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Shell buys remainder of shares in Gasnor for $74 million

July 12th 2012

Shell, the current owner of 4.1% of the shares in Gasnor AS, has signed a Share Purchase Agreement for the acquisition of the remaining outstanding shares in the company for USD 74 million (NOK 455.5 million). Subject to Norwegian regulatory approvals, the transaction is expected to be closed in the 3rd quarter of 2012.
Gasnor is a market leader in Norway in small scale LNG (Liquefied Natural Gas), supplying LNG as a fuel to industrial and marine customers and operating an end to end supply chain, with three small scale production plants and distribution assets including two tanker ships, a fleet of trucks and a network of terminals. The acquisition of Gasnor is an important step for Shell towards creating an LNG sales business.  LNG will be a reliable new addition to Shell’s commercial customers’ fuel mix.

Colin Abraham, Shell’s Vice President for Downstream LNG, said: “The benefits of natural gas in meeting our future energy needs are well-documented. Shell believes the Liquefied Natural Gas (LNG) in transport sector will develop into a sizeable market and given its industry leading expertise across the LNG value chain, the extension into this market is a good fit for Shell. The Gasnor acquisition provides Shell with invaluable customer and market insight built up over a number of years. This will help us to quickly develop and meet customer requirements for LNG as a transport fuel.”

Through this acquisition, Shell will capitalise on Gasnor’s experience in LNG sales and marketing, combining it with its own customer reach to target European marine customers ahead of new environmental regulations that will come into force from 2015.  These regulations will apply across the Baltic Sea, English Channel and North Sea and will require lower levels of ‘air-quality emissions’ such as sulphur oxides (SOx) and nitrogen oxides (NOx). Switching to LNG can help to reduce these emissions.  Shell expects European marine LNG to be a key growth sector as customers look for cleaner, cost competitive fuel alternatives as part of their fuel supply mix.

Eilef Stange, Gasnor’s Chief Executive Officer, said: “Shell’s customer reach and Gasnor’s LNG sales and marketing experience is a winning combination.  There is real growth potential for small scale LNG in Europe, particularly in the marine sector, and Gasnor with Shell is well placed to capitalise on this.”

Source: Shell Official Press Release – 11 Jul 2012

National Grid expects gas demand to peak this winter

July 11th 2012

According to the National Grid outlook report released earlier this week, it is expecting gas demand in the UK to peak this coming winter at 507 million cubic meters/day. This is a 7% increase compared with the firms forecast for last winter.

National Grid commented in its key points, “The peak forecast now allows for high power generation as well as cold weather.” They also forecasted a “further UK Continental Shelf decline”.

Predictions showed declining figures in average gas demand across all sectors this winter, including industry, power generation, exports and injections into storage sites. Total demand for the October-March period, which makes up the so-called winter gas season, is estimated at 50.9 billion cubic meters, compared with 55.2 billion cubic meters from the previous year, figures suggested.

“The analysis strongly suggests that coal should be the favoured source of fuel for generation for next winter. Other factors may part mitigate this; these include running hours for LCPD and generation portfolios,” it said.

“For gas to become the preferred source of fuel for power generation next winter, the gas price needs to fall by about 20 pence a therm or there needs to be a further increase in the coal price of about $50/tonne,” National Grid said. National Grid is also forecasting declines in domestic production, but suggested imports from Norway – Britain’s largest supplier, would most likely remain stable.

On the subject of liquefied natural gas (LNG), it commented, “LNG imports will remain suppressed due to the high levels of demand in Japan and other Far East markets”. There has been a decline in UK LNG supplies since last March, a key factor of this is the Fukushima nuclear incident in Japan which meant supplies were being re-routed to substitute the loss of nuclear output.

Source: Enzen Global

Business Stream appoints two Directors as it prepares opening in England

July 10th 2012

Business Stream, the non-domestic arm of Scottish Water, has announced the appointment of two new non­executive directors as it prepares for the opening of a competitive market in England.

