Utility Week

UTILITY WEEK | 16TH - 22ND MARCH 2018 | 3 This week 4 | Seven days 6 Policy & Regulation 6 | News Ofwat begins probe into supply problems 7 | Chief executive's view Dara Lynott, Electricity Association of Ireland 8 | Analysis Energy in a post-Brexit world 10 | Analysis The five key themes of Ofgem's RIIO2 framework document 12 | Analysis RIIO2: the noose tightens 13 | Market view A whole-system approach is the key to coping with demand spikes 16 | Analysis What sort of water sector does Michael Gove want? 19 Finance & Investment 19 | News Leveraged water firms may need fresh equity 20 | Analysis How the deal between RWE and Eon shakes down 22 Operations & Assets 22 | Analysis How water companies are coping with extreme weather events 26 | Comment Bob Gallienne, Street Works UK 27 Customers 27 | News Ofgem releases first paper on price cap 28 | Comment Jacob Tompkins, The Water Retail Company 29 | Analysis Are water brokers a threat or an opportunity? 30 Community 31 | Disconnector GAS 26 | Comment Bob Gallienne, Street Works UK WATER 6 | News Ofwat begins probe into supply problems 16 | Analysis What sort of water sector does Michael Gove want? 19 | News Leveraged water firms may need fresh equity 22 | Analysis How water companies are coping with extreme weather events 29 | Analysis Are water brokers a threat or an opportunity? ELECTRICITY 7 | Chief executive's view Dara Lynott, Electricity Association of Ireland 13 | Market view A whole- system approach is the key to coping with demand spikes ENERGY 8 | Analysis Energy in a post-Brexit world 10 | Analysis The five key themes of Ofgem's RIIO2 framework document 12 | Analysis RIIO2: the noose tightens 20 | Analysis The deal between RWE and Eon 27 | News Ofgem releases first paper on price cap Pitney Bowes: Make self service smarter and more engaging http://bit.ly/2nAa2rC CGI: Demand side flexibility in UK utilities http://bit.ly/2hrMapA Knowledge worth Keeping Visit the DownloaDs section of Utility week's website http://www.utilityweek.co.uk/ downloads Leader Ellen Bennett Mega-deal is a U-turn that makes sense O n paper, the mega-deal between Eon and RWE unveiled last weekend, involving the acquisition of Innogy and various asset swaps, makes sense. It leaves Eon free to pursue its future as a networks and retail business, and RWE as a generation giant spanning both renewable and traditional forms of generation. It deepens and broadens the European footprint of both businesses, provides the opportunity to cut costs, and means they will have just one growth business (retail in one case, renewables in the other) on which to focus their investment and plans for growth. Admittedly, it's something of a U-turn, coming just a couple of years aer the RWE/Innogy and Eon/Uniper splits. At that time, the companies insisted there was a natural synergy between their cus- tomer services and renewables businesses – a synergy they either rethought, or abandoned in favour of realpolitik. And wisely so – the challenges of today's shiing energy landscape mean saving face is a minor consideration compared with coming up with a business model that's geared for growth. What does it mean for the UK market? The most immediate ques- tion – apart from potential job losses – is what its impact will be on the planned merger between Innogy's Npower and SSE's energy retail business. Under the blueprint for this set out last year, Innogy was to retain a minority stake in the resulting independent business, while SSE was to demerge its majority share to its shareholders. It seems unlikely Eon will want to rock this boat. While ambitious players within its retail business might eye Npower with interest, a mega-merger between Eon and Npower's retail businesses would be subject to stiff anti-competition scrutiny. It would also create a volume that might mitigate against Eon's plans to upscale its retail business from plain selling to more valuable customer solutions, and provide an unwelcome local distraction to what is essentially a pan-European deal with bigger factors at play than one country's retail market. While the companies are remaining tight-lipped for now, it seems likely the Npower/SSE merger will continue as planned, concluding before the Eon/RWE deal. When Eon emerges as the ultimate owner of Innogy's stake in the business, it may follow SSE's example and demerge the holding to its shareholders. RWE, meanwhile, becomes a major force in renewables, with a wind portfolio to rival Orsted's. On a broader scale, it means vertical integration, brought to its knees by the original business splits, is a thing of the past. Genera- tion and retail, each beset by economic and political challenges, are going their separate ways. The rest of the big six will be watching. Ellen Bennett, Editor, ellenbennett@fav-house.com

• Cover