Utility Week

Utility Week 9th May 2014

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18 | 9th - 15th May 2014 | UtILIty WEEK Finance & Investment This week Water firms to take on £440m of work early Move should stabilise supply chain by easing the effects of cyclical spending in regulatory periods Around £440 million worth of work will be brought forward by a year into 2014/15 to help lessen the boom and bust impact of cyclical investment in the UK water industry. Water minister Dan Roger- son confirmed the amount in a response to a written question in the House of Commons. Previously, investment declined significantly in the first and final years of the five-year regulatory period, while ramping up in the middle years, leading to destabilisa- tion of the supply chain. Research by industry trade body British Water has shown that this cyclical spending was responsible for up to 40,000 job losses in the sector. Last October, the industry came to an agreement with regulator Ofwat that allowed companies to include transition investment in their business plans for 2015/2020. However, a number of companies would not reveal how much they intended to set aside for transi- tional expenditure when they submitted their plans in December. As part of the arrangement, water companies also committed to covering the cost of borrowing the money to undertake the work a year early. The Cyclicality Working Group worked with Ofwat and the Treasury aer a 2012 government report made recommendations to smooth the AMP cycle. Paul Mullord, UK director at British Water also wel- comed the news. CM EnErgy SSE's credit outlook is downgraded Worsening energy market conditions have taken a toll on the credit ratings outlook of Big Six utilities SSE and Centrica, Moody's said last week. The ratings agency cited chal- lenging market conditions as the key reason it has downgraded the credit ratings outlook of SSE from stable to negative, with British Gas parent company Centrica also placed on review for potential downgrade. Moody's said the SSE out- look downgrade comes amid "an increasingly difficult and uncertain operating environ- ment for utility companies in the UK, which is likely to maintain pressure on SSE's ability to grow profits, particularly in its retail supply business." ELEctrIcIty Renewables boost for Scottish Power First quarter profits for Scot- tish Power and parent company Iberdrola received a boost following increased renewable power output, financial results show. Earnings before interest, tax, depreciation and amortisation (Ebitda) for Scottish Power were 7.7 per cent higher across the generation and supply business at €197.7 million (£162.7 million), due to increased hydro power output over one of the wettest winters on record. The UK also experienced windier conditions than in the same quarter a year ago, boost- ing Scottish Power's total renew- able output by 38.7 per cent to 1,089GWh. Spain-based Iberdrola's net profit rose by 8.4 per cent to €952.6 million in Q1 2013, with Ebitda down 0.3 per cent at €2.126 billion. In the generation and supply business, Ebitda was up 24 per cent to €915.5 million. WatEr Anglian names AMP6 partners Anglian Water has named its capital delivery partners for a £1.3 billion contract during AMP6 – the next price control period from 2015/2020. The water company has pro- posed 15-year contracts, which it will review aer every five-year AMP cycle. Anglian expects to invest more than £3 billion dur- ing this period. Balfour Beatty, Barhale, Grontmij, MMB – a joint venture of Mott MacDonald and JN Bent- ley – as well as MWH and Skan- ska have signed contracts with the water company aer being successful in a procurement process that builds on Anglian Water's existing @one Alliance. Black & Veatch has also signed a contract as a reserve partner. Maintenance work can be brought forward a year Share prices at South West Water's parent company, Pennon, rose 2.5 per cent from £7.51 to £7.70 the day after its draft determination was published by Ofwat last Wednesday. Along with Affinity Water, the company was given "enhanced" status by Ofwat for submitting a "high-level" business plan. Shares have climbed steadily since the regulator made the announcement on 4 april. 760 750 740 730 720 770 765 760 755 750 Stock watch Pennon share Price, 7 aPril-5 may Pennon share Price, 29 aPril-6 may 29 Apr 7 Apr 14 Apr 21 Apr 28 Apr 5 May 30 Apr 1 May 2 May 6 May

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