Utility Week

18 | MARCH 2023 | UTILITY WEEK Finance Download report U tility Week's UK Utilities CFO Outlook 2023 report, developed in conjunc- tion with leading business process management company WNS, comes at a time of immense scrutiny for utilities. In the past year, they have rarely been out of the headlines and the eye-watering price rise of energy has driven in• ation and forced a £48 billion government intervention. There has been a constant threat of elec- tricity blackouts this winter because of sup- ply shortages. Outrage is regularly directed against water companies by MPs, environ- mentalists and the public for their frequent discharge of sewage into rivers and coasts. Meanwhile, utilities themselves battle the elements, a volatile macroeconomic cli- mate and tough regulatory price reviews. Given the soaring in• ation, fears of bad increases in debt and unpredictable political prospects, coming on top of years of politi- cal chaos and the a… ere† ects of Brexit and the pandemic, forecasting the year ahead is understandably more di‰ cult than usual for CFOs. In the midst of this maelstrom, a survey of Œ nance leaders was conducted by Utility MAIN SURVEY FINDINGS Finance directors' roles are made more di cult by increasingly demanding regulation, political uncertainty and recruitment di culties, rather than the macroeconomic environment. Almost half (47%) of survey respondents said greater demands from the regulator were making it harder for them to do their job, followed by lack of skilled people to recruit (42%) and by the ongoing political uncertainty over government policy (42%). A third (32%) said the macroeconomic environment was making their role more di cult. The macroeconomic environment is having a signi- cant negative impact on utility businesses with two-thirds of respondents (65%) scoring it 1 or 2 on a scale of 1-5, with 1 being the highest negative impact. The e… ects of inflation are, however, cushioned over a period for regulated utilities – water companies and energy networks – by index-linked allowances. Those with inflation-linked debt fare worst. Inflation has had the biggest impact on commercial arrangements across all utilities (80%), with the ability to service existing debt (15%) the least impacted by inflation. Energy retailers/generators appear to be satis- ed or ambivalent to the Energy Price Guarantee. Half (50%) scored it 4 out of 5 (with 5 being very satis- ed) with a third (33%) rating it as a 3. In follow-up interviews they expressed concern about the sticking plaster approach of trying to - x the broken energy market, and called for a system overall and the scrapping of the price cap to allow retailers a chance to be pro- table and invest in the future. There is concern across all utilities about the ability of consumers to pay their bills in 2023, with bad debt expected to rise. A quar- ter (26%) though this one of their biggest risks in the survey, but it was highlighted as a potential risk by interviewees. Half (50%) of respondents were con- dent or very con- dent they would be able to make necessary investment in infrastructure in the next 12 months, with just 15% saying they were not con- dent (scoring 1 or 2 out of 5). Con- dence in investing for sustainability is high with 65% returning scores of 4 and 5 out of 5. Utilities expressed concern about investor con- dence in the sector – with more than half (55%) scoring their level of concern 4 or 5 out of 5. Interviewees warned that the growing attractiveness of the US market is increasing competition for investment. Calculated risks What do utility chief fi nancial offi cers think will be the biggest risks to their businesses in 2023? We went out and asked them, and compiled the results in an exclusive downloadable report.

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