Utility Week

Finance & Investment This week Networks to retain innovation profits Ofgem to allow networks to keep underspend if they have invested their own cash in NIC projects Network companies could keep the profits they make from investing in innovation, under proposals from regulator Ofgem. Currently, all profits from projects funded by the Network Innovation Competition (NIC) must be returned to customers. However, the regulator is propos- ing rules that would allow net- works and third parties to keep any underspend result- ing from efficiency, or revenue generated from means other than intellectual property, if they have invested their own funding in the projects alongside NIC cash. The default position will still be that all underspend from NIC projects is returned to customers. However, under the proposals, the licensee will have the option of requesting a redistribution of the money to other parties to reflect any financial contributions they have made. The regulator said this was justified because custom- ers benefit from projects going ahead with network and third-party funding, requiring less support from the NIC. Ofgem added that NIC projects have already returned underspend, but it feels "it would be better to clarify the default position to avoid any confusion in the future". The NIC funding mechanism already allows com- panies to fund projects by receiving payments through National Grid Electricity Transmission and National Grid Gas. It also allows money to be returned to custom- ers when a project is halted, when money is spent not according to the project directive and when a project has received revenue from intellectual property. The consultation will close on 29 March. LD ENERGY Record loss for Eon as split approaches German energy giant Eon has posted a record net loss of nearly €7 billion (£5.4 billion), as its separation into two compa- nies – Eon and Uniper – nears completion. The loss was the result of an €8.8 billion write-down on its generation assets, the firm said, resulting in a 10 per cent year- on-year decline in operating profit to €7.6 billion, in line with the company's expectations. Operating profit at Eon UK remained steady at €384 million, as a weak pound and lower costs in conjunction with government- mandated energy-efficiency measures were offset by nar- rower margins, lower sales volumes and keen competition. Eon predicts that operating profit at a group level in 2016 will fall further to between €6 billion and €6.5 billion, because the first months of the year have seen new lows in energy prices, further declines in gas prices and a persistently weak Russian rouble. WATER Welsh Water parent to be restructured Welsh Water's parent company, Glas Cymru, has confirmed changes to its structure that will enable the potential creation of new subsidiary companies, joint ventures and other commercial activities. Following approval from its members at an extraordinary general meeting, and a scheme of arrangement in the High Court, the board confirmed the creation of a new holding com- pany – Glas Cymru Holdings Cyf – which will hold the existing Glas Cymru Group. The company said these changes would enable it to respond more effectively to changes within the water and wastewater sectors. ENERGY SSE sells stake in Clyde windfarm SSE has agreed the sale of a £355 million stake in its 349.6MW Clyde windfarm to Greencoat UK Wind and GMPF and LPFA Infrastructure LLP (GLIL). The windfarm is operational at 349.6MW, with a 172.8MW extension due to complete in June 2017. The joint equity stake by Greencoat UK Wind and GLIL will be diluted from 49.9 per cent to 30 per cent a¦er completion, with SSE retaining 70 per cent. In 2014, SSE announced a disposal programme with intended proceeds and debt reduction of £1 billion through the sale of non-core assets and existing or in-development onshore windfarms – this latest sale surpasses that target. NIC projects have already returned underspend 14 | 18TH - 24TH MARCH 2016 | UTILITY WEEK Stock watch 2,200 2,150 2,100 2,050 2,000 SEVERN TRENT WATER SHARE PRICE, 16 FEBRUARY - 15 MARCH 2016 16 Feb 23 Feb 1 Mar 8 Mar 15 Mar 960 940 920 900 880 UNITED UTILITIES SHARE PRICE, 16 FEBRUARY - 15 MARCH 2016 16 Feb 23 Feb 1 Mar 8 Mar 15 Mar Shares in Severn Trent Water and United Utilities have continued on a downward trajectory over the past month, despite the announcement on 1 March that they would create a joint venture for the non-household retail market. Severn Trent's share price fell from a high of 2,178p on 22 February to a low of 2,024p on 10 March, while United Utilities saw a high of 948.50p on 22 February, before dropping to a low of 891.50p on 10 March.

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