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National Grid plans to invest £3.5bn to boost business growth

30th July 2012

With a great financial and operational start to the financial year, National Grid has said it plans to invest £3.5 to £3.8 billion this financial year including an investment of over £1.5 billion into its UK Transmission business.

Steve Holliday, Chief Executive of National Grid said the firm has “Our businesses have started the year well” in the firms interim management statement released today. “In the UK, our focus has been on strengthening the resources, processes and organisational model needed to deliver future performance improvements. At the same time, we are working with Ofgem to secure appropriate long term financial frameworks for our regulated businesses”, he added.

On July 3rd July 2012, National Grid sold its New Hampshire, US, energy distribution units, Granite State Electric and Energy North Natural Gas, to Liberty Energy Utilities (New Hampshire) Corp., a subsidiary of Algonquin Power & Utilities Corp., for $309 million, including working capital of $24m.

“There have been no material changes to the financial position of the Company during the period. National Grid has a strong balance sheet, underpinned by regulatory revenues, which is key to our ability to secure the required long-term funding for our businesses in both the UK and the US.” The firm said.


UK to close loophole that allows utilities to exploit grid congestion

27th July 2012

British authorities are planning to close down a legal loophole which enables utility firms to cash in millions on grid congestion, at a cost to consumers.

Energy regulator, Ofgem estimates that the unwarranted exploitation may have caused consumer bills in 2008/09 to have collectively increased by £125 million; the energy industry however disputes the figures.

“Situations can arise where a generator has the opportunity to act in such a way as to make it very likely that National Grid will be compelled to accept its offers, bids or inter-trip contracts at an unduly high price in order to balance the network” said the Department of Energy and Climate Change (DECC).

National Grid pays the costs in the first instance, but they are then passed on to consumers.

Documents published last week by DECC said, Generators can cause congestion in parts of the electricity network and then benefit from deals to adjust their supply. When there are only a few generators in one region with more capacity than can be transmitted through the grid, they can charge high rates to reduce supply and prevent congestion.

The government has taken action to ban this behaviour by bringing in a new temporary condition in generators’ licences (TCLC), which will be enforced by energy regulator, Ofgem and is due to come into effect from October 29 2012. The Government has faced criticism from the electricity industry whose members took part in a three-month consultation about the new measures.

Gaynor Hartnell, chief executive of the Renewable Energy Association said in an open letter to DECC, Government references to exploitative behaviour are “based entirely on Ofgem estimates that have not been tested”.

The Association of Electricity Producers wrote in a public email to DECC that, generators do not have enough promptly available information to tell when there are worsening congestion in the network.

 


British Gas owner Centrica reports rise in profits

26th July 2012

British Gas owner, Centrica has announced a 15% increase in first-half adjusted operating profits to £1.45 billion along with a 23% increase in operating profits of residential arm, British Gas, to £345m. The utility said that increases were due to “colder than usual weather” in the months between April and June.

British Gas suggested in May this year that customers might face the possibility of increase in bills this winter and said rising wholesale gas prices were to blame. This was after they announced a 5% cut in its standard electricity tariff four months earlier.

Sam Laidlaw, Centrica Chief Executive said in the company’s interim results statement, “Centrica has performed well in the first half of 2012 despite challenging market conditions, although the increase in earnings must be placed in the context of unusually low levels of consumption and profits in the UK in the first half of 2011. We continue to focus on high standards of service, while ensuring that we run the business as efficiently as possible for the benefit of our customers. We have made significant investments to secure energy supplies for the UK – and will continue to invest across the Group, where we see value. As a result, we have a stronger business that is delivering benefits for all our stakeholders.”


Li Ka-shing to buy Wales and West Utilities for £645 million

25th July 2012

A consortium led by Hong Kong business tycoon Li Ka-shing is set to buy UK Gas Company Wales and West Utilities for £645 million ($1 billion), this acquirement will add to Li’s growing portfolio of Energy and Utility businesses in the UK.

The billionaire is continuously expanding his UK business portfolio and has businesses in various sectors including telecommunications, ports, energy and utilities and Li’s companies are continuously looking abroad for possible acquisitions to broaden their revenue base.

