Utility Week

UTILITY Week 5th February 2016

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Finance & Investment This week 300,000 electricity and gas users quit SSE Supplier is to analyse its power generating strategy in face of 'challenging' market conditions Big six energy supplier SSE lost 300,000 gas and electricity cus- tomers in Britain and Ireland in the nine months to 31 December 2015, with accounts falling from 8.58 million to 8.28 million, according to a trading update issued on 28 January. The supplier, which also announced plans to cut gas tariffs by an average of 5.3 per cent, is on target to deliver adjusted earnings per share of at least 115p for 2015/16, and still expects to report an increase in the full-year dividend for 2015/16 at least equal to RPI inflation. The company said it would shortly complete an analysis of market conditions and options for the future operation of power generating plant. The Daily Tele graph reported that the early closure of Fiddler's Ferry, which failed to secure a contract in December's capacity auction, was on the table. SSE estimated that its household customers' average electricity consumption fell three per cent in the period, while their gas consumption remained steady. Its homes services customers rose by 14 per cent to over 390,000. The number of power cuts per 100 customers fell in its network businesses, from 53 to 49 year-on-year for Scottish Hydro Electric Power Distribution, and from 46 to 34 for Southern Electric Power Distribution. Chief executive Alistair Phillips-Davies said: "SSE con- tinues to fulfil its core purpose of providing the energy people need in a reliable and sustainable way… Market conditions, however, continue to be challenging." EB See stock watch, below. ENERGY Policy uncertainty deters investors Uncertainty over energy policy is making Britain less competi- tive for investors, experts told the Energy and Climate Change Committee this week. Andrew Lee, chief executive officer and managing director at Velocita Energy Developments, said: "Long-term investment in the onshore wind sector in France and Germany is achieved at five, six per cent returns. In the UK, we probably have to add two or three per cent on to that." Matthew Knight, director of energy strategy and government affairs at Siemens, said Britain should be the best place in the world to invest in energy: "We have the rule of law; we have access to the city; we have 25 years of privatisation." However, he said the political system was holding the country back: "[Europe is] a lot more consensual and technocratic about the way it views energy policy. Here in the UK… it's a much more partisan thing." WATER Ofwat seeks proof of long-term resilience Water companies must include an "explicit statement" in their statutory and regulatory accounts to demonstrate long- term financial resilience, under new proposals set out by Ofwat. The regulator said it would not publish the detailed results of companies' stress tests aer objections from water compa- nies. However, Ofwat said it "still believed" firms should stress test their plans to demonstrate that they are financially resilient. Under the proposals, compa- nies would have to make a state- ment to Ofwat about how far forward they have looked and outline actions they had taken if stress testing had resulted in an "unacceptable" level of deterio- ration in their financial metrics. ENERGY District heat needs 'level playing field' The government should create a level playing field for invest- ment in district heating to boost development of the sector, the Association for Decentralised Energy (ADE) has told MPs. In an evidence session to the Energy and Climate Change Committee on 26 January, ADE director Dr Tim Rotheray welcomed the £300 million the government has put in place to develop district heat projects, but said it needs to develop a "regulatory investment frame- work" to support future growth. He said district heating needs a framework comparable to that for electricity and gas so "insti- tutional investors" can evaluate them on a "level playing field". Fiddler's Ferry: SSE may consider early closure UTILITY WEEK | 5TH - 11TH FEBRUARY 2016 | 13 Stock watch 1460 1440 1420 1400 1380 SSE SHARE PRICE, 27 JANUARY - 2 FEBRUARY 28 Jan 29 Jan 1 Feb 2 Feb 1700 1600 1500 1400 1300 SSE SHARE PRICE, 2 NOVEMBER 2015 - 2 FEBRUARY 2016 Dec 2015 Jan 2016 Feb 2016 Shares in SSE rose briefly in the past week following the supplier's announcement of a 5.3 per cent cut to its gas tariffs. The company also released its third-quarter trading statement (see story, above). Market analyst Whitman Howard said SSE shares had on the whole performed poorly since the start of 2016, adding: "Given the relatively benign trading statement, we still see the potential for some continued share price recovery in the short term."

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