Utility Week

UTILITY Week 2nd October 2015

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Finance & Investment Stock watch 780 760 740 720 700 24 Sep 25 Sep 28 Sep 29 Sep 8 Sep 15 Sep 22 Sep 29 Sep PENNON SHARE PRICE, 24 - 29 SEPTEMBER 760 750 740 730 720 710 PENNON SHARE PRICE, 8 - 29 SEPTEMBER South West Water's parent Pennon this week saw its share price climb 5.5 per cent following its investor day and latest financial statement. Although the report contained few surprises, analysts said the company reiterated its message that it is focused on remaining at the frontier of efficiency and is targeting outperformance for AMP6 2015-2020. It also hinted that its acquisition of Bournemouth Water could be okayed by the CMA 'shortly'. This week ELECTRICITY Swansea Bay Tidal aims for financial close next July Swansea Bay Tidal Lagoon has said it is working towards secur- ing a financial close in July 2016, before starting construction next autumn. Chief executive Mark Shorrock told Utility Week the company was "driving this pro- cess as if the [contracts for differ- ence auction] has happened". "We're finishing the advance works phase next month," he said. "We then do the real detailed design. We're in a process whereby we will engage with the banking community in January next year and drive towards financial close." Speaking at a conference in Berlin, Shorrock said the banks did not have any concerns about financing the project. "Banks just love our technol- ogy. Banks are super-keen," he said. PAN-UTILITY European utilities 'could go broke' A senior energy academic has warned that European utilities face possible bankruptcy, and may rely on government bailouts to survive. Professor Jonathan Stern from the influential Oxford Insti- tute of Energy Studies (OIES) said the debate over government intervention in the energy sector should not rule out the chance that bankrupt utilities may need to be bought out by government in order to continue to provide a service. "I don't want to sound too dramatic but these utilities are facing an existential threat," Stern told delegates of a London conference. "Rather than having an ideological debate over private versus state ownership, a num- ber of these companies have said it is entirely possible that it may need to be bought," Stern said. See analysis, p18 WATER Pennon: CMA ruling expected soon The Competition and Markets Authority (CMA) is poised to offer its provisional findings on Pennon's takeover of Bourne- mouth Water. Pennon, the parent company of South West Water (SWW), said in its financial results that the mandatory investigation into the merger would conclude shortly. This could see the approval of the £100 million deal. "Bournemouth Water's results are in line with expecta- tions and the referral is progress- ing as expected," said Pennon. "Provisional findings from the CMA are due to be published shortly," it added. UTILITY WEEK | 2ND - 8TH OCTOBER 2015 | 17 Drax shelves future White Rose CCS plans Generator says decision is based purely on the different financial and regulatory environment Generation giant Drax has said it will not continue with plans to develop the White Rose carbon capture and storage (CCS) project beyond the initial development phase, blaming the govern- ment's shi in energy policy. Drax will complete its work on the feasibility and technology development stage of the ambitious scheme alongside its project partners, but will withdraw from the con- sortium once complete. "We are confident the technol- ogy we have developed has real potential, but have reluctantly taken a decision not to invest any further in the development of this project," said Drax operations director Pete Emery. "The decision is based purely on a drastically differ- ent financial and regulatory environment and we must put the interests of the business and our shareholders first," he added. Analysts said the decision was "not a great surprise" given the regulatory uncertainty faced by companies reliant on green subsidies. Drax is in the process of converting its coal-fired power generation units to biomass, with two of the three reliant on subsidies through the government's Renewa- bles Obligation regime, which has suffered multiple blows following the Conservatives' victory in the election. In addition, Drax took a multi-million pound hit following the government's decision to scrap the levy exemption certificates (Lecs) previously offered to renewa- ble generators. Market experts at Icis said the move could cut £5.54/MWh of revenue for renewable generators. JA White Rose: Drax will not invest any further

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