Utility Week

Utility Week 24th February 2017

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

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Page 13 of 31

Finance & Investment This week Centrica sets £100m aside for innovation New venture Centrica Innovations will 'identify, incubate and accelerate' pioneering technologies Centrica is to launch a new ven- ture to "identify, incubate and accelerate" fresh technologies and innovations. Centrica Innovations will invest up to £100 million over the next five years in fledgling firms developing new products and services for customers. The enterprise will be headed by Charles Cameron, Centrica's group director of technology and engineering. It will deploy scouts to key technology hubs in London, Cambridge, Seattle, Houston and Tel Aviv. As well as investing in promising start-ups, Centrica Innovations will act as an "incubator" for those not yet mature enough for investment, supporting them with expertise, mentoring or product piloting, for example. It will also help companies inside the Centrica group, such as data services firm Io-Tahoe. Ignite, Centrica's £10 million social entrepreneurship fund, will be brought into the new venture. Centrica Innovations is part of the group's multi-bil- lion-pound pivot – announced in June 2015 – away from its loss-making gas and power businesses and towards its more lucrative customer-facing activities. "The launch of Centrica Innovations is an important step in identifying and responding to the changing needs of our customers," said Centrica chief executive Iain Conn. "The new venture will ensure innovation is embedded across our business and will allow us to invest in the technologies that can support our custom- ers into the future." TG ENERGY 'Unfair advantages' for interconnectors Interconnectors are being unfairly advantaged in the energy market compared with indigenous generators, Uniper's UK chairman has warned. In an interview with Utility Week (see p6) Felix Lerch said interconnectors "are not compet- ing on even terms with genera- tors; that should be addressed". Lerch said interconnectors can benefit from access to mar- ket payments such as contracts for difference and capacity market contracts, but they are not subject to the system charges that apply to generators. "They don't pay carbon floor price, nor for transmission losses. They don't pay any trans- mission charges. That leaves interconnectors at an advantage when compared to indigenous generators," said Lerch. ELECTRICITY Low prices and levies hit Drax Drax Group profits have seen a sharp decline in 2016 as a result of low wholesale power prices and the removal of levy exemp- tion certificates for renewable generation halfway through 2015. Earnings before interest, tax, depreciation and amortisation (EBITDA) dropped by 17 per cent year-on-year to £140 million and underlying earnings were down 54 per cent at £21 million. The removal of levy exemption certificates reduced EBITDA by £34 million. The results were boosted by an increase in revenues from provision the ancillary services, which more than tripled to £47 million aer National Grid awarded a black start contract to Drax in April last year. They were also lied by the improved performance of the company's business retail arm Haven Power and the increased profitability of its pellet supply operations. ELECTRICITY Offshore wind at record high in 2016 Offshore windfarm construc- tion hit a record high last year, according to the latest figures. The total construction value of offshore wind projects in 2016 was £4.1 billion, up from £2.45 billion the previous year, says data from Barbour ABI. The construction industry analyst's statistics reveal that offshore windfarms accounted for 42 per cent of the value of UK construction contracts in the utilities and power sector. Three projects, the Beatrice, Galloper and East Anglia One offshore windfarms, represented £3bn pounds of value. There are a further £23.2 billion-worth of offshore windfarm projects in the development pipeline. Centrica is moving away from gas and power 14 | 24TH FEBRUARY - 2ND MARCH 2017 | UTILITY WEEK Stock watch 390 380 370 360 350 340 390 380 370 360 350 340 DRAX GROUP SHARE PRICE, 15 FEBRUARY - 21 FEBRUARY 16 Feb 17 Feb 20 Feb 21 Feb DRAX GROUP SHARE PRICE, 24 JANUARY - 21 FEBRUARY 24 Jan 31 Jan 7 Feb 14 Feb 21 Feb Investors were clearly expecting better from Drax's financial results for 2016. Shares in the group lost nearly 10 per cent of their value in the opening hours of trading last Thursday, falling from 380p to 343p per share, aer the coal and biomass generator reported a sharp fall in profits, in part because of low wholesale power prices. By the end of the day the shares had rebounded to 360p but were changing hands for about 346p at the time of publication.

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