Utility Week

UtilityWeek 5th August 2016

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Finance & Investment This week Centrica profit slides as customers exit Company puts loss of 400,000 customers down to competition and to long-term contracts ending Centrica's adjusted operating profits were down by 12 per cent year on year in the first half of 2016 to £853 million, as its UK home business lost almost 400,000 customers. The group said the profit drop was mainly driven by low com- modity prices – gas, power and oil – as well as warm weather in North America, and was offset by cost reductions. Adjusted operating profits for Centrica's UK home division fell by 6 per cent to £635 million. Customer numbers fell by 2.7 per cent compared with the previous half-year to 21.8 million, and were down by 3.2 per cent on the same time last year. Centrica blamed its customer losses on "long-term contract roll-offs and increased competitive intensity". It added that it gained customers in June following the launch of a new tariff. The company's UK business division "returned to profitability in the first half, with the issues experienced following implementation of a new billing and customer relationship management system having been largely rectified by the end of 2015". Adjusted operating profits for the UK business arm were four times those in the same period last year at £31 million. Customer numbers were down by around 70,000 – or 9 per cent – year on year. Centrica's overall revenues fell by 13 per cent to £13.38 billion. The group said that it had made "strong progress" towards cutting its annual costs by £750 mil- lion by 2020. TG energy SSE retail base shrinks by 50,000 Despite shedding 50,000 retail customers in the three months to the end of June, SSE made a "solid start" to the financial year, its chief executive said in a first-quarter trading update. Retail customer numbers fell from 8.21 million at the end of March to 8.16 million. At the same time the number of home service customers grew from 400,000 to 416,000. The com- pany has installed more than 250,000 smart meters so far. Renewables generation over the quarter was 1.51TWh, down from 2.2TWh during the same period last year, due to "differ- ences in weather between the two periods". The company generated 4.40TWh from gas and oil- fired power stations, up from 2.42TWh. No power was gener- ated at Fiddler's Ferry – the company's only coal-fired power plant since the closure of Ferry- bridge in March. Its coal-fired plants generated 0.41TWh of electricity in the same three months in 2015. serviCes Private equity switch for MUS Infrastructure services provider Morrison Utility Services is to be acquired from Bregal Capital by First Reserve, another private equity firm. The deal is subject to Euro- pean Commission approval, and is expected to close by Novem- ber 2016. MUS operates in the electric- ity, gas, water and telecoms sec- tors. Scottish Water, Yorkshire Water and Anglian Water are among its water contracts. The company has nearly 4,000 direct employees, and focuses on training and development pro- grammes to enhance expertise. MUS chief executive officer Charles Morrison said: "The growth opportunities in our mar- kets are significant on the back of continued long-term invest- ment in the UK's infrastructure." water SESW takes Scottish retail plunge Sutton and East Surrey Water (SESW) plans to enter the busi- ness retail market in Scotland to gain experience ahead of the market opening in England. The water-only company has gained a licence to extend its service to Scotland, where com- petition is already in force. SESW said its new retail business – Sutton and East Surrey Water Services – has already started to win customers outside its existing supply area in England, and has secured "long-term commitments" from its largest customers. UK business division back to profitability UtiLity weeK | 5th - 11th aUgUst 2016 | 15 Stock watch 16.00 15.75 15.50 15.25 15.00 rwe share price, 1 august 8am 10am midday 2pm 4pm 20 15 10 5 rwe share price, august 2015 to July 2016 Sep 2015 Dec 2015 Jun 2016 Mar 2016 Shares in German utility RWE fell around 5 per cent on 1 August – from 16.00 euros at 9:00am to 15.20 euros at 5:10pm – as it warned core profit at Innogy will fall by up to 9 per cent this year. Last December, RWE announced plans to spin off its renewables, grids and retail operations into a separate company – Innogy – and list it on the stock market later this year. Since that announcement, shares in RWE have regained about 25 per cent of their value. euros euros

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