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UTILITY WEEK | 1ST - 7TH APRIL 2016 | 17 Finance & Investment This week Operating profits set to fall, warns UU Tighter price controls and payouts for flooding will take their toll on United Utilities this year United Utilities' (UU's) operating profit for 2015/16 will be lower than 2014/15, mainly because of tighter price controls, the com- pany said in a trading statement. The group said the drop also reflected an increase in infra- structure renewals expenditure (expected to be around £20 mil- lion higher than last year) and depreciation, as well as employee and other operating costs. The figure will be partly offset by a reduction in bad debt and regulatory fees, and the group said it was "in line with expectations". Costs relating to business retail market reform would be around £10 million for the full year, the group said, of which £5 million was recognised in the first half. Operat- ing profit would be hit by the extreme weather that caused flooding in December 2015, although it expects these charges to be largely offset by insurance. Analysts have predicted the cost of flooding to UU could be as much as £50 million, including clean-up costs of between £20 and £25 million, and an Ofwat- imposed penalty of £20-£22 million. But UU said it did not expect the extreme weather to have a material impact on its outcome delivery incentives. The company also incurred costs of around £25 mil- lion relating to the cryptosporidium outbreak last summer, which were recognised in the first half of the 2015/16 financial year. UU will announce its 2015/16 full year results on 26 May 2016. LV ELECTRICITY Good Energy profits plummet 92 per cent Good Energy has reported a 92 per cent drop in pre-tax profit for the year ending December 2015, following the sale of West Raynham solar park (see Stock watch, below). The company said the perfor- mance was in line with expecta- tions. Revenue grew by 12 per cent over the period, driven by customer growth – up 44 per cent – and increased revenue from generation, which recorded output up 83 per cent on 2014. Good Energy chief executive Juliet Davenport said: "Good Energy has seen significant growth in the past 12 months. It has continued to deliver against its strategic business plan – investing in systems and assets, and driving growth across all sectors of its customer base." ELECTRICITY Most utilities 'back energy storage' Most utility companies across the world are planning to invest in energy storage and expect to see a return on that investment within ten years, research by Accenture has claimed. A survey of 85 industry execu- tives from 18 countries revealed that 77 per cent were already investing or planning to invest in energy storage in the next ten years. Almost half of those surveyed also said they expected moderate or significant revenue from investing in storage by 2030. Accenture said it expected network companies to learn from their experience of the uptake in domestic solar PV and "get into the game early". Accenture smart grid services' global managing director Stephanie Jamison said: "We see utilities learning from PV, where they did not have sufficient means to manage the effective integration of the new supply, and lagged in developing complementary services." ENERGY LCF will overspend despite cuts Recently announced cuts to low- carbon subsidies will save £300 million in the last four years of the Levy Control Framework (LCF), but the government is still on course for a £1.9 billion over- spend in the final year, based on figures released by the Office for Budgetary Responsibility (OBR). The OBR has projected the total cost of contracts for differ- ence, the Renewables Obligation and the feed-in tariff will reach £10.9 billion in nominal prices in 2020/21. According to investment firm Jefferies, the LCF budget in that year translates to roughly £9 billion in nominal prices. This means the LCF will be over budget by around £1.9 billion. Counting the cost of extreme weather Stock watch 210 205 200 195 GOOD ENERGY SHARE PRICE, 21 - 29 MARCH 21 Mar 23 Mar 29 Mar 210 200 190 180 GOOD ENERGY SHARE PRICE, 29 FEBRUARY - 29 MARCH 29 Feb 8 Mar 15 Mar 22 Mar 29 Mar Shares in Good Energy were le largely unscathed by the announcement of a 92 per cent drop in profit in its full year results last week. The supplier said the performance was in line with expectations, highlighting a 12 per cent increase in revenues. Despite a few dips, the shares finished the week trading at 203.5p – only slightly lower than the starting point of 205p. The stocks are up over March aer beginning the month at 186.6p.