Utility Week

8 | 26TH JANUARY - 1ST FEBRUARY 2018 | UTILITY WEEK Policy & Regulation Analysis C onsistent and successful" are how Carillion describes its strategy on the section of the website that houses the company's annual reports. The now defunct construction giant's per- formance took a nosedive over the year since the publication of its 2016 annual report. A profit before tax of £236 million in 2016 turned into a £1.15 billion loss for the first half of last year as the company was forced to write down the value of three projects to the tune of £845 million as a result of cost overruns and delays. Construction halt Work has ground to a halt on a host of Caril- lion building projects, including new hos- pitals and roads, across the UK. So far the utility sector appears to have escaped lightly from the collapse of what was, until recently, the UK's second biggest construction com- pany. EDF, Eon and SSE have all told Utility Week that they had no projects with Carillion when the company went bust last week. The last major energy project with a util- ity trumpeted by Carillion was the laying of a 26km-long cable for Eon to plug its Rampion windfarm into the National Grid at Bolney. But this project was completed in late 2016. The main Carillion-inspired headaches are at National Grid, which had three out- standing projects with the company when it entered liquidation. The projects include a £38 million con- tract to build a new overhead line to hook the new Nemo interconnector, which strad- dles the English Channel between Belgium and north Kent, up with the National Grid. The 20km-long line between the Canterbury North substation and a new 400kV substa- tion at Richborough in Kent, where the inter- connector lands, involves the construction of 60 new steel lattice towers together with associated fittings and conductors. The project was awarded to Carillion's joint venture with Scandanavia's Eltel Net- works in August 2016 before the construc- tion company's financial problems came to light. Work began last year, and is due to be completed in 2020. Eltel did not respond to a request for comment by Utility Week about the future of the project. Carillion was also replacing a transformer at West Weybridge in Surrey and relocating a cable at Wylfa to support the development of Horizon Nuclear Power's new station at its Isle of Anglesey site. A National Grid spokesperson says that there are contingency plans in place for all its projects with Carillion, using alternative suppliers if necessary, which will keep any disruption "to a minimum". Carillion was also lead contractor on a West Sussex Council project to deliver energy efficiency and renewable energy schemes across the county. The latest of these was a solar farm project at Westhampnett, which is due to be completed in February. Following the liquidation announcement by Carillion on Monday 15 January, West Sus- sex Council put out a statement that the pro- ject will be completed in line with the official receiver's priority to ensure continuity of public services. Energy entry However, Carillion had long ago branched out from its construction roots into services, including energy. In 2011, the construction company set up Carillion Energy Services following its acqui- sition of Newcastle-based energy company Eaga. Carillion had hoped to become, via the acquisition, the biggest player in a sector that looked for rapid expansion on the back of supportive coalition government policies, notably the Green Deal. However, the Green Deal famously proved to be a flop. Carillion's biggest initiative in the energy services field was a partnership with Birmingham Council, which aimed to harness the Green Deal to retrofit the city's leaky pre-First World War terraced homes and poorly insulated post-war council hous- ing. Just over two years ago, though, the council pulled the plug on Birmingham Energy Services. Carillion Energy Services, which kept its head office in Newcastle, remained in busi- ness, installing renewable technologies and Who will feel Carillion pain? David Blackman reports on the impact on the utility sector of the collapse of a construction company that had diversified into energy services to escape from the risk hole it found itself in. domestic heating services. The company also had a dedicated centre based in Manchester, which monitors its clients' energy use round the clock. In addition, Carillion was involved in a joint venture with Breathe Energy, offer- ing what it described as a multidisciplinary "total energy management" solution. There was no response from Breathe to a request for comment on the future of the joint ven- ture this week. Carillion Energy Services' clients included the Northern Ireland Housing Executive. The company had a share of a £336 million con- tract, signed last November, to replace heat- ing systems across the 86,500 homes owned by the executive, which is the biggest social housing landlord in Northern Ireland. However, energy services proved to be far from the pot of gold that Carillion had hoped for when it bought Eaga. In its accounts for 2016, the last that it submitted to Companies House, Carillion Energy Services recorded a £16 million loss on a turnover of £42.8 million. This repre- sented a major plunge into the red follow- ing a £342,000 loss on £52.5 million worth of turnover recorded in 2015. The company blamed the dip in turnover on a fall in pro- ject wins, adding that it was operating in dif- ficult markets where activity had not grown as the government had expected. In the grander scheme of things, Caril- lion's energy services losses were dwarfed by those the company suffered in its hardcore construction business. Unhappily for Caril- lion, energy didn't prove the hoped-for get out of jail card that would reduce its reliance on risky building projects. Energy services proved to be far from the pot of gold that Carillion had hoped for when it bought Eaga "

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