Utility Week

UTILITY Week 23rd January 2015

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Page 18 of 31

UTILITY WEEK | 23rd - 29Th JanUarY 2015 | 19 Finance & Investment This week UK fracking 'faces financial uncertainty' Committee told uncertain economic future poses biggest threat to UK's nascent shale gas industry The future of the UK shale gas industry in the UK is uncertain because it faces a difficult finan- cial future, MPs have been told. In the first of two sessions examining the environmental risks of fracking, the Environ- mental Audit Committee heard that it was uncertain economics, rather than environmental risks, that posed the biggest threat to the UK's nascent shale industry. Chair of environmental think-tank E3G, Tom Burke, said he had confidence in the regulatory authorities to manage the shale gas industry, but told the committee it was "a very difficult, competitive environment". He said: "It is difficult for a new industry with no infrastructure – financial infrastructure or supply chain infrastructure – to build from scratch. It won't result in you being the least-cost operator. "If you want to be something other than niche, you have to get the costs down. And it is very difficult to get cost down to compete with others. That is likely to be a disincentive to investors." He added that the carbon emission commitments the UK was signed up to would also limit the long-term future of shale gas. Professor Paul Stevens, a fellow at Chatham House in energy and environment resources, also raised concern over the economic future for UK shale development. He told MPs: "I remain sceptical it will be a viable economic option over a significant time period here in the UK." Stevens said it would take a long time to drill the number of wells needed to make shale gas production economically viable. MB ELECTrICITY Hinkley investment deal by end of March EDF expects to sign an investment agreement with two Chinese nuclear power companies for the Hinkley Point C new nuclear project by the end of March. At a conference in Beijing, the chief executive of EDF China, Song Xudan, confirmed the investment deal would be signed with China General Nuclear Power (CGNP) and China National Nuclear Corp (CNNC) at the end of the first quarter, according to a report from Bloomberg. The agreement would pave the way for construction of the first UK new nuclear power plant in a decade to begin by the start of 2016. EnErgY Split for RWE possible 'over time' German energy giant RWE may follow the lead of rival Eon in splitting the upstream and sup- ply sides of its business in the future, but has ruled out a break- up in the near term. In an interview with Bloom- berg, RWE chief financial officer Bernhard Guenther said the com- pany's reasons for not currently following suit "are all of a nature that might change over time". Late last year, Eon said it would focus on emerging energy innovations including renew- ables, distribution networks and customer solutions; while a new independent business will man- age the group's conventional power generation, energy trad- ing and upstream activities. RWE's Guenther said the move "makes it easier for differ- ent shareholder groups to pick which type of risk return trade- off they want to own", but said RWE must work to reduce its debt before thinking about how to structure itself. EnErgY Efficiency saves £37.2bn each year The UK's investment in energy efficiency has already saved the economy £37.2 billion every year by reducing the need for centralised generation capacity and the country's dependence on imported fossil fuel sources. A report from the newly renamed Association for Decen- tralised Energy (ADE) has found that demand-side investment has saved the UK the need for 14 power plants and cut fossil fuel imports by two-thirds. By 2020, decentralised energy could save the UK a further £5.6 billion, the report claims. "Cutting energy waste using demand-side services delivers economy-wide benefits," said ADE director Tim Rotheray in a statement alongside the report. See Industry view, page 21 Uncertain future: UK's shale gas industry Stock watch share prices, 20 December - 20 january The share prices of the three publicly listed water companies – Severn Trent, United Utilities, and South West Water (under parent company Pennon) – all continued on their steady upward trajectory. This is despite a slight dip recorded by all three around 14 January and the launch of Ofwat's new regulatory strategy. Pennon's shares showed a significant fall – down by 20.50p – around the strategy launch, before rebounding 13.5p to 905p. United Utilities' share price fell from 950p on 12 January to 941.50p on 14 January, before bouncing up to 964.50 two days later. Severn Trent went from 2095p down to 2071p on the day of the launch, but picked back up again to 2138p the next week. united utilities pennon severn Trent 980 960 940 920 900 920 910 900 890 2150 2100 2050 2000 1950 23 Dec 30 Dec 6 Jan 13 Jan 20 Jan

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