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UTILITY WEEK | 14Th - 20Th FEbrUarY 2014 | 23 Finance & Investment This week Ofwat abandons Thames clawback Ofwat drops 'substantial favourable effect' mechanism in truce with Thames Ofwat has abandoned plans to claw back cash from Thames Water. The regulator announced on Tuesday that it would not go ahead with the "substantial favourable effect" mechanism, outlined in a consultation paper in October, whereby it would take back unexpected profits the company had made from a favourable economic environment. The announcement marks the end of a battle between the regulator and the largest water company, which began last year when Thames asked to be allowed to hike customer bills by £8 a year to cover unplanned costs, mainly around the preparation of the Thames Tideway tunnel. Ofwat turned down that application in November, and in turn reserved the right to claim back money from Thames. Thames accepted its decision in December, choosing not to take Ofwat to appeal. The regulator said this was one reason it was not pursuing the deductions. Ofwat also said it had taken "careful note" of respondents' views that any reopening of existing price limits should not be undertaken lightly. In a statement, Ofwat said: "A particular consequence of our determination of Thames Water's application has been that, like other companies, Thames Water has now accepted that its investors can absorb cost increases that have occurred in 2010-15 above the allowances assumed in existing price limits. In this context, we consider it to be proportionate that we do not issue a substantial favourable effect notice on Thames Water." CM EnErgY Profit soars for Dong but tax results in loss Dong pre-tax profit soared by 74 per cent to Danish kroner (DKK) 15 billion (£1.67 billion) in 2013, the Danish energy giant announced last week. The increase was driven by higher earnings in offshore wind, cost-cutting and an increased stake in Ormen Lange gas field. Aer tax, the company made a loss of DKK1 billion (£111 mil- lion), an improvement on losses of DKK4 billion in 2012. It invested DKK21.2 billion, mainly in offshore wind and oil and gas production. Projects included the London Array, which officially launched in July, and Race Bank, which Dong bought from Centrica for £50 million in December. The company also sold assets worth DKK15.3 billion, includ- ing the 800MW Severn gas-fired power station, which it sold for £350 million in December to a consortium led by Macquarie. ELEcTrIcITY Nuclear clean-up costs 'astonishing' Nuclear waste clean-up costs at Sellafield have spiralled amid delays to major projects, the Public Accounts Committee said in a searing critique on Tuesday. The select committee slammed government's decision to reap- point private consortium Nuclear Management Partners to run the plant for five more years instead of re-tendering the contract. The cost of one project, "Magnox swarf storage silos retrievals", nearly doubled from £387 million to £729 million within 18 months, MPs found. Another was delayed by six years. The authority responsible for the site estimates total decommissioning costs will top £70 billion in cash terms. Costs are rising to "astonish- ing levels", said committee chair Margaret Hodge. She called on the government to axe NMP's contract if its performance does not improve quickly. ELEcTrIcITY Smart grids could save networks £10bn Smart grids could save electric- ity networks £10 billion by 2050, according to a leading developer of industry models. EA Technology claimed that by using its "Transform" model, distribution network operators (DNOs) have already cut the cost of their next eight-year business plans by around £200 million. Running the government's future energy scenarios through the techno-economic model shows the potential for further savings. If DNOs use the smart tech- nology, EA Technology said they can avoid laying 28,000km of cable by 2030. Water under the bridge: Ofwat/Thames dispute centrica's share price fell more than 3 per cent after energy secretary Ed Davey threatened on Monday a market investigation that could lead to it being broken up. retail arm british gas looks particularly vulnerable in the event, due to its 42 per cent share of the household gas supply market. by the end of the day, centrica shares closed 1.7 per cent down. SSE share price also fell but it recovered by Tuesday. 316 314 312 310 308 306 304 302 1354 1350 1346 1342 1338 1334 1330 Stock watch CentriCa share priCe, 4 - 10 February sse share priCe, 4 - 10 February 4 Feb 4 Feb 5 Feb 6 Feb 7 Feb 10 Feb 5 Feb 6 Feb 7 Feb 10 Feb