Weekend press round-up: Pennon considers takeover of Southern Water

In our latest review of sector coverage across the national newspapers, there is speculation that Pennon Group, having considered approaches for several water companies, now has Southern in its sights. There is also the latest on Boris Johnson’s 10-point roadmap for building back greener and plans for a solar power station in space, among others.

Pennon considers takeover of Southern Water

Water giant Pennon is looking into a takeover of embattled rival Southern Water.

The FTSE 100 owner of South West Water recently sold waste business Viridor to private equity titan KKR for £4.2bn, netting £3.7bn of cash. It has told shareholders it is keen to recycle that cash via a takeover, rather than hand it back to them.

Pennon, run by new boss Susan Davy, is also understood to have run the rule over Wessex and Bristol Water, but Southern is thought a more likely target.

Southern has endured a turbulent time in recent years amid sewage leaks, a £126m fine last year, investigations by regulators and uproar over hefty dividends and debt.

It was bought for £4.2bn from Royal Bank of Scotland in 2007 by a consortium including JP Morgan Asset Management and UBS. They took out dividends totalling £190m in 2016 and 2017 — part of a wider plan to extract £210m while, in effect, halving annual contributions to the pension scheme.

Unlike many of its rivals, Pennon is on good terms with Ofwat, and its five-year spending plans were given the green light by the industry watchdog. Ofwat has been thrown into turmoil by the competition regulator’s shock decision to overturn its ruling on how much profit companies could make.

Pennon shares stand at £10.41, valuing it at £4.4bn. Pennon declined to comment.

Sunday Times

Boris Johnson forced to self-isolate again as crucial week begins

Boris Johnson was forced into self-isolation on Sunday night just as he embarked on a crucial week designed to restore calm and project an air of competence after a vicious No 10 turf war.

There were concerns that Covid-19 had returned to Downing Street as the result of a 35-minute meeting between the prime minister and a group of Tory MPs at No 10, one of whom subsequently tested positive for the virus.

Johnson was pictured standing next to Lee Anderson, MP for Ashfield in Nottinghamshire, inside Downing Street on Thursday. The men appear to be less than 2 metres apart and neither is wearing a mask.

The advice for Johnson to now self-isolate for 10 days comes at a difficult moment for the government. He is expected to continue to make public statements from inside No 10, including on the government’s green plans. This is also a pivotal week for Brexit, as negotiations with the EU reach their final phase.

The Guardian

No 10 and Treasury clash over spending on environmental agenda

Boris Johnson’s plans to relaunch his premiership with a blitz of announcements on combating climate change and the creation of tens of thousands of new green jobs are meeting stiff resistance from the cash-strapped Treasury, the Observer has been told.

Senior figures in Whitehall and advisers to the government on environmental issues say negotiations on the content of a major environmental speech by the prime minister are still ongoing between No 10, the Treasury and the Department for Business, Energy and Industrial Strategy with just days to go before Johnson delivers the keynote address.

The speech, containing a 10-point plan, has already been repeatedly delayed as government attention has been focused on the fight against Covid-19 and multibillion-pound measures by the Treasury to keep the economy and business afloat during the resulting economic crisis. On Thursday, however, the prime minister made clear his determination to press ahead with the speech, tweeting that it would be of historic importance and was imminent.

He said: “We’re one year out from hosting @COP26 in Glasgow. There is no time to waste and we have to act now to take bold action in the fight against climate change. I’m looking forward to shortly setting out my 10-point plan to create thousands of green jobs in the UK.”

Johnson hopes his plans to “build back green” after Covid-19 will help him bond with the new US president Joe Biden, who has placed environmental issues at the top of his agenda. The UK will chair the COP26 meeting of world leaders on climate change in a year’s time, placing Johnson in the international spotlight in the fight to curb global warming.

The prime minister wants to include plans such as speeding up moves towards zero-carbon housing, an expansion of nuclear power, more support for the hydrogen economy to replace fossil fuels in steel and chemical manufacturing, and measures to phase out sales of new diesel cars and boost the use of electric cars.

But many of these pledges involve long-term financial commitments of funding and subsidy which the Treasury is reluctant to make until the extent of the bills from the Covid crisis are better known.

“The Treasury is fighting back hard against a lot of the green plans and there is a battle going on with No 10,” said a source close to the talks. “The PM wants to get on with it, with plans for the long term, but he is meeting a lot of resistance. You would expect that from the Treasury but with Covid it is of another order.”

The Observer

National Grid spared from £220m penalty

National Grid’s spending plans for Britain’s energy networks were deemed to be so flawed by the regulator that it would have faced a £220 million fine were it not for a cap on penalties.

