Weekend press round-up: Centrica gears up for £200m activist assault

In our latest review of sector coverage in the national newspapers, the owner of British Gas is said to be braced for a raid by hedge funds eager to take advantage of the global energy crisis. A government plan to mitigate the worst impacts of that crisis is set to be unveiled this week, another report suggests. Meanwhile, Macquarie’s return to the UK water sector is analysed.

British Gas owner Centrica gears up for £200m activist assault

The owner of British Gas is bracing for an assault from activist investors eager to take advantage of the global energy crisis.

Centrica is understood to be preparing contingency plans with investment bankers from Goldman Sachs against a raid by hedge funds.

The business is on alert after large stakes worth hundreds of millions of pounds changed hands through accounts fronted by investment banks last week.

A 5pc tranche of Centrica stock was also bought a fortnight ago through a Bank of America nominee account.

The trade was made up of a combination of shares and contracts for differences, a standard tactic by investors planning to demand change.

Industry insiders said that Centrica’s board, led by chairman Scott Wheway, a former director of Boots, is preparing its defence ahead of an activist investor appearing on the company’s share register. Centrica declined to comment.

Daily Telegraph 

Sink or swim: Macquarie plunges back into crisis-hit UK water industry

The UK’s water industry has for years promised to clean up its reputation for pollution incidents, leaks and murky financial dealings. Yet once again, it is hoping for a clean start.

In total, water companies spilled raw sewage into coastal bathing waters more than 5,500 times last year, prompting a another investigation by the Environment Agency and the industry regulator, Ofwat, in November.

Weeks later, Ofwat raised a red flag over the financial health of three of Britain’s biggest water companies – Southern, Yorkshire and SES. The regulator expressed concern about “weak levels of financial resilience” and levels of customer service that lagged behind the rest of the industry.

For Southern, the resilience report gave a snapshot of the company’s financial health before an equity injection from a familiar character in the water sector’s chequered history, the Australian investment bank Macquarie.

Macquarie gained notoriety for its role as the owner of Thames Water between 2006 and 2016, when it attracted fierce political scrutiny for extracting billions in shareholder dividends while Thames’s debt soared. By 2018 the Labour party had called for the sector to be returned to public ownership.

But five years after selling out of Thames, the Australian infrastructure investor was given the regulator’s blessing to return to run one of the most troubled water companies in the industry – a move that raised eyebrows in the industry.

The £1bn in fresh equity for Southern over the summer followed Ofwat’s decision to enforce a record £90m fine against Southern for deliberately pouring sewage into the sea, and came with a promise to invest a further £2bn over the next four years.

Macquarie has not stopped there. Within months of its return to the UK’s water sector, it agreed to invest £130m in green bonds issued by a subsidiary of Affinity Water, and £120m in Anglian Water’s debt. The passive investments are part of the bank’s sprawling set of investments in UK infrastructure.

Macquarie owns the Green Investment Bank, which was set up with UK taxpayer funds and controversially privatised four years ago. Under its ownership, GIB’s profits more than quadrupled to £144m for the year ending March 2021, compared with the year before. It has paid a total of £174m in dividends to Macquarie, which also owns gas networks, airports and telecoms service companies across the UK.

Aileen Armstrong, a senior director at Ofwat, said the regulator had “really welcomed the money coming into the regulated business” while being “clear about the expectations on what the company needed to do for customers.

“We have wanted to see a turnaround, and a component of that is an equity injection into the company, which is what this transaction did. We have been very clear – and would be with any prospective new owner – about what we expected of the regulated company and the need for a turnaround in the operations there,” she said.

One senior industry source said Ofwat’s decision to give Macquarie its blessing to return to the water industry showed “just how desperate they were” after Southern’s record pollution fine and its troubling financial position.

“Southern was not an attractive prospect for investors, and the company’s management was, perhaps unsurprisingly, on its knees. Investors would not have been falling over themselves to take a share of Southern,” the source said.

However, Martin Bradley, the head of Macquarie’s “real assets” team in Europe, the Middle East and Africa, said his bank was happy to return to the UK’s water industry despite “misunderstandings” over its ownership of Thames and the concerns over Southern’s financial health.

“We didn’t pay a premium for Southern Water,” he said. “We invest in long-term infrastructure, and there’s nothing more long-term than the provision of utilities like water. This is what we do, and we think we’re quite good operators.”

