Utility Week

UTILITY Week 19th June USE

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UTILITY WEEK | 19TH - 25TH JUNE 2015 | 17 Finance & Investment Stock watch Share prices at Engie fell following a warning from credit ratings agency Moody's that it faces a negative outlook because of concerns over its operational performance as well as weak power and commodity prices. Share prices closed at €17.52 on 11 June, before the note was issued, but dropped to €16.95 on 12 June and then to €16.70 by noon on 16 June. The share price was as high as €20.52 at the start of December last year. This week Investor fears over CMA probe diminish Citigroup analysts say investors are reassured as CMA indicates break-up of big six is unlikely Concerns over the initial findings of the Competition and Markets Authority (CMA) have all but evaporated now that a break-up of the big six seems unlikely, according to Citigroup analysts. Early indications from the CMA suggested it had found little cause for concern in the verti- cally integrated structure of the UK's largest energy suppliers, allaying early fears that the companies may be forced to separate their retail and generation business arms in a radical industry overhaul. Ahead of the publication of the CMA's initial find- ings in a few weeks' time, a weekend report from the Daily Mail cited sources within the CMA as saying there would be no calls for a break-up. Citigroup analysts have backed the report, saying: "In our conversations with investors, we believe the market is not too concerned about the possible announcements to come. "Since the release of CMA's issues statement, we believe market concerns for a possible break-up have diminished to near zero. Of bigger interest, in our opin- ion, is any remedies imposed on the number, level and flexibility of tariffs and the discrepancies in profitability between customers that have never switched and those that have shopped around," the analysts added. The Daily Mail report quoted an industry insider as saying: "The CMA will give a clean bill of health to the big energy companies on this issue. It has accepted that the notion that they are taking advantage of consumers because they own generating arms does not stack up." JA WATER Holding companies 'not transparent' The holding companies behind the UK's regulated water com- panies are failing to provide the transparent financial informa- tion Ofwat has requested, the regulator said this week. In an update on its good governance principles, first published in January 2014, Ofwat said there was "limited evidence" that most holding companies were meeting its criteria regarding transparency of information. The regulated companies themselves had done better, the regulator said, with the appoint- ment of independent chairs and board members, and regular reviews of board membership. Ofwat will publish its find- ings in the autumn. WATER Welsh Water profits up by more than half Welsh Water has posted a jump in underlying profits for 2014/15 of more than 50 per cent. Preliminary results for the year ended 31 March 2015 showed that underlying profits increased from £50 million to £77 million. Revenues were also higher, up from £737 million to £752 mil- lion, with the increase attributed to "efficiency savings" achieved within the company and to a 2.05 per cent regulated tariff increase. The increase comes weeks aer Welsh Water announced it was cutting 360 jobs as part of a £56 million efficiency drive over the next AMP period, something the GMB has said is the result of an "overzealous" financial settle ment from Ofwat. WATER Dee Valley Group profits hold steady Dee Valley Group posted steady like-for-like profits despite facing increased costs, its financial results have revealed. The group, which is the holding company of Dee Valley Water, posted an operational profit of £7.45 mil- lion for the year ended 31 March 2015, up £0.2 million on the previous year. This is despite a rise of £0.9 million in operational expenses resulting from "incremental con- sultancy costs" associated with the PR14 process, an increase in reactive maintenance costs and a higher bad debt charge. These additional costs were partially offset by growth in revenues of £0.8 million due to "favourable" consumption in the household and non-household sectors, and the impact of a 2.2 per cent price increase. Lower financing costs of £3.25 million compared with £3.5 million in the previous year also helped to offset the higher costs. Generation divestment unlikely 19.0 18.5 18.0 17.5 17.0 16.5 ENGIE SHARE PRICE, 19 MAY – 16 JUNE 19 May 26 May 2 Jun 9 Jun 16 Jun 22 21 20 19 18 17 16 ENGIE SHARE PRICE, JULY 2014 – JUNE 2015 Jul 2014 Sep Nov Jan 2015 Mar May

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