Utility Week

UTILITY Week 5th September 2014

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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4 | 5TH - 11TH SEPTEMBER 2014 | UTILITY WEEK National media Strong wind Renewable UK has trumpeted August as "an exceptional month" for wind energy, with new records set and output exceeding both nuclear and coal, according to official National Grid statistics. Five Number of days in August when wind plant generated more than coal 11 Aug Wind set a new daily record when it provided 21 per cent of the UK's electricity needs 17 Aug Wind broke its own record, setting a new figure of 22 per cent 10% Over the month wind generated a tenth of total UK output, close behind the 13 per cent record set in December 2013 GDF Suez in frame for Morwell mine fire The Hazelwood coalmine fire in Australia was entirely foreseeable, could have been put out more quickly and its impact greatly reduced if operator GDF Suez had not taken a "minimal compliance" attitude towards fire risk, the Hazel- wood Mine Fire inquiry has found. The fire began on 9 February and burned for 45 days, blanketing the nearby town of Morwell with ash, smoke and, at times, toxic carbon monoxide. The Guardian, 2 September North Sea oil gets $500m equity boost The future of North Sea oil has been given a half a billion dollar vote of confi- dence by private eq- uity firms, who have invested in a new energy group run by a former Centrica executive. Blackstone Energy Partners, the energy division of one of the world's biggest private equity funds, has teamed up with peer Blue Water Energy and Singapore's sovereign wealth fund GIC to invest $500 mil- lion (£301 million) into exploration, development and production group Siccar Point Energy. The Telegraph, 31 August Water stress 'may curtail fracking' Water shortages could hinder fracking for shale oil and gas in many parts of the world, the World Resources Institute (WRI) has said. In the first report of its kind, the WRI found that 38 per cent of the world's shale resources were in arid areas or in areas with severe water stress. Accessing fresh water was likely to present "serious chal- lenges", it said. The BBC, 2 September STORY BY NUMBERS A further cut to the weighted average cost of capital (Wacc) for water companies in the latest price review (PR14) could see prices increase in the future, according to analysts. Last week, Ofwat said it was looking to reduce the Wacc for water companies because the cost of debt was lower than originally estimated. Analysts predicted the Wacc, which has already been reduced from 5.1 per cent to a provisional 3.85 per cent for PR14, could be cut a further 0.05 per cent. Angelos Anastasiou, utilities analyst at stockbroker Whit- man Howard, told Utility Week a cut to the Wacc now could see it increase for the next price review period. He said: "A small cut in the Wacc could be manageable by most of the companies, but may lead to higher costs in the future if the companies struggle in any way, or make inadequate returns. "If the markets perceive that the companies have been squeezed too hard in the next five years, costs of debt and equity will move up for PR19." Anastasiou said this cut could become "self-fulfilling" because if Ofwat discovered the lower rate could be achieved, it would press ahead with it. Stephen Hunt, analyst at UBS, said the water companies "would be upset if [the Wacc] was to be cut". When Ofwat published its dra determinations last week, Sonia Brown, chief regulation officer, told Utility Week the reg- ulator would question whether the Wacc should be reduced fur- ther because "market evidence is telling us that the cost of debt has decreased". The share prices of United Utilities, South West Water's parent company Pennon, and Severn Trent all remained stable following the statement the Wacc may be reduced. M B See analysis, page 20 Ofwat looking at further reductions to the Wacc 'negative' Fitch Ratings's new outlook for the UK utilities sector, reduced from "stable" because of "forecast profitability of thermal generation and increased political and regulatory risk". See page 21 "Shale gas extraction must only be permitted to happen with robust regulation and comprehensive monitoring" Labour's shadow energy minister Tom Greatrex on the party's decision to table amendments to the Infrastructure Bill to tighten fracking regulations Seven days...

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