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18 | 18TH - 24TH NOVEMBER 2016 | UTILITY WEEK Finance & Investment This week Grid: UK does not yield excessive profits Differences in rates of return are down to accounting practices, not soft UK regulation National Grid has denied that it makes excessive profit from a generous regulatory regime in the UK as it reported steady earnings in the first half of its financial year. Figures suggesting it earns a much greater return from its investments in the UK than from those in the US are largely illu- sory, a senior figure at the group told Utility Week. "People say: 'Well, you earned a 9 per cent return [on equity] in the US but you earn 13.3 per cent in the UK: UK customers pay more'," noted chief financial officer Andrew Bonfield. However, he said the dispar- ity was mainly because of the difference in regulatory approaches of the two countries: Nominal regulation in the US "means you get a cash return faster", while real regulation in the UK means "the customer in effect defers part of the bill through indexation into future years". "There's also an element within the 13.3 per cent we earned in the UK last year that relates to legacy allow- ances… That's about 0.7 per cent of the total," Bonfield added. His comments came aer the company reported an adjusted operating profit from its regulated activi- ties in the UK of £1,259 million for the six months to the end of September, as it invested £970 million in its domestic businesses. By comparison, the group invested £1,039 million in its regulated activities in the US over the period, while generating earnings of just £435 million. TG ENERGY RWE profits down more than a fifth Npower owner RWE has reported a sharp decline in profit for the nine months to the end of September. The German energy giant blamed the fall on the rising cost of maintaining its network infra- structure in continental Europe and the poor performance of its trading division in the second quarter. Ebidta plunged 13.2 per cent year on year to €3,821 million (£3,303 million). Operating profit plummeted by more than a fih (20.1 per cent) to €2,116 million. Ebitda for supply, including Npower, dropped 0.4 per cent to €699 million, and operating profit shrank by 8.4 per cent to €547 million. Reiterating what it said in its previous results in August, RWE declared its restructuring of Npower was "beginning to bear fruit". WATER Welsh Water invests £161m as profits fall Welsh Water has invested £161 million in water and environ- mental service improvements, as its profit fell in the first half of the financial year. In its financial report for the six months to September 2016, the water firm laid out its latest £161 million investment. This forms part of a wider £1.7 billion investment in its network between 2015 and 2020. The water firm also reported a £24 million drop in underlying profit to £1 million (the figure in 2015 was £25 million). It said the reduction reflected increased expenditure, including on the maintenance of infrastructure assets, and increased interest costs resulting from higher RPI inflation. ENERGY Smart meter rollout hits SSE bottom line SSE has blamed a 13 per cent drop in profit on the weather, falling customer numbers and infrastructure upgrades such as smart meter rollout costs. The company on 9 November announced interim results for the six months to 30 September 2016 in which adjusted profit before tax fell by 13.3 per cent on the same period in 2015 to £475.8 million. The reduction reflected lower profits in its wholesale and retail businesses because of the weather, lower customer num- bers in very competitive markets and energy infrastructure upgrades such as smart meter rollout costs, it said. Meanwhile, its network business saw a small increase in profit, which it put down to a continued focus on operational efficiency. UK: returns are comparable with the US Stock watch 540 520 500 480 460 440 420 DKK US$ VESTAS SHARE PRICE, 1 - 15 NOVEMBER 1 Nov 7 Nov 14 Nov 16 14 12 10 8 6 4 2 PEABODY SHARE PRICE, 1 - 15 NOVEMBER Shares in renewable energy companies plunged last week aer Donald Trump's shock victory in the US presidential election. Trump has declared man-made global warming a hoax by the Chinese. Aer closing on Tuesday at 471 kroner, shares in Danish wind firm Vestas plummeted to 415 kroner on Wednesday morning. Trump has also pledged to revive America's coal industry. Shares in US coal giant Peabody shot up to $14.10 on Wednesday, having closed the day before at $8.55. 1 Nov 7 Nov 14 Nov