Utility Week

UTILITY Week 9th 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 1550 1500 1450 1400 1350 SSE SHARE PRICE, 8 SEPTEMBER - 6 OCTOBER 1650 1600 1550 1500 1450 1400 SSE SHARE PRICE, AUGUST - OCTOBER 2015 SSE's share price climbed around 8 per cent this week following a pre-close statement in which the big six utility said it expects its profits for the first half of the financial year to be stronger than in the year before. The company said it remains conservative about its expectations for full-year results, but the share price still rallied from just over 1,435p pence on Tuesday 29 September to more than 1,550p on Monday 5 October. This week CMA dismisses fears over Pennon merger Authority grants provisional clearance to merger of South West Water and Bournemouth Water Ofwat's concerns over the merger of South West Water and Bournemouth Water were brushed aside by the Competi- tion and Markets Authority (CMA), which has given the deal provisional clearance. South West Water par- ent company Pennon Group completed the £100.3 million takeover of Bournemouth Water in April this year and the deal was automatically referred to the CMA in June for an in-depth investigation. The initial CMA findings into the merger state it is not likely to prejudice Ofwat's ability to compare water companies' performance and set price controls. The ruling comes despite concerns raised by the regulator that the merger could potentially cost the sector's efficiency drive £119 million by 2025. However, Ofwat did not oppose the deal, stating its priority "has been to ensure current and future customers in England and Wales remain properly protected". The regulator's stance on the Pennon-Bournemouth Water merger has raised concerns among investors over its "mixed signals" on mergers and acquisitions. Whitman Howard analyst Angelos Anastasiou told Utility Week: "[Ofwat chairman] Jonson Cox indicated he would be content with mergers happening with some of the businesses. "But the actual input they gave to the Bournemouth Water takeover inquiry was a bit less positive and a bit more reticent about [mergers] and the loss of compara- tors. We're seeing slightly mixed signals." MB RENEWABLES Swansea Bay lagoon project hit by delays Construction of the Swansea Bay Tidal Lagoon has been delayed until spring 2017 because the government is taking "longer than expected" to finalise a con- tract for difference, Tidal Lagoon Power has said. A company spokesperson said it would be ready to build once the remaining permissions have been secured and financial close with investors is achieved. However, "the Board of Tidal Lagoon Swansea Bay [the com- pany created to own and operate the lagoon] has concluded that this won't be possible by the year end, ruling out the start of marine works next spring", they added. "A new timetable has there- fore been agreed with tier one contractors: targeting financial close next summer. Our aim is to then start the initial civil works on site in autumn 2016 in order that the marine works can start in spring 2017." (Analysis, p18) ENERGY Lacklustre response to innovation fund Ofgem's network innovation competition (NIC) for electricity networks has failed to attract high levels of interest, leaving it undersubscribed by as much as £13 million for 2015. The regulator said it had received seven submissions for the 2015 electricity NIC – its replacement for the low carbon networks fund – seeking a total of £68.35 million. However, this is out of a total available pot of £81 million. By contrast, the £18 million gas NIC was oversubscribed by £700,000. Ofgem will announce the projects approved for funding next month. ELECTRICITY National Grid cuts connection forecast National Grid Transmission has said it expects to connect just 11GW of new generation to its network by 2021 – 22GW less than its original forecast at the beginning of RIIO-T1. The firm blamed recent changes in the political and regulatory environment for the downgrade, saying that government cuts to support for renewables have had an "adverse impact on the timing and amount of new generation connections to the grid". In a performance report, National Grid said: "We expect to connect around 11GW of new generation and 48 new SGTs [super grid transformers] over the RIIO period. The baseline figures agreed at the start of RIIO were 33GW of new generation connections and 72 SGTs." Pennon: acquired Bournemouth Water in April 14 | 9TH - 15TH OCTOBER 2015 | UTILITY WEEK 8 Sep 15 Sep 22 Sep 29 Sep 6 Oct Aug 2015 Sep 2015 Oct 2015

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