The consortium consists of Cheung Kong (Holdings) Ltd, Li Ka Shing Foundation Ltd, Cheung Kong Infrastructure Holdings Ltd and Power Assets Holdings Ltd. The deal is expected to complete at the end of September subject to European Commission approval.

Kam Hing-lam, group managing director of Cheung Kong Infrastructure, said “we are pleased to have the opportunity to acquire another high-quality asset, which is poised to extend our growth momentum and generate recurring profit contributions similar to that of our other infrastructure projects”.

Gas Distribution Network (GDN), Wales and West Utilities operate in Wales and the Southwest of England have a 7.4 million strong customer base over an area covering 42,000 square kilometres, which equates to nearly one-sixth of the UK.


Ofwat board agrees to RPI linked wholesale prices

24th July 2012

UK Water Regulator, Ofwat is set to keep wholesale prices linked with inflation, as stated in the Ofwat minutes of the 21 June 2012 Board meeting, “the Board agreed that an approach which would expressly confirm in companies’ Licences Ofwat’s previous assurances that wholesale would be linked to RPI –K would be more appropriate than the broader modifications originally proposed in the December 2011 consultation. The Board noted that there was still time for a short period of further engagement with stakeholders before a final decision on the exact details of the Licence change could be agreed.”

This comes after an uproar from industry stakeholders and investors around the regulators proposals to remove reference to the RPI in licences, in relation to broader reforms. Ofwat’s Chief Executive Regina Finn and Chairman Philip Fletcher are due to engage in further stakeholder discussions before the exact wording is decided.

This collective board decision backs Ofwat’s previous pledge, when it said it did not plan to remove the RPI link in the foreseeable future.


UK’s Big Six face competition as Hudson Energy launches UK operations

23rd July 2012

This week marks a new challenge for the UK’s ‘big six’ energy companies, with a new addition to the UK B2B energy market called Hudson Energy. Based in Milton Keynes, the firm said it plans to win business customers by “leveraging its leading edge proprietary technology to provide highly competitive energy products, efficient and timely pricing, deal management and excellent customer service.”

Hudson Energy Supply UK Limited is owned by North American Utility, Just Energy; who already have more than 120,000 commercial customers in Canada and the United States. The firm’s core focus will be to sell electricity to small and medium-sized (SME) UK businesses and then aims to expand into the gas market. Hudson currently has a strong foothold in the deregulated energy markets such as New York and Texas.

Hudson’s UK sales and marketing director, Steve Fitzsimons, said his group was starting off in electricity as it was more accessible to new entrants, less seasonal than gas and offered better returns.  Fitzsimons also stated that the company would deal mostly with brokers rather than end users, as 70 per cent of the UK business energy market is brokered. The firm starts off its business with a  team of just 30 people.

Ken Hartwick, Just Energy’s President and Chief Executive Officer said in a statement, “Our move into the UK energy market is a natural step in the evolution of our company. We have leveraged our strong North American supplier relationships to support our entry and many of our North American brokers also serve customers in the UK.”

 


DONG Signs Deal with Siemens for Wind Turbines Totalling 1,800MW

20th July 2012

Denmark’s DONG Energy has signed a deal with Germany’s Siemens Energy to purchase 300 giant offshore wind turbines with an individual capacity of 6 megawatt, giving a total capacity of 1,800 megawatt which will be used for DONG’s offshore wind farms across the UK. The deal marks a leap forward in efforts to set up ever larger units out at sea to boost renewable power output.
Carsten Krogsgaard Thomsen, Acting CEO of DONG Energy said in an official statement, ”The agreement will enable DONG Energy to install a significantly larger turbine from 2014 compared to the turbines, we know today. The agreement is a key element of DONG Energy’s strategy to significantly expand offshore wind and will strengthen our position as market leader in the offshore area. The agreement on the supply of the new turbines totalling 1,800 megawatt is an important step for the growing wind industry and will help make offshore wind more competitive.”

Both firms have a working track record; in March 2009 they had an agreement for 500 offshore wind turbines with a total capacity of up to 1,800 megawatt. “The supply agreement was the world’s largest of its kind and the parties thus took a big step towards industrialisation of the offshore wind sector.” Dong said in a statement.

