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UTILITY WEEK | 6Th - 12Th March 2015 | 17 Finance & Investment This week PR14 sparks credit reviews by Moody's Moody's to review Yorkshire Water's rating and warns that Severn Trent's credit quality will decline The investor community has given PR14 a lukewarm wel- come, with Moody's launching a review of Yorkshire Water's credit rating and warning that Severn Trent's credit quality will deteriorate. Moody's is reviewing York- shire Water's credit rating with a view to downgrading it from its current Baa1 status. The potential downgrade is being considered because of the impact of low interest rates and concerns over the company's debt hedging strategy, despite a final determination broadly in line with its submitted business plan. The rating review is expected to be completed within the next three months. Severn Trent's credit quality "will deteriorate" over the five-year AMP6 cycle because of a challenging finan- cial settlement from the regulator, according to Moody's. Moody's vice president – senior analyst, Paul Marty, said: "Financial policy changes made by the group in response to the review will be insufficient to fully offset the challenging regulatory price review." These changes include cutting about 100 jobs, slashing the final dividend by 5 per cent and launching a £100 million share buyback programme, and were announced at the end of January when Severn Trent accepted its final determination. Welsh Water's outlook has been upgraded to positive, as has Southern Water's, primarily because it is allowed to recoup about £200 million from under-recovered AMP5 revenues. Anglian, Thames and South East Water all have stable outlooks. MB ELEcTrIcITY Drax sees challenges despite good results Generation giant Drax posted strong preliminary financial results for 2014 despite the historic collapse in global energy commodities markets, but warned that continued market weakness could hit earnings in the year ahead. Drax reported its 2014 earn- ings at £229 million, in line with its 2013 results and ahead of consensus expectations of £219 million. Net profit also beat expectations, at £96 million. In addition, the final dividend of 7.2 pence per share was ahead of Bloomberg's forecast of 6.2p. The generator's results were bolstered by higher sales through its Haven Power retail arm at £1.1 billion compared with £751 million the year before, but chief executive Dorothy Thompson added that internal cost efficiencies had also helped. Despite these results, Drax said the outlook for 2015 remains challenging due to the commodi- ties markets' downward pressure on coal-fired power profits. EnErgY First full-scale tidal plans move ahead Development of the UK's first full-scale tidal lagoon power plant has moved forward with a key planning application sub- mitted in line with a 2018 final approval target. Tidal Lagoon Power said on Monday it has submitted an environmental impact assess- ment report to the planning inspectorate for its Cardiff Tidal Lagoon, which will have an installed capacity of between 1.8GW and 2.8GW. Tidal Lagoon Power expects to submit a full planning appli- cation for Tidal Lagoon Cardiff in 2017 and a decision is expected in 2018. The plant will include up to 90 turbines set within a 22km breakwater. ELEcTrIcITY Renewables fund profit soars by 126% The Renewables Infrastructure Group (Trig) has more than dou- bled its annual profit before tax to £23.3 million in 2014. Annual results show the fund's pre-tax profit was up 126 per cent from £10.3 million in 2013. This was a result of the fund adding 52 per cent to its generating capacity, bringing it to 439MW, with nine newly acquired projects. This increased the fund's portfolio value to £472.9 million at the end of 2014, compared with £300.6 million the previous year. The acquisi- tions include the 16MW capacity Earlseat windfarm in Scotland, which was bought in a deal worth up to £32 million. Yorkshire Water's rating may be downgraded Stock watch 20.0 19.5 19.0 18.5 gdf suez share price, 25 february - 2 march 2015 25 Feb 26 Feb 27 Feb 2 Mar 20.5 20.0 19.5 19.0 18.5 18.0 gdf suez share price, 8 december 2014 - 2 march 2015 8 Dec 5 Jan 19 Jan 18 Feb 2 Mar gDF Suez shares climbed on the publication of its annual results on 26 February, despite it posting a net loss of €9.1 billion in 2014, down from a net profit of €1.5 billion in 2013. It cut its dividend from €1.50 to €1 per share for 2014/16 and wrote off €14.9 billion. Shares rose to €19.51, from €19.32 the previous day. analysts said the write-down and dividend cut gave gDF clarity. a higher forecast and capex rise were also seen as positive. 2 Feb