Utility Week

UTILITY Week 21st October 2016

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

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Finance & Investment This week SSE sells stake in SGN for £621 million Equity sale nets a 40 per cent premium on Rab despite Ofgem's warnings against overpaying SSE has agreed to sell a 16.7 per cent equity stake in gas distribu- tion network SGN to wholly owned subsidiaries of the Abu Dhabi Investment Authority (ADIA) for £621 million. Investment firm Jefferies said SSE had achieved a "good price", with a 40 per cent premium to regulatory asset base (Rab) being "ahead of our expectations". It estimated that the transaction valuation implied a Rab premium close to 45 per cent. As of March 2016, SGN had a total Rab of £5 billion and external debt of £3.6 billion. Earlier this year National Grid announced that it wanted to sell a stake in its gas distribution network business, prompting regulator Ofgem to warn potential bidders against overpaying based on misguided assump- tions about the returns that could be achieved in future price controls. In an open letter, Ofgem chief executive Dermot Nolan said it would not provide compensation for any premium paid over the Rab or set allowances for finan- cial arrangements in future price controls. The SGN deal is expected to be completed by the end of this month, with SSE retaining a 33.3 per cent stake. SSE will announce what it is doing with the proceeds of the sale at its interim results in November, but chief executive Alistair Phillips-Davies said the sale "confirms SSE's ability to deliver value for shareholders through focused, timely disposals" as well as through its diverse range of other businesses. LD ENERGY Ovo sells business customers base Ovo Energy has sold its business customer base to multi-service provider Verastar for an undis- closed sum. Following the acquisition, Verastar now provides electric- ity, gas, water, fixed and mobile telecommunications, broadband and fibre connectivity, to around 9 per cent of small businesses in the UK. Last month, Ovo announced that its domestic customer base had grown 47 per cent in the 12 months to June 2016, its seventh consecutive year of double-digit growth. ENERGY Lockheed Martin and Cogen tie-up Lockheed Martin and Cogen have joined forces to build a series of energy-from-waste plants around the UK, starting with one in Wales. The 15MW facility in Cardiff will be owned and developed by Cogen. Lockheed Martin will be responsible for engineering, procurement and construction. The plant will process around 150,000 tonnes of waste each year. Construction is sched- uled to begin in 2018 and it is expected to be up and running by 2020. The plant will make use of advanced gasification technol- ogy developed by Concord Blue. So far, it has only been deployed at a 250kW plant in New York. Cogen chief executive Ian Brooking told Utility Week: "Unlike most advanced gasifica- tion and energy-from-waste projects where there is a steam cycle, we are taking the steam out and going straight to a gas combustion engine, which means it's far more efficient than most other technologies." ELECTRICITY Small Wind Co-op in 6.5% share offer The Small Wind Co-op has launched its second share offering to fund the installation of farm-scale wind turbines in Scotland and Wales. The offer aims to raise £550,000 with a minimum investment of £100 and a pro- tected average annual return of 6.5 per cent over 20 years. It follows a successful share offer this year that raised more than £1 million for two small community-owned projects. Small Wind Co-op director Jon Halle said: "We're building on that momentum with our second offer and we really want to encourage those living near the turbines [to buy shares]." The projects are both sup- ported by the feed-in-tariff and have attracted support from poli- ticians in Scotland and Wales. SGN: SSE will retain one-third of the company 14 | 21ST - 27TH OCTOBER 2016 | UTILITY WEEK Stock watch 10.6 10.5 10.4 10.3 10.2 10.1 EDF SHARE PRICE, ONE DAY 18 OCTOBER 10:00 12:00 14:00 16:00 10.6 10.4 10.2 10.0 9.8 EDF SHARE PRICE, FIVE DAY 13 - 18 OCTOBER 13 Oct 14 Oct 17 Oct 18 Oct EDF shares took a brief tumble on Tuesday 18 October aer it was reported that the supplier would halt production at five of its nuclear plants in France in order to undertake safety tests at the behest of the country's nuclear regulator ASN. The price dived from €10.53 to €10.18 in the half hour following the news but soon bounced back to €10.42. EDF shares have been broadly level since spring but are down significantly on a year ago when they stood at around €17. euro euro

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