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18 | 13th - 19th March 2015 | UtILItY WEEK Finance & Investment Stock watch 24.6 24.4 24.2 24.0 23.8 23.6 RWE shaRE pRicE 10 MaRch 2015 10am 12pm 2pm 4pm 35 30 25 20 RWE shaRE pRicE 10 MaRch 2014 - 10 MaRch 2015 Apr 2014 Jul 2014 Oct 2014 Jan 2015 Shares in Npower parent rWE faltered on 10 March after the release of the group's financial results for 2014. although the company saw profit in line with expectations, the outlook for 2015 remained under pressure from falling wholesale prices and difficult generation conditions. the share price opened at €24.50 and see-sawed to lows of €23.83 and highs near the opening level within hours before trending lower again. This week Competition could push up cost of capital retail competition in the water sector will add risk and push up companies' costs, say analysts Retail competition in the water sector is seen as a potential risk and could push up the cost of capital, financial analysts have warned. Investors are set to price in the perceived additional risk that comes with a competitive retail market, whereby returns are not guaranteed. This is coupled with the impact of slender margins, which are expected to be less than 3.2 per cent. Speaking to Utility Week, HSBC analyst Verity Mitch- ell said that "changing the risk [by introducing competi- tion] will push up the cost of capital". She also warned that if returns were not attractive enough, "public inves- tors will be quick to move elsewhere". RBS head of coverage and debt capital markets Richard Bartlett also sounded a warning for the industry. "Competition in the retail sector has to be handled carefully," he told Utility Week, adding that it could otherwise pose a risk to the financeability of the sector. This view was echoed by Moody's associate manag- ing director Neil Griffiths-Lambeth, who said at Water UK's City Conference last week that companies and their investors faced "a world that is a less comfortable place". He said that under the non-competitive model, "cus- tomer service didn't matter and it was of little interest for debt investors" but now it would play an important role, adding more risk, which will be priced into any finance agreements. MB ENErgY Npower operating profits fall 26% Npower's operating profit for last year came under significant pressure as the supplier sought to address its poor customer service record and meet rising network costs, parent company RWE said on Tuesday. The UK subsidiary of German energy giant RWE saw operating profit fall 22 per cent to €227 mil- lion (£162.5 million). "The UK supply business had to cope with a number of burdens," RWE said, including historically mild weather over the past year and "higher than expected" costs relating to a customer service restructuring. The group's results showed operating profit fall 25 per cent on the year to €4 billion (£2.8 billion). gaS Ineos buys into IGas licence areas Ineos has expanded its interest in the UK's nascent shale indus- try with a £30 million deal to take a 50 per cent stake of seven of IGas's shale gas licences in the Bowland area of northwest England. The deal also includes IGas's Scottish shale site near Ineos's Grangemouth refinery, and will see the chemicals giant take the remaining stake in the licence to give the company 100 per cent ownership. Ineos Upstream chief execu- tive Gary Haywood said the "significant step" was part of the company's plan to become "the biggest player in the UK shale gas industry". In October last year, Ineos bought a 51 per cent stake in the Scottish project, which already has a five-year gas supply deal with big six utility SSE. Ineos said it intended to use gas extracted from the licence to fuel the recently acquired 145MW combined heat and power plant which supplies power to its petrochemical refinery. ELEctrIcItY UK-Ireland power link scrapped Ofgem has proposed scrap- ping plans for a new electricity interconnector linking the UK to Ireland, in favour of three pro- jects to drive greater connection with continental Europe. The regulator said it was consulting on abandoning plans to offer financial support to Greenlink through its cap and floor regime because it did not offer value for money. Under the terms of the regime, developers are guaran- teed revenue at an agreed floor price but with a ceiling set at the cap price. It is funded through standard transmission charges. See news, p4 Customer service is an unknown quantity