Utility Week

Utility Week 9th January 2015

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18 | 9th - 15th January 2015 | utILIty WEEK Finance & Investment Stock watch 360 340 320 300 280 260 centrica share price, January-december 2014 Jan Mar Jul Sep 2100 2000 1900 1800 1700 1600 severn trent share price, January-december 2014 Jan Mar May Jul Sep the share price trends of the uK's energy and water utilities diverged in 2014. Water company share prices rose as Ofwat's Pr14 final determinations neared; analysts now expect takeover bids for some uK water companies, including Severn trent, which is reflected in its share price. For energy firms, the threat of enforced restructuring following the CMa inquiry led to weaker investor interest and falls in share prices for giants such as Centrica. This week Falling oil prices to cut utilities' costs Slump in Brent crude prices is expected to filter through to utilities as a lower input cost in late Q1 European utilities could see their input costs fall by the end of the first quarter as Brent crude prices continue to tumble to five- and-a-half year lows, according to analysts. RBC Capital said the heavy losses in global oil markets since last summer will impact more than a third of gas in Europe, which is still bought through oil-indexed supply con- tracts that usually have a two- to six-month time lag. "The sharp drop in oil over the past three to four months will be filtering down as a lower input cost to utilities in late Q1 and they will then be able to pass it through to customers from Q2 onwards," an investor note from RBC Capital said. France is set to become the first European country to cut its regulated gas tariff by 1 per cent to reflect the his- torically low oil price, according to local news reports. While lower oil and gas prices oen have a negative impact on energy companies, RBC Capital said the abil- ity to pass on lower costs to consumers – or at least to cap price rises – may help to ease the political pressure. "There is a silver lining in that, as long as these [lower costs] are passed on to customers, possibly lower overall bills could relieve some regulatory pressure on utilities and avoid any harsher direct intervention from governments," RBC Capital said. "It is important to remember, though, that the 2013/14 winter was extremely mild, with gas demand down 10-20 per cent in most European countries, meaning that overall customer bills might still end up flat or even up [year-on-year]." JA WatEr Southern Water to assess desalination Southern Water has started environmental assessments for a potential £40 million desalina- tion plant near Southampton. The company is "looking at various options for the plant" and carrying out environmental screening assessments. The desalination plant, which could provide up to four million gallons of water a day in periods of low rainfall, is one of a number of options being considered by Southern Water as part of its water resources management plan. A company spokesman said: "A desalination plant is being considered for construction in Southampton by 2028, but com- prehensive planning with the regulators, local authorities and environmental and community groups would be required if it was to be pursued." EnErgy Dong to build Burbo Bank Extension Dong Energy has decided to con- struct the 258MW Burbo Bank Extension offshore windfarm in Liverpool Bay following a final investment decision on the project. The Burbo Bank Extension will consist of 32 wind turbines and is expected to be commis- sioned in 2017. It is one of the first three projects for which Dong Energy was awarded con- tracts for difference in April. Dong Energy executive vice president Samuel Leupold said: "We can now begin the construc- tion of Burbo Bank Extension, which will supply green power to approximately 180,000 UK households." WatEr NI Water remains on 'high alert' Northern Ireland Water "remains on high alert" with a major incident regime in place as industrial action by trade unions continues. The "indefinite" industrial action was started by more than 1,000 members of NI Water staff on 22 December in a dispute over pensions. Members of the GMB, NIPSA and Unite trade unions withdrew from working overtime and have refused to provide on- call services. A major incident team was established over the holiday period to deal with emergen- cies that present a risk to public health or vulnerable customers, and "will remain in place as long as required". NI Water added that "it is virtually inevitable there will be interruptions to services" because the resources available to the company "remain very limited". Global oil markets have suffered heavy losses May Nov Nov

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