Utility Week

UTILITY Week 27th May 2016

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Page 17 of 31

Finance & Investment This week Grid rules out cuts in transmission charges National Grid will not use proceeds of gas distribution business sale to lower charges National Grid has ruled out using the proceeds of the sale of its gas distribution busi- nesses to lower the trans- mission charges applied to customers' bills. Aer the release of the company's 2015/16 full year financial results – which revealed an increase in pre-tax profit of 15 per cent to £3 billion, up from £2.6 billion the previous year – chief financial officer Andrew Bonfield confirmed to Utility Week that the proceeds from the sale would be distributed to shareholders. Bonfield said: "These are assets that are owned by shareholders and returning the cash to them is what you would expect us to do. "It is not a profit, it is just merely returning the capi- tal that we have actually invested in these businesses over the years." National Grid said its gas distribution business had made "good progress" on the work needed to create a standalone business. Bonfield quashed suggestions made in national media that Ofgem could put pressure on the transmis- sion operator to cut its rates, saying the regulator has already ruled out a mid-term review of the price control for gas distribution, through which such changes would have to be made. He also told Utility Week it is unlikely that the buyer of its four gas distribution businesses will also bid for the minority stake in SGN, which energy supplier SSE put up for sale earlier this month. LD WATER Severn Trent to save £670m in AMP6 Severn Trent has predicted totex savings of £670 million across AMP6, due to efficiencies across its operational and capital investment activities. In its full-year financial results, the company said this equates to a £260 million outper- formance, of which 50 per cent (£120 million) will be reinvested for the benefit of customers. It includes the £372 million of savings announced in November to reach the final determination level of totex; a further £80 mil- lion of savings locked in today, and an additional £180 million that the company is "confident" in delivering over the remainder of the AMP. Severn Trent posted a total turnover of £1,787 million, down £14.4 million on the year, which the group put down to a £31 mil- lion fall in regulated prices. Underlying profit before tax and interest was £523 million, down 3.2 per cent on the year. GAS SSE mulls partial sale of SGN stake SSE is poised to sell up to one- third of its 50 per cent stake in gas distribution business SGN. If it goes ahead with the sale, SGN will join National Grid's four gas distribution businesses on the open market, making 2016 a potentially transformative year for the ownership profile of the UK's gas network. It said it would return the value of any sale to shareholders. SSE reported pre-tax profit of £593.3 million for the year end- ing March 2016, a 19.3 per cent fall on the previous 12 months (£735.2 million). It blamed lower wholesale gas prices and the mild winter. ELECTRICITY Beatrice windfarm gets green light SSE has announced that con- struction of the £2.6 billion Bea- trice offshore windfarm in Moray Firth will begin this year aer the 84-turbine project reached financial close. The Beatrice offshore windfarm project – owned by SSE (40 per cent), Copenhagen Infrastructure Partners (35 per cent) and SDIC Power (25 per cent) – will be one of the largest private investments in Scottish infrastructure. The 588MW farm is expected to be fully operational in 2019. Beatrice should bring numer- ous socio-economic benefits, delivering about £680 million into the UK and Scottish econo- mies through employment and supply chain opportunities dur- ing construction and up to £525 million during the windfarm's 25-year life. Shareholders to get proceeds of gas business sale 18 | 27TH MAY - 2ND JUNE 2016 | UTILITY WEEK Stock watch 11 20 10 18 9 16 8 14 EGDON SHARE PRICE, 19 - 24 MAY IGAS SHARE PRICE, 19 - 24 MAY 19 May 19 May 20 May 20 May 23 May 23 May 24 May 24 May Shares in both IGas and Egdon Resources rocketed by about 25 per cent as fellow shale firm Third Energy's application to frack its existing well near Kirby Misperton was approved by North Yorkshire county council on 23 May. Shares in IGas shot up to 20.00 pence on Tuesday morning aer closing the previous day at 15.75p. Shares in Egdon closed at 9.45p on Monday, before rising to 10.43p the following morning. Full story, p9.

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