Read the full article here

The Guardian

Johnson aims to help low-income households with energy bills

Boris Johnson and Rishi Sunak will this week seek to finalise a package of measures to help millions of low income UK households with a looming big increase in their energy bills.

The prime minister and chancellor have agreed to prioritise “targeted support” for less affluent families struggling with rising energy costs rather than the same relief for all households, according to government insiders.

Johnson is trying to win over his Conservative critics by showing that, despite the partygate scandal, he has several key policy initiatives, including on the cost of living crisis.

Johnson and Sunak are considering how to improve up to three schemes providing financial help to pensioners and those on low incomes with their energy bills, by potentially increasing the size of payments available and the number of households that qualify.

These schemes are the £140 annual warm homes discount, the winter fuel payment of up to £300, and the cold weather payment of £25 a week when the temperatures fall below zero degrees Celsius.

The government is racing against the clock to finalise the package because industry regulator Ofgem will on February 7 announce a rise in the energy price cap, which analysts estimate could increase the average household bill from about £1,300 a year to nearly £2,000. It follows a surge in wholesale gas prices in recent months.

The Treasury has not ruled out a big intervention, whereby the government would pay energy suppliers when wholesale gas prices rise sharply, so they do not immediately pass on the increase to households, but officials said it would be difficult to implement at speed. “It’s fair to say the aim is to ensure some targeted support,” said one.

Separately the government will on Monday announce a new 75 per cent super levy, called the public interest business protection tax, that would apply to owners of energy suppliers that seek to sell valuable gas price hedges and close their businesses.

The government is concerned some owners could prematurely close down companies and net a windfall at the expense of customers.

The Financial Times

Boris Johnson urged to hold No10 cost of living summit to ‘thrash out’ solutions

Boris Johnson has been urged to host a ‘cost of living summit’ in Number 10 to “thrash out” solutions to the looming crunch on household budgets.

Lib Dem leader Ed Davey accused the Prime Minister of being “missing in action” – and too busy trying to save his own skin than to help struggling families.

He said: “It is utterly shameful that Boris Johnson held law-breaking parties in Downing Street, but won’t haul in the bosses of energy firms to help struggling families with their bills.”

The proposed summit would require the heads of the top five utility companies in the energy, telecoms and water sectors to come to Downing Street for roundtable meetings with ministers.

It would also include representatives of the public, so that both ministers and company bosses hear from people struggling to afford their household bills.

Energy bills are forecast to soar by 50% in April or an estimated £600 per household, forcing families to choose between eating and heating, while broadband bills are set to rise by 9.3%.

The Daily Mirror

Over-65s may go without food or heat to cope with energy bill rises, says Age UK

Nearly a quarter (24%) of older people believe they will be forced to choose between heating their home and the food they buy if their energy bills increase substantially.

More than half (54%) of those surveyed said they would have to heat their home less, a survey for Age UK found.

And just over two-fifths (43%) said they would have to cut back, go into debt or simply will not be able to afford to pay their bill, according to the research among over-65s.

Inflation jumped to a near 30-year high of 5.4% in December and the energy price cap is due to rise in the spring, possibly increasing bills by 50%, according to predictions.

One 69-year-old woman told Age UK: “I am currently in bed keeping warm today as it’s so cold and I can’t afford to have my heating on for the whole day.

“I’m reduced to showering on alternate days, which I hate, and I’m eating food that’s microwaveable to avoid heating my oven.”

Age UK warned that many older people are missing out on extra income as well as vital support such as Cold Weather Payments and the Warm Home Discount Scheme because they are not receiving Pension Credit, despite being eligible.

It said many older people on low incomes are unaware that they qualify for Pension Credit, and that a successful claim opens the door to a wide range of other support, including help with energy bills.

As part of its campaign The Cost Of Cold, Age UK is urging any older person on a low or modest income who is struggling with their bills to have a full benefits check.

The Independent

BP & Shell make £900-a-second profits as Brits shiver at prospect of energy bills rise

Oil goliaths Shell and BP are set to spark fury by raking in more than £7billion profit between them in just three months, while households are reeling from a cost of living crisis.

The bumper haul will reignite calls for a windfall tax on firms making a packet out of the surge in wholesale energy prices.

Meanwhile, ordinary households around the country are struggling to pay their bills.

Someone who won’t be facing the same anguish is Shell’s 63-year-old boss Ben van Beurden, who netted £5.2million in pay and perks in 2020, and nearly £70million since he took charge in 2014.

Shell is the first of the pair to announce quarterly results next Thursday.