The FTSE 100 utility group is still fighting a record £66.6 million proposed fine for the poor quality of its electricity networks business plan, and a £26.4 million fine for its gas networks plan. Ofgem documents reveal that the company’s business plans were so poor that the total £93 million penalty could have been more than twice as high and was only reduced because the regulator introduced a cap on potential fines.

Network companies’ spending is funded through levies on energy bills, which are regulated through “price controls” where Ofgem assesses their proposed investment plans.

The companies that operate Britain’s gas pipelines and electricity transmission cables are going through the price control process at present to determine how much they can spend at consumers’ expense over the next five years.

National Grid, which last week reported half-year profits of £1.1 billion, has been battling Ofgem since July when the regulator’s draft price control proposed halving its investment plans and returns to shareholders.

Ofgem documents show that National Grid’s business plans for its gas and electricity networks were the only ones out of seven companies’ submissions to fail the first stage of its assessment. Ofgem found that National Grid repeatedly failed to provide evidence to justify proposed increases in its workload and expenditure.

The regulator assessed that National Grid was liable for a £196.3 million penalty on its plans for the electricity transmission networks in England and Wales. This was reduced to £66.6 million because this was the maximum fine allowed after the regulator introduced a cap on penalties. That would still be the biggest fine levied on a company by Ofgem. Only one other company, SSE’s Scottish Hydro Electricity Transmission, scored so badly as to be in line for penalties in excess of the cap.

John Pettigrew, National Grid’s chief executive, said: “Our view is that they set the guidance, we followed the guidance. They then, after we put the business plan in, challenged us and said they wanted more detail,” he told The Times last week. “Since then we have provided 22,000 pages of detailed information to Ofgem, to give them the assurance that the investments are needed, and will benefit consumers.”

The Times

Millions of homes could be powered by solar power beamed down from space by 2050

Millions of British homes could be powered by a giant solar power station 24,000 miles up in space within three decades, under proposals being considered by the government.

Under the plan, a system of five huge satellites – each more than a mile wide, covered in solar panels and weighing several thousand tonnes – would deliver laser beams of energy down to Earth.

These would provide up to 15 per cent of the country’s electricity supply by 2050, enough to power 4 million households – with the first space energy expected to be delivered by 2040.

Each satellite would be made from tens of thousands of small modules, propelled into space through 200 separate rocket launches, and then steadily assembled by robots once.

The satellites would use thousands of mirrors to concentrate the sunlight onto the solar panels, which would be converted into high frequency radio waves. These would be beamed to a receiving antenna on the Earth, converted into electricity and delivered to our homes.

While the prospect of a solar space station beaming energy into our homes might seem outlandish, advocates are hopeful it can be done.

The government and the UK Space Agency are taking the technology extremely seriously, believing it could play a crucial role in helping the country to fulfil its promise of becoming carbon neutral – or net zero – by 2050, while keeping the lights on.

They have appointed the engineering consultancy Frazer-Nash to look into the technical and economic feasibility and it will report back next year.

“Solar space stations may sound like science fiction, but they could be a game-changing new source of energy for the UK and the rest of the world,” said Science Minister Amanda Solloway.

“This pioneering study will help shine a light on the possibilities for a space-based solar power system which, if successful, could play an important role in reducing our emissions and meeting the UK’s ambitious climate change targets,” she said.

Martin Soltau, of Frazer-Nash, who is leading the feasibility study, said: “This technology is really exciting and could be a real force for good. It has the potential to transform the energy market and make the net zero target achievable – and from an engineering perspective it looks feasible.”

Previous analysis by other researchers on economic viability suggests space solar could be ‘competitive’ with existing methods of electricity generation but we will need to independently assess that, said Mr Soltau.

iNews

Big UK offshore windfarms push risks harming habitats, say campaigners

Offshore windfarms risk harming delicate landscapes and vulnerable wildlife habitats if the government fails to coordinate the planning system in its push for a big expansion of clean energy, green campaigners have warned.

The prime minister, Boris Johnson, has promised that every home will be powered by offshore wind by 2030, which will require dozens of new sites for large turbines around the coast.

However, the turbines require connections to the electricity grid and other construction on land, proposals for which are decided by local authorities on a case-by-case basis, and there is little national coordination of their construction.

That means sensitive coastal sites, such as wetlands and marshes that are home to birds and large numbers of other wildlife, could be at risk, according to campaigners. A group of 18 leading environmental organisations, including the RSPB, Friends of the Earth and the Wildlife Trusts, have written to the prime minister to call for better coordination that would ensure a minimum of disruption.

The groups warned that the current planning system was “not fit for purpose”, as it failed to take a strategic view of how such infrastructure could be accommodated in a way that allows fragile and degraded ecosystems to recover from disturbance.

