Utility Week

Utility Week 7th March

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UTILITY WEEK | 7Th - 13Th March 2014 | 19 Finance & Investment This week Npower profit rises as RWE posts net loss Non-domestic sales drive growth at Npower but rWE writes down €4.8bn on European plants Npower has posted a marginal increase in its profits, while its parent company, RWE, reported a net loss for the first time in more than 60 years. The UK supply business recorded a profit of £246 million in 2013, up from £231 million the previous year. An 8 per cent rise in non- domestic sales, from £91 million in 2012 to £121 million the following year, was behind the increase as domestic profits fell by 5 per cent to £134 million in 2013. RWE's generation portfolio in the UK recorded a loss of £65 million last year, down from a profit of £158 mil- lion in 2012. This came despite a £1.65 billion investment in two combined cycle gas turbine plants in 2011 and 2012; the loss was blamed on "very challenging market conditions". Paul Massara, Npower's chief executive, said: "Our generation business lost money and our domestic elec- tricity and gas business saw profits decline. "There are those who claim there are excess profits in energy, but these figures show a very different story." RWE recorded a net loss of €2.8 billion in 2013, down from a net income of €1.3 billion in 2012. The loss was attributed to the €4.8 billion write-down of its fleet of coal and gas-fired power plants across Europe. Bernhard Günther, chief financial officer at RWE, said the loss represented a "very serious situation", but 2013 was a "one-off " and he predicted the company would make a profit of €1.3 billion to €1.5 billion in 2014. MB ENErgY GDF Suez writes down €15bn GDF Suez has written down €14.9 billion in asset values on weak profits for European ther- mal power generation and gas storage, it announced last week. The French utility, which owns the most UK power genera- tion capacity of any company aer the big six, took a profit hit in 2013. The group reported earnings before interest, tax, depreciation and amortisation (Ebitda) of €13.4 billion, down 8.1 per cent on 2012. Net recurring income totalled €3.4 billion. WaTEr Negative rating for Yorkshire Water Yorkshire Water's credit rating has been downgraded to nega- tive by Fitch Ratings as a result of Ofwat's risk and reward guid- ance for PR14. Fitch is concerned that water companies will suffer from lower returns following Ofwat's announcement last month that its target weighted average cost of capital (Wacc) is 3.85 per cent for 2015/20, down from 5.1 per cent in the current cycle. While Yorkshire Water could earn additional returns from outperformance incentives, Fitch says the impact of this could be limited. The ratings agency will reas- sess the sector's scope to out- perform and establish detailed forecasts as the price control process progresses. ENErgY 'Black hole' hinders low carbon R&D A "black hole" in the govern- ment's energy policy is prevent- ing investment in low carbon technologies, MPs heard last week. The Energy and Climate Change select committee (ECCC) was told that uncertainty over the future of low carbon generation in the UK is harming investment into research and development. Gordon Edge, Renewable UK's director of policy, said there is a "black hole" in the UK's energy policy and the Depart- ment of Energy and Climate Change's forecasts are "all over the place". He added: "Offshore wind could be doing nothing in 2020 or it could be doing 30GW. So how is anyone meant to priori- tise the funding for innovation, if we don't know what it is going to be doing?" Edge told MPs: "We need much more clarity on what the long-term objectives are", which would then allow people to invest in innovation and "bring forward the large-scale genera- tion technology". Npower: generation business lost money UK gas prices rose almost 10 per cent on Monday as mounting tensions in the Ukraine stoked fears of supply disruptions. The Kremlin's move to take control of the unsettled crimea region threatens around a tenth of Europe's gas supplies, which come from russia through Ukrainian pipelines. On the IcE, gas prices for next-month delivery jumped to 61.5 pence a therm, reversing a downward trend from winter Stock watch €30 €28 €26 €24 €22 RWE shaRE pRicE, apRil 2013-maRch 2014 Apr 2013 Jul Oct Mar 2014 €30.00 €29.80 €29.20 €28.80 €28.40 RWE shaRE pRicE, 26 FEbRuaRy-4 maRch 2014 26 Feb 27 Feb 28 Feb 3 Mar 4 Mar

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