Utility Week

Utility Week 17th April 2015

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20 | 17TH - 23RD APRIL 2015 | UTILITY WEEK Finance & Investment Stock watch 35 30 25 20 RWE SHARE PRICE, MAY 2014 - MAR 2015 May 14 Jul 14 Sep 2014 Jan 15 Mar 15 16 15 14 13 12 EON SHARE PRICE, MAY 2014 - MAR 2015 Investors have backed Eon over rival German energy giant RWE, saying the former's radical structure overhaul and shift in strategy will prove more beneficial than RWE's cost cutting. "We prefer Eon over RWE on evaluation of earnings risks and due to our ongoing concern on RWE's balance sheet," said the Citigroup utilities team. RWE shares are down 12 per cent year on year while Eon's share price is 6 per cent higher. This week EDF Energy 'in line for windfall profits' Independent supplier Utility Warehouse raises concerns to the CMA investigation into the sector EDF Energy could be in line for windfall profits as the lifespan of its existing nuclear fleet is extended while other vertically integrated players face increas- ingly challenging market condi- tions for thermal generation, the Competition and Markets Authority (CMA) has heard. The concerns were raised by independent energy supplier Utility Warehouse in a formal hearing as part of the CMA investigation into the energy sector. The supplier warned that competition in the retail energy market could be distorted because EDF Energy has the ability to "cross-subsidise the retail part of its business with cheaper energy from its generation busi- ness" either by selling the electricity on the open market or by reducing its retail prices, the CMA heard. "The energy which EDF Energy generated at its nuclear plants could be available to it at a price sig- nificantly below that of the open market, which could enable EDF Energy to cut its own prices and distort the retail market," Utility Warehouse told the CMA. For example, in January this year the operator said it had extended the lifetime of its Dungeness B nuclear power station by ten years to 2028. By contrast, other vertically integrated companies are exposed to the rising cost of emissions through both the European Union carbon market and the UK's own carbon tax due to its thermal generation interests. In addition, gas-fired power profits are exposed to the risk of volatile gas prices. JA ENERGY RWE to slash admin costs by 30 per cent German energy giant RWE plans to slash its administrative costs by as much 30 per cent through a new series of measures to be implemented from the middle of this month, targeting the com- pany's administrative processes. According to German media reports, the Npower parent com- pany distributed the plans of its "Lean Steering" programme internally, saying a second wave of cost-cutting would follow in June. RWE chief executive Peter Terium outlined plans for greater cost efficiencies in its latest financial statement, but according to reports, the memo claims these are "not enough" to bring the group back on track as market conditions across Europe become increasingly difficult for large generators. UK-based utilities analysts at Citi said Lean Steering 2.0 might not be enough, and they favour shares in rival German energy company Eon, which is under- taking a more radical overhaul of its corporate structure. "In our opinion, with power prices at current levels, cost-cutting alone cannot turn around the financial outlook of the group," a Citi investor note said on Monday morning. RWE has said an Eon-style business split could be consid- ered, but is not currently on the table. But a similar route may prove inevitable if its cur- rent plans are not able to yield results, the investors said. ELECTRICITY UK still number one for offshore wind The UK continues to lead global offshore wind but falls behind in onshore wind deployment, which is dominated by China, according to the Global Wind Energy Council (GWEC). The GWEC's annual Global Wind Report found that at 813MW of installed capacity, the UK produces more offshore wind energy than the rest of the world combined, with Denmark "a distant second". Germany took "great strides" in offshore in 2014, with more expected in 2015, and there was offshore progress in China, the Netherlands and Belgium, the report said. GWEC secretary general Steve Sawyer said: "The UK dominance will diminish but I don't think it will be overtaken until and unless the Chinese market takes off in earnest over the course of the next three or four years." China once again topped the global wind energy league table overall. In the annual market, "China was the big story", add- ing 23GW of new wind power to bring its cumulative total to more than 114GW. Dungeness B: lifetime extended by ten years May 14 Sep 2014 Jan 15 Mar 15

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