The two new board members are Amanda McMillan, current managing director of Glasgow Airport, and Willie MacDiarmid, a former director of energy retail at Scottish Power.

Mark Powles, chief executive of Business Stream, said the two brought with them “an enormous amount of experience in customer-led regulated businesses. We’re very excited to have them join us and I know they’ll have a lot to offer as we continue to prepare for full market opening in England, which we expect to happen over the next few years. We’ve made some excellent progress in that direction and we’ll benefit further from the invaluable input of two very talented and experienced individuals who have been successful in extremely challenging markets.”

Business Stream is currently facing competition in the Scottish market, which has been deregulated since 2008 from Anglia Water’s Osprey subsidiary, Aimera, Severn Trent and Wessex Water Utility Solutions.

The UK government is due to publish a draft water bill this month; this is set to progress proposals that could give all non-domestic water customers in England the ability to choose their supplier.

Tim Yeo urges Treasury Secretary to give evidence on Energy Bill‎

July 9th 2012

Tim Yeo, Chair of the Energy and Climate Change Select Committee is once again calling for The Treasury to provide evidence on the draft Energy Bill.

Yeo has written to Chloe Smith, Economic Secretary to the Treasury, stating his disappointment at Smith’s “refusal to offer a direct response to the Committee’s questions”.  Yeo also emphasised a statement from a Downing Street Spokesperson “The Prime Minister and the Chancellor and all Cabinet ministers comply with the wishes of select committees”. This was in regards to the Barclay’s Libor rate fixing case.  Yeo also asked Smith to “keep to the spirit of this statement and assist the Committee by offering a written reply as soon as possible”.

A copy of the letter can be viewed by clicking here.


Severn Trent Raise £75m in First UK RPI-Linked‎ Retail Bond

July 6th 2012

UK water company, Severn Trent has officially closed its offer period for an RPI-linked, ten-year sterling bond. The final issue size was £75 million, which was in line with the firm’s expectation of raising between £50 million to £100 million. Severn Trent announced the launch of the bond on 21 June 2012.

This marks a first for the UK Water Industry, as Servern Trent is the first company to make the RPI-linked bond available to retail investors, as they have previously only offered bonds to institutional investors.

Group finance director Mike McKeon said: “Our debut retail bond has been a great success. We have achieved our objective of opening up this exciting new source of finance for Severn Trent. It demonstrates that for the right company there is keen investor interest. The success of this offering means that we may consider further offerings to retail investors in future.”

The company has appointed Barclays Bank and Investec Bank as joint lead managers of the bond issue and they are expected to be issued on 11 July 2012.

DECC asks for evidence after claims of deteriorating PPA market

July 5th 2012

The Department of Energy and Climate Change (DECC) is now asking independent renewable generation developers to supply them with evidence to support claims that the Power Purchase Agreement (PPA) market has deteriorated.
The move comes after DECC said it had noted that a number of generators were “reporting a decline in the terms they are being offered for PPA’s.”
Due to the fact that investing in renewables industry in the initial stages usually involves a considerable amount of investment, it is vital that such long-term contracts which guarantee the purchase of the power offer the right rewards and fair terms. The Government is now calling on generation developers to provide DECC with evidence so that it can assess and address barriers to market access that independent renewable generators seem to be experiencing.

The Government is estimating that over the next ten years it requires £110 billion of investment in low-carbon forms of generation to meet climate obligations and energy requirements. DECC will collect feedback from today, (5 July) until 16 August 2012 which will be used to give Government a more informed understanding of the PPA market and in turn, help refine proposals set out in the draft Energy Bill.

To read DECC’s document; ‘A call for evidence on barriers to securing long-term contracts for independent renewable generation investment’ click here.

