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Finance & Investment This week Dee Valley deal likely to spur more mergers Impending competition in the English water market is seeing merger and acquisition activity Further acquisitions are likely to follow Severn Trent's purchase of Dee Valley Water, consulting firm Frost & Sullivan has predicted. Severn Trent announced on Wednesday 16 November that it would buy Dee Valley in a deal worth £78.5 million. It said the water-only company was a "natural fit" because it operates in neighbouring areas in England and Wales. Frost & Sullivan's vice president of environment and water, Fredrick Royan, said the opening of the retail market presented an opportunity for water and wastewa- ter service companies, such as Severn Trent, to "explore opportunities of consolidation in the UK market". PwC's lead analyst for the UK water sector, Richard Laikin, agreed. He told Utility Week the fact that the last two whole-business transactions in the sector had been consolidation plays may "embolden other companies", adding that the obvious geographical area for this was "the patchwork quilt of companies in the south". "This transaction continues a long-standing trend of consolidation, and so is unlikely to be the last," he said. Water Plus chief executive Sue Amies-King told Utility Week she predicts "quite a bit of consolidation" when the market opens as "smaller books of business join together to get scale". She also said she foresaw a range of multi-product plays in the market, and that energy companies are likely to be more interested now that domestic competition has been mooted. LV See analysis, p16; interview, p6 ELECTRICITY Reforming carbon price support could save £12.5bn by 2030 Reforming the carbon price support (CPS) mechanism could save consumers £12.5 billion by 2030, Policy Exchange has claimed in a report. Although the CPS has "largely failed" to meet its original objective of supporting investment in low-carbon gen- eration, the report argued, it has been "instrumental" in prompt- ing a switch from coal to gas. Policy Exchange recom- mended the CPS be retained until the early 2020s to support the phase-out of all unabated coal generation by 2025. Once accomplished, it should be grad- ually removed by the mid-2020s to bring carbon prices in the UK in line with those in Europe. ELECTRICITY Greencoat UK Wind in £147m share issue Renewable infrastructure fund Greencoat UK Wind has raised £147 million through the sale of new shares to pay off its debts and boost growth. More than 133 million shares were issued at a price of 110 pence each, bringing the total number of shares in the fund to nearly 737 million. "We are delighted to announce a heavily oversub- scribed capital raise, highlight- ing the strong support of both existing and new shareholders," said the fund's chairman, Tim Ingram. "The proceeds will be used to pay down the company's short- term acquisition facility in full, enabling Greencoat UK Wind to pursue a pipeline of attractive investment opportunities. The company's long-term borrowings will remain in place." ENERGY First Utility: big six are profiting from WHD customers The six largest energy companies are profiting from vulnerable customers on the Warm Home Discount (WHD) scheme by overcharging them on expensive tariffs, First Utility has claimed. The independent supplier urged the government to man- date that all WHD customers be moved on to their supplier's cheapest tariff. Ofgem figures show that 97 per cent of WHD customers are with a big six provider, and 70 per cent of those are on the standard variable tariff, which is oen the costliest tariff and results in these customers over- paying by an average £300 each year. First Utility estimates that this equates to an overspend of £440 million a year from the 1.5 million households in receipt of the government grant. Severn Trent: first mover advantage UTILITY WEEK | 25TH NOVEMBER - 1ST DECEMBER 2016 | 15 Stock watch 3.4 3.2 3.0 2.8 2.6 2.4 PLUTUS SHARE PRICE, FIVE DAY 14 Nov 15 Nov 18 Nov 21 Nov 3.0 2.5 2.0 1.5 1.0 PLUTUS SHARE PRICE, ONE MONTH 24 Oct 30 Oct 3 Nov 15 Nov 21 Nov Shares in flexible electricity developer Plutus Powergen surged aer it announced a funding partnership with an unnamed big six supplier. On 21 November, shares shot up 24 per cent to 3.22 pence, and were trading up 18 per cent in the mid-aernoon at 3.08p. The big six supplier has offered to fund up to 20 per cent of Plutus Powergen's 20MW renewable or gas projects. Shares in Plutus Powergen have been on an upward trend over the past month, having opened at 1.50p on 1 November. 9 Nov 17 Nov 16 pence pence