we have shareholders too. We can't keep making donations and doing non- profitable work." Tsai was speaking to Utility Week prior to the announcement that two of his compa- nies, NGN and WWU, were rejecting Ofgem's final determinations on their RIIO2 business plans. Both have cited the cost of equity in their appeals. He stressed his respect for Britain's regu- latory framework but called for the govern- ment to give clear guidance to Ofgem on its responsibilities to facilitate decarbonisation. "We want to invest if there is a clear mechanism for us to do that. That has to come from Ofgem and to do that Ofgem has to know what the government wants from it." He said the regulator's approach towards funding net-zero projects through uncer- tainty mechanisms made sense but added that this needed to "carry some certainty in terms of reimbursement of the funds we want to invest". A global investor Power Assets has investments in nine coun- tries, serving 19 million customers, as well as operating HK Electric, which is responsible for the generation, transmission, distribu- tion and supply of electricity to Hong Kong and the Lamma Islands. It diversified out of its homeland in 1993, with Tsai responsible for its international investments since 1997. He became chief executive in 2014. The company owns 41 per cent of NGN, 40 per cent of UKPN and 36 per cent of WWU, as well as 25 per cent of Seabank Power Station in Bristol. Unlike CKI, Power Assets does not invest in water companies in the UK (aside from a small stake in Northumbrian Water). The company had been identified as a possible suitor for Western Power Distribu- tion in the early stages of a process which ended with National Grid agreeing to buy the DNO (See Review). On the potential for further M&A, Tsai said: "Our appetite for UK utilities hasn't changed." He admitted that the uncertainty around Brexit had been unsettling but that "now everything is known it's actually not too bad". The decarbonisation agenda brings its own uncertainty and Tsai called for the UK government to provide more details of its roadmap. However, he insisted that did need mean utilities should just wait for guidance. "Net zero brings a huge change from a technical standpoint for both gas and elec- tricity and we have no choice but to embrace it. Because of that I have always told our directors we need to be ahead of the curve, otherwise we will be le¢ behind." Tsai pointed to projects being undertaken by his Australian companies as evidence of the kind of change the UK will need to grap- ple with. With one in four houses in South Aus- tralia now fitted with solar panels, the gov- ernment there is withdrawing from subsidies and assessing its approach to distributed generation. He said: "They are looking at the whole Charles Tsai, CEO, Power Assets Holdings "It would be great if the UK government would make a decision as to whether it will embrace hydrogen."

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