This deal will support Siemens Energy to optimise production of its 6 megawatt offshore wind turbine and will also help strengthen its market position as supplier of wind turbines for the offshore industry. “Offshore wind energy has huge potential,” said Michael Suess, member of the Managing Board at Siemens AG and CEO of the Energy Sector.


Shell and SSE Win U.K.’s First CCS Seabed Licence

19th July 2012

In a UK first, Shell and SSE have been granted approval on their carbon capture and storage (CCS) project, to store carbon dioxide under the seabed.
The Crown Estate, which manages the seabed on behalf of the monarchy, announced in a statement that an “agreement for lease (AfL) for the permanent geological storage of carbon dioxide” was “signed with the Peterhead CCS Project (Shell UK Limited and SSE CCS Limited) at the offshore depleted Goldeneye gas field, located in the North Sea 65 miles from St Fergus, north east Scotland. This agreement will see carbon being pumped from the 385MW gas-fired power plant in Peterhead to Goldeneye.

Started this year by The Crown Estate, owner of the storage rights on the UK continental shelf; the programme will allow CCS project developers to apply for AfL’s across potential storage sites. The AfL’s offer companies exclusive time-limited opportunities to progress their CCS projects through to final investment decisions.

The Crown Estate said the project “is seeking funding under the UK Government’s commercialisation programme for carbon capture and storage (CCS).” Peterhead is contending for £1 billion of funding through the programme. This would put the U.K. on track to reduce emissions in half by 2027 and strip carbon out of the electricity generation industry. Alstom SA and Drax Group Plc. are also competing for the funds.

“We see CCS as an important technology in helping manage climate change and security of energy supply issues as part of the various ways of continuing to deliver power and industrial processes to the UK with low or zero emissions. Much work still has to be done to progress CCS and in particular transport and storage infrastructure. We look forward to working with those developers who are successful in the UK Government’s commercialisation funding competition to begin the delivery of this infrastructure.” The Estate said.

The value of the deal has not been disclosed either of the parties involved.


Scottish Power, SmartReach and Siemens commence Suffolk smart meter trial

July 18th 2012

Scottish Power is collaborating with Siemens and SmartReach to commence a smart metering trial in Ipswich for 1,000 of its customers. The main aim of the trial will be to test long-range radio communications networks and discover the percentage of smart meters that have a reliable first time connection.

SmartReach, is a consortia consisting of Arqiva, BT, BAE Systems Detica and Sensus. David Green, smart metering director at Arqiva – speaking on behalf of SmartReach commented “the trial would be the first to test systems end to end”.

Thames Water is also collaborating with SmartReach in smart meter trials. Green commented that the water sector should not be ignored in smart meter plans. “It would be foolish for the UK to do one system for smart metering, one for smart grids and another for water”.

Andrew Ward, operations director at Scottish Power, said “This trial will help us to evaluate the potential of long-range radio to reach meters wherever they are located, with the goal of achieving high first-time connection rates and on-going high levels of reliability.”


National Grid set to receive £44b spend approval from Ofgem

July 16th 2012

National Grid, Britain’s largest energy distributor looks set to receive the go ahead from Ofgem, the energy regulator to spend up to £44bn under strict funding terms to help transform the UK’s energy infrastructure.

Grid is proposing to spend over £21bn on its electricity transmission network over the next eight years beginning in 2013 to connect new power plants across England and Wales; along with a £9bn spend on gas pipelines and £13.5bn on gas distribution networks.

Industry analysts are indicating that Ofgem will not allow National Grid to increase prices as much they may wish, under the “price control” regulation which governs the level of expenditure and rate of return. This comes after Grid indicated bills may see an increase of £15 to £20. There is also a likelihood that Grid may have to cut its dividend, raise capital or sell off assets to raise funding.

Grid has suggested that its preferred method of fundraising would be to sell off assets. Steve Holliday, National Grid chief executive is keen to please company investors after he faced criticism in 2010 in a £3.2bn rights issue where he was accused of misleading shareholders regarding the company’s cash reserves.