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Finance & Investment This week Energy giant reviews offshore development programme in light of subsidy changes rEnEWabLEs SSE downbeat about investment prospects The prospects for investment in power generation are "not encouraging", SSE warned in an interim management statement last Thursday. The energy giant flagged up its fears for the future as it confirmed it is on course to invest about £1.5 billion this financial Beatrice: denied early approval for subsidies year. Adjusted pre-tax profit is also expected to be around the £1.5 billion mark. Despite progress with the government's Electricity Market Reform package, SSE said "important detail has still to be confirmed". The energy company is reviewing its offshore wind development portfolio after the government denied Galloper and Beatrice arrays early approval for subsidies. That decision, after a surprise change in the rules to ration support under the go-early process, is one reason "there is greater uncertainty" about SSE's investment programme from 2015 to 2020. It is "likely to be lower" than the £1.5 billion to £1.7 billion a year invested since 2010. SSE expects to increase the dividend by about 3 per cent when it announces its full year results in May. Adjusted earnings per share are set to rise 2-4 per cent. The profit rise will be driven mainly by expansion in the upstream gas market, with customer numbers down and power generation flat. Gas production rose from 131 million therms to 300 million therms, after the purchase of Sean gas field assets in April 2013. In the nine months to 31 December 2013, SSE lost a quarter of a million customers. MD Stock watch Following the publication of Ofwat's risk and reward guidance on Monday morning, severn Trent shares rose from 1,689 pence to 1,750 pence as of 14.00 on Tuesday. The proposed allowed weighted average cost of capital (Wacc) of 3.85 per cent set by Ofwat this week matched market expectations and saw United Utilities also climb – from 688 pence to 720 pence – in the same period. the investor "some protection against those changes" to ensure they continue to invest. Investment by major developers in the Scottish offshore wind sector has more than halved, according to a report from Scottish Renewables. The amount invested in offshore wind projects north of the border in 2013 was only £28.9 million, down from £63.6 million in the previous year. Lindsay Leask, senior policy manager for Scottish Renewables, said there is uncertainty in the market because a number of planning applications are still to be approved, while accessing market incentives also remains "unclear". EnErgY EnErgY WaTEr Ed Miliband's proposed energy price freeze is giving investors the "jitters", according to Sir John Armitt, chair of the Olympic Delivery Authority. In an interview with The House magazine, Armitt said political uncertainty, including that caused by the proposed price freeze that would be implemented if Labour wins the 2015 general election, "gives them [the] jitters". He added that if governments want to adapt policy to reflect public opinion, they need to give Scottish Water has pledged to keep its bill hike 1 per cent below the level of inflation next year, with a 1.6 per cent rise in April. The company says the rise – only the second since 2009 – will help it improve service and maintain investment in water works and pipes. Water charges in Scotland, which have fallen by 10.2 per cent relative to the rate of inflation since 2009, are expected to remain below average household charges from private water companies in England and Wales. Uncertainty spooks wind investors… …as does Miliband's planned price freeze Severn TrenT Share price, 22-28 January 1,760p 740p 1,720p Spanish energy company Iberdrola is not seeking new acquisitions, although it is sitting on €12 billion in cash. Iberdrola chief executive Jose Galan said: "Our liquidity hasn't diminished. At €12 billion, we continue in this level of liquidity. We made important acquisitions in the middle of the last decade in the US and the UK. Now we have very good expectations of growth without needing to make acquisitions." Scots water charges to rise 1.6pc in April uniTed uTiliTieS Share price, 22-28 January 720p 1,680p Iberdrola rules out further acquisitions 700p 1,640p 22 Jan 23 Jan 24 Jan 27 Jan 28 Jan 680p 22 Jan 23 Jan 24 Jan 27 Jan 28 Jan UTILITY WEEK | 31sT JanUarY - 6Th FEbrUarY 2014 | 19