Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/453358
UTILITY WEEK | 16Th - 22nd JanUarY 2015 | 21 Finance & Investment This week Nuclear group loses Sellafield contract nda strips private consortium of £9 billion clean-up contract because of soaring costs The Nuclear Decommission- ing Authority (NDA) has stripped the consortium responsible for the clean- up of the Sellafield nuclear waste site of a contract reportedly worth £9 billion, following spiralling costs for the project. A government statement said ownership of Sellafield would revert back to the NDA in order to "simplify" the authority's relationship with the site and allow a greater focus on progress and value for money. The NDA's chief executive, John Clarke, said: "This decision is the result of careful consideration and review of various commercial approaches in use where the combination of public and private sector comes together to deliver complex programmes and taxpayer value." The decision comes less than a year aer the Public Accounts Committee (PAC) slammed soaring costs, which reached "astonishing levels" under the control of private consortium Nuclear Management Partners (NMP). NMP was awarded the Sellafield clean-up contract in 2008, but PAC chair Margaret Hodge said last year the committee was "not confident that taxpayers' interests are being protected". The PAC was told the cost of one project at the site nearly doubled from £387 million to £729 million within 18 months, with another delayed by six years. Hodge called for the contract to be taken from NMP unless its performance improved. JA WaTEr Welsh Water secures £230m EIB loan Welsh Water has secured a £230 million loan from the Euro- pean Investment Bank (EIB) to help fund its AMP6 investment programme. The 15-year loan is the biggest deal between the EIB and Welsh Water in more than two decades and will help fund its £1.5 billion capital investment programme starting in April 2015. The money will be used to fund a £120 million invest- ment programme to rebuild or upgrade 12 water treatment works, as well as rolling out innovative schemes such as the £15 million sustainable urban drainage scheme, RainScape, in Llanelli and Gowerton. The company said it had agreed a "competitive interest rate" with the EIB as a result of it "having the highest credit rating in the UK's utilities sector". Welsh Water has benefited from more than £500 million of loans from the EIB since 2001, and this has helped to finance more than £1 billion of capital expenditure projects. Welsh Water chief executive Chris Jones said: "As a company without any shareholders, our sole focus is on providing the best possible service to our customers at the most affordable price. "To deliver this, we must manage challenges such as accessing funding for our invest- ment programmes at a com- petitive rate as well as the tight management of costs." The EIB has provided more than £3.2 billion for investment by water companies across the UK over the past five years. ELEcTrIcITY Eon to sell Italian power assets to EPH Eon is set to sell its Italian gas and coal-fired generation assets to the same Czech energy company that agreed to buy its Eggborough coal power plant last year. Eon said it would sell around 4.5GW of capacity to Energeticky a Prumyslovy Holding (EPH), as part of a radical overhaul that will see much of its older ther- mal generation assets sold to allow a greater focus on emerg- ing technologies and retail. The EPH group operates mainly in the Czech Republic, Slovakia and Germany, through a complete value chain. At the time, its acquisition of the 2GW Eggborough plant more than doubled its installed capacity portfolio of 1.75GW. Utilities analysts at Citigroup and RBC Capital said further disposals of Eon's 6GW of Italian power assets were possible. The sale to EPH is expected to close next year, subject to EU competition approvals. Sellafield: back under NDA ownership Stock watch 16p 15p 14p 13p 12p Eon sharE pricE, January 2014 - January 2015 Jan 2014 Mar 2014 May 2014 Jul 2014 Sep 2014 Nov 2014 Jan 2015 analysts at rBc capital this week said that Eon's recently announced restructuring into two new entities "clearly distinguishes it from integrated peers". "It brings greater investor clarity and should allow Eon to close the gap to our sum-of-the- parts valuation. One key attraction is the potential for higher dividends. We forecast a combined payout of €1.0/share in 2016, resulting in a yield of 7.5 per cent, which is comfortably the best on offer from the peer group," the analysts said. Eon's share price peaked in the week following its restructuring plans, at 15.46 pence, but eased back in the new year.