Centrica to sell 30% of generation on N2EX

July 3rd 2012

Centrica Plc., parent company of British Gas has announced it has started to sell at least 30% of its day-ahead electricity generation on the N2EX exchange. The N2EX platform which is owned by Nasdaq and Nordpool, has been used by the firm since it was launched in January 2010. But they have only started selling at least 30 per cent of power via the platform this week.
The increased sales have been sparked after industry competitors Scottish and Southern Energy (SSE) and E.ON announced their plans to auction off day-ahead electricity production on the open market. Britain’s big six energy suppliers – EDF, Centrica, SSE, EON, RWE and Scottish Power – were criticised by Ofgem for high rises in energy bills in 2011 as the regulator pushed for more competition in the industry, pledging to break the “stranglehold” of the country’s “big six”.

“This new initiative will bolster the N2EX exchange and strengthen the industry’s drive to increase liquidity and improve market transparency” Centrica said in a statement.

Fracking is safe with heavy regulation and best practices

July 2nd 2012

The risks of hydraulic fracturing (fracking) for shale gas are low, as long as it is regulated. This seems to be the conclusion of a joint report released last week by The Royal Society and Royal Academy of Engineering who say the technique is safe if firms follow best practice and rules are enforced.

There has been mixed opinions about fracking, after the gas extraction method triggered two earth tremors near Blackpool last year. According to experts, it should not cause earthquakes or contaminate water but the rules governing it will need to be tightened. Exploratory fracking is currently being proposed in at least seven sites across the UK.

Prof. Robert Mair from Cambridge University and the report’s chair said, “Our main conclusions are that the environmental risks of hydraulic fracturing for shale can be safely managed provided there is best practice observed and provided it’s enforced through strong regulation”.

Consumer Council for Water tells water companies to show value for money

June 29th 2012

Further to the Consumer Council for Water’s latest tracking survey, the watchdog has said that Water companies must do more to satisfy their customers to ensure they are receiving value for money. CC Water reported that although nine out of ten customers were satisfied with the standard of service they received, a considerably lower proportion was satisfied with the value for money aspect.

Across England and Wales, 72% of bill payers that were involved in the tracking survey said they were happy with the value for money of their water service and 73% said the same in relation to sewerage; while satisfaction with general service levels came in at 92% and 89% respectively.

CCWater chief executive Tony Smith said: “Customers’ views reflect the continuing price increases and water companies’ lack of communication about what they are doing with the extra money they are getting from customers. CCWater will be pushing water companies, particularly the poor performers, to improve their communication with their customers and show an improved trend on customer satisfaction with value for money. We will also be pressing for water regulation to incentivise water companies to improve this vital measure of success for the industry.”

Northumbrian Water, Yorkshire Water and Portsmouth Water came in on top with percentage scores in the low 80’s. South West Water came in at last place, with just 35% of customers satisfied with value for their water bill and 39% for sewerage.

Veolia Water sold for £1.2bn in attempt to cut group debt

June 28th 2012

French Utility, Veolia Environment SA has today sold its three UK regulated water businesses for £1.2bn ($1.92bn; €1.5bn) in an attempt to cut its debts. Rift Acquisitions, a fund managed by Morgan Stanley and Prudential’s MG, will buy a 90% stake of Veolia Water’s central, southeast and east businesses.
Veolia Water serves more than 3.5 million people in southern England and has a combined annual turnover of 274 million pounds.

Veolia Environment will retain a 10% stake in Veolia Water along with its Veolia Water Outsourcing business which provides services to other UK water providers. The proceeds of the sale will go towards paying down the €15bn of net debt owed by the group’s French parent company.

CEO Antoine Ferret said he plans to reduce Veolia’s debt by 3 billion euros by the end of next year in an attempt make the company more profitable. Last month Ferret said, he wants to focus on “promising” countries and will pursue asset sales in the U.S. and the U.K.

“This first significant divestment shows that we are moving in the right direction regarding the implementation of our strategic plan,” “The transformation of Veolia is progressing at a good pace.” Ferret said in a statement.