Analysts expect it to reveal profits of almost £4.3billion – equivalent to just over £32,000 an hour, or the same as an average NHS nurse earns in a year.

Shell has benefited through not only producing gas but also being the world’s biggest trader in liquefied natural gas.

BP follows on February 8, with analysts forecasting it made almost £3billion in the final three months of last year.

Labour is set to step-up pressure by using an opposition day debate next week to challenge Tory MPs to vote against a windfall tax.

Daily Mirror

Green energy measures saving households £1,000 a year – analysis

Energy efficiency measures have already saved the average British household about £1,000 a year in energy bills, and further insulation and home improvements could halve future bills, analysis has shown.

But the future savings are unlikely to be realised unless the government focuses swiftly on insulation, as the savings to date have come largely from efficiency improvements in electrical appliances and boilers, which will not be repeated.

The energy price cap is forecast to rise to £2,000 for a typical household in April, owing to the gas crisis, from about £1,300 today. But average household energy bills would be £3,000 a year if it were not for a range of regulatory measures that have brought down energy use in the last two decades, according to the Regulatory Assistance Project (RAP), an analyst organisation.

Jan Rosenow, director of European programmes at RAP, said the analysis showed the failures of the government in the past decade to take action that would have staved off much of the current energy price crisis. “If the government had acted, we could have had a properly funded programme that would have reduced greenhouse gases and energy bills,” he said.

Electrical appliances such as lightbulbs, fridges and washing machines now use much less power than 20 years ago, owing to EU directives. A 2005 UK government regulation mandating the use of condensing boilers has brought down average gas use significantly.

Energy consumption overall has declined by 16% since 2000 despite a 15% increase in the number of homes, the average home being 10% larger and the rise in appliance ownership, the RAP said.

Insulation, double glazing and similar home upgrades have also somewhat reduced energy use, Rosenow said, but by far less than could have been possible, as the UK has fallen behind on such improvements. Insulation rates have plummeted in the past decade, after successive government schemes have been scrapped and not replaced.

At least 14m households have missed out on insulation because of the abandonment of the green deal scheme, which was set up in 2013 and stopped in 2015, with only about 15,000 homes upgraded. A further 47,500 were improved in the most recent successor scheme, the green homes grant, instead of the 600,000 promised, when the scheme was scrapped after only six months.

The “stop-start” nature of the government’s insulation efforts has also stifled the growth of the insulation industry, which requires skilled workers and a broad network of suppliers, Rosenow added. Thousands of jobs have been lost in the industry over the past decade.

The RAP analysis suggested it would be a mistake to cut the energy company obligation (ECO), which the government is considering. The £1bn a year programme, the cost of which is added to energy bills, channels funding to insulation for people on low incomes. Cutting ECO “would slow down the much-needed transformation of our housing stock and leave more people exposed to rising energy prices in the future”, RAP said.

Rosenow said the failure to keep up consistent action on insulation was a massive missed opportunity, but that action now could still reduce bills in future years. Some analysts have forecast high gas prices for at least the next two years, as the world recovers from the coronavirus pandemic and economic shocks.

“Gas boilers are now about as efficient as they can be. The big area for improvement is insulation,” said Rosenow. “You can’t get to net zero without insulation. It’s impossible, it would be far too expensive and impractical.”

The Guardian

Paddlers barred from 150 reservoirs

Whether gliding across glassy lakes or wobbling over waves, paddleboarding has become a beloved hobby for thousands of Britons.

But new rules from one of the largest water companies bar paddlers from more than 150 reservoirs to avoid the risk of them drowning.

United Utilities, which owns 170 reservoirs in the northwest has outlawed stand-up paddleboarding from all but five of its locations. In a statement posted online, United Utilities said it did not permit swimming in its reservoirs due to the cold water, steep sides and risk of hidden machinery under the water. Paddleboarding would “often involve time spent in the water”, it said.

Previously, paddlers enjoyed open access to some of its reservoirs including Thirlmere and Ennerdale Water in the Lake District, British Canoeing, which oversees paddle sports, said. On other reservoirs, sailing, canoeing and kayak clubs were increasingly expanding to offer paddleboarding, which has become Britain’s fastest growing sport.

Under the new rules, only five clubs will be allowed to offer paddleboarding and enthusiasts will not be allowed to go out independently in any reservoir.

The Times

Utility Week’s weekend press round-up is a curation of articles in the national newspapers relating to the energy and water sector. The views expre