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Policy & Regulation Climate change talks around 134 per cent of RCV. In 2011, Cheung Kong Infrastructure took Northumbrian Water private for a 27 per cent premium to RCV, suggesting a resilience in the valuation of water companies under the PR09 regime, notwithstanding wider economic conditions. This year, Sumimoto Corporation's acquisition of Sutton and East Surrey Water in February was reported to be at a premium of 40-50 per cent to RCV, although analysts put this at closer to 30 per cent once discounted to take account of the groups' property portfolio and non-regulated activities. This was in spite of the sale process being overshadowed by Ofwat's controversial proposals (dropped in December 2012) to introduce flexibility in UK water company licences to remove parts of their business from the current wholesale price control framework. It is notable that the consortium bid for Severn Trent, also at a 30 per cent premium, was rejected this summer on the basis of management's "belief that Severn Trent has a value to our shareholders above the level [the consortium] indicated it was willing to pay". Despite negative commentary, and notwithstanding regulatory uncertainty and pricing concerns, it seems that both water companies and investors continue to expect a significant acquisition premium above RCV. Investors will have been reassured to note the removal of provisions from the published Water Bill that would have enabled new entrants in the sector to provide last-mile infrastructure. Incumbent operators had raised concerns that this could lead to asset stranding, and have a possible negative impact on underlying RCV. The Bill also includes a new primary duty for Ofwat to secure the long-term resilience of water supply and sewerage systems, and a general emphasis on long-term planning. Ofwat continues to face difficulties in reconciling political pressure to push down bills for consumers with continued capital investment requirements. This balancing act was recently put into practice in the context of Thames Water's proposed interim determination to fund its "super sewer". Caution should be exercised in using this interim review process as a barometer for PR14, though – Thames may not be representative, having had the largest capital investment programme of any company during the current period. The cost of capital argument will be a strong element of PR14 submissions across the industry and the outcome of that argument will be a significant factor in M&A prospects in the sector going forward. Steven Bryan is a partner at Hogan Lovells LLP 25% "A shift of this magnitude at this time represents a major step backwards" The cut in carbon dioxide emissions from 1990 levels Japan had targeted for 2020 3% The rise in emissions Japan is now planning over the same period 1 /4 The proportion of Japan's electricity needs delivered by nuclear power prior to the Fukushima disaster Energy secretary Ed Davey "Scientists are giving us a very certain message. Even if you're less certain than the scientists, it makes sense to act both in terms of trying to prevent and mitigate" David Cameron on climate change this week "The typhoon has cast a pall over the UN climate talks starting in Warsaw" 3,976 Latest confirmed death toll from Typhoon Haiyan in the Philippines 11.5 million The number of people affected by Typhoon Haiyan "I do not have any words to describe my dismay at Japan's decision" Samantha Smith, leader of WWF's Dorothy Thompson, chief executive of Globalbiomass & Energy Initiative Climate generator Drax Su Wei, China's lead negotiator at the UN Climate Change Conference UTILITY WEEK | 22nd - 28th November 2013 | 15