Utility Week

UTILITY Week 9th December 2017

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Finance & Investment This week Severed cables could cut UK power prices Damage to interconnector with France means it will be at half capacity until the end of February The partial severing of the UK's interconnector with France may reduce British power prices over the winter, price reporting firm Icis has said. The outage is likely to throttle exports to France, where ongoing safety tests have limited the avail- ability of EDF's nuclear capacity. Contracts for delivery in January 2017, usually one of the coldest months of the year, saw a day-on-day decrease of 1 per cent aer National Grid announced on 29 November that four of the eight subsea cables that make up the interconnector had been severed. The firm said the damage to the interconnector meant it would be running at half of its 2GW capacity until the end of February. It is investigating the possibility the cables were cut by a ship dragging its anchor along the sea floor during Storm Angus. "The UK's supply shortage has meant that at times of highest demand, in the late aernoon, electricity in the UK has been priced above France, attracting imports and reversing the flow of power at peak times," said Icis power editor Jamie Stewart. "However, the UK actually exported to France for most hours of the day over Novem- ber, because of a shortage of French nuclear capacity. "This could mean that UK power prices will be lower in delivery over the winter, because the outage will limit the amount of power that can be sent out of the UK, so more supply will stay in the national market. However, if prices spike high enough during times of peak demand, the price of those hours could be high enough to bring the overall average price higher." TG ELECTRICITY Drax to buy Opus Energy for £340m Drax has entered a conditional agreement to buy Opus Energy for £340 million. Completion of the acquisi- tion depends on the approval of Drax's shareholders and approval by the European Commission of the Contract for Difference invest- ment contract awarded to Drax by the UK government. Comple- tion is expected in early 2017 aer shareholders have voted. Opus Energy is the UK's sixth biggest business energy supplier, with 130,000 customers and 8.3 per cent of non-domestic business supply market share. The move will help Drax expand into supplying power to small and medium businesses. Drax has also announced that it will acquire four open-cycle gas turbine plants with a capa- city of 1.2GW from Watt Power for an initial price of £18.5 million. ELECTRICITY North-south divide driving investment National Grid has identified potential network capacity deficits arising from increasing north-to-south electricity flows in Scotland and England. National Grid identified the increasing imbalance between generation and demand in the north and south of England and Scotland in its Electricity Ten Year Statement (ETYS), released on 30 November. In this, the company's head of network capability, Richard Smith, said: "From our future energy scenarios we continue to see increasing north to south transmission flows across Scotland and much of northern England to supply southern demand." He said this is largely because of significant growth in low-carbon generation in the north, combined with fossil- fuelled plant closures. Smith added: "Increasing interconnector activity is also putting additional stress on the southern part of the network." WATER SES Business wins £1m of Scots deals SES Business Water has already signed up £1 million worth of customers in Scotland, and is "enthusiastic about its prospects" for the English market. In its financial report for the six months to September 2016, Sutton and East Surrey Water (SESW) said its associated com- pany – SES Business Water – has been "actively pursuing opportu- nities" to acquire new customers in Scotland prior to market open- ing in England next year. SESW has applied to exit the business market on 1 April 2017, with the aim of transferring its customers to SES Business Water. Cables may have been cut by a ship's anchor UTILITY WEEK | 9TH - 15TH DECEMBER 2016 | 13 Stock watch 1 Dec 2 Dec 5 Dec 6 Dec 340 320 300 280 260 DRAX GROUP SHARE PRICE, THREE MONTHS Oct 2016 Nov 2016 Dec 2016 The stock market welcomed news that Drax has entered a conditional agreement to buy Opus Energy for £340 million (see story above). Completion is expected in early 2017 aer shareholders have voted. The deal would help Drax expand into supplying power to small and medium-sized busi- nesses. The share price jumped from 277.6 pence on Monday morning, to a high of 330.3p on Tuesday 6 December – the highest it has been since October. pence 340 320 300 280 260 DRAX GROUP SHARE PRICE, ONE WEEK pence

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