“Offshore wind infrastructure can be designed sensitively for nature if a transparent system of strategic and spatial planning of future offshore wind and associated grid infrastructure is put in place,” wrote the conservation chiefs.

They do not want to place curbs on the number of offshore windfarms or turbines, but called for better planning and communication among local authorities and central government. “Each new development must be planned in the light of better mapping and data about the habitats affected and the cumulative effects of multiple activities.”

If there were more coordination among wind farm developers and local authorities, fewer onshore construction sites, substations and other structures may be needed, without reducing the number of turbines at sea.

The green groups point out that seagrass, saltmarsh and deepsea mud – all of which can be disturbed by offshore windfarm construction – also store large amounts of carbon, so disturbing them to build windfarms is counter-productive.

Richard Benwell, chief executive of Wildlife and Countryside Link, which coordinated the letter to ministers, said: “It’s heartbreaking when action to improve one aspect of our natural world harms another. A headlong race to build offshore wind could be ruinous for marine ecosystems, but it’s not inevitable. With intelligent reform of offshore planning to prioritise space for clean energy and for nature in our seas, the UK can achieve its laudable net zero aspirations at the same time as bringing life back to our ocean.”

The wind industry body said companies were already subject to strict regulations and were working closely with one another and with conservation groups in order to minimise the negative impacts of construction.

Luke Clarke, director of strategic communications at RenewableUK, told the Guardian: “Climate change poses the greatest threat to our ocean habitats and wildlife, so it is vital that we rapidly develop effective solutions, like offshore wind, and that we do so in an environmentally sensitive way. We already work closely and collaboratively with other sea users and wildlife organisations, including many of the signatories to this letter, to maximise the protection of the precious biodiversity in our waters. We share their values as environmentally sensitive developers.”

He added: “Strict rules rightly mean that windfarms can only be built in a way which meets rigorous standards to protect wildlife. Offshore windfarm developers dedicate millions of pounds in funding detailed surveys over a period of years before they build anything as part of the stringent Environmental Impact Assessments process. We will only build projects in the right locations and in an appropriate way, respecting our rich natural environment.”

The Guardian

Give tax discount to green homes, Eon tells ministers

Homeowners who make their properties more energy efficient should pay less council tax and stamp duty, the UK boss of renewable energy giant Eon has told Ministers.

Michael Lewis has presented proposals for tax cuts linked to energy efficiency as Boris Johnson prepares to unveil his blueprint for Britain’s green energy transition.

He said making homes greener is ‘absolutely critical’ to meeting the UK’s 2050 net zero target, and the Government should make green incentives a major part of property transactions.

In talks with Energy Minister Kwasi Kwarteng, Eon – the second biggest domestic energy supplier in Britain – has also suggested giving home buyers access to ‘green loans’ as part of their mortgages. They could spend this money on making their home more energy efficient.

He said the Government should then ‘align the tax system to zero carbon’ by adjusting council tax bands and stamp duty to favour energy-efficient homes. Eon has also suggested cutting VAT on heat pumps and solar panels.

Lewis told The Mail on Sunday: ‘The energy transition has to be focused around the customer. If we don’t make the UK’s housing stock much more energy efficient, we will never deliver zero carbon.

‘There are around 19million UK homes with an energy efficiency rating of D to G. If these were all upgraded to energy efficiency bands A, B or C, you would save roughly 130 Terawatt hours of energy per year.’

Comparing the output to nuclear energy, he added: ‘That’s roughly six Hinkley Points.’

Mail on Sunday

M&G to invest £150m in UK battery start-up Zenobe

M&G, the FTSE 100 asset manager, has agreed to invest £150m in UK battery company Zenobe, helping the start-up accelerate supply for electric buses and energy storage.

Zenobe said the funding from M&G’s infrastructure arm Infracapital would also allow it to enter new markets in Europe.

The deal is the latest in the UK battery sector. London-listed Gresham House Energy Storage said this month it would raise £257m to fund 10 energy storage projects to provide power to the UK grid.

“With the increase in renewables we are going to have to be cleverer and smarter about how we balance the system,” said Steve Holliday, Zenobe’s chairman and former National Grid chief executive.

Zenobe helps bus fleets go electric by providing the batteries, charging infrastructure and software to manage the charging schedules. By financing the battery, which is the most expensive component in an electric bus, the company lowers the costs for bus operators.

The company has developed its own software for managing batteries that provide a range of services such as frequency balancing to the National Grid.

It also provides batteries to industrial customers that enables them to lower their energy bills. Last year Zenobe helped United Utilities, the UK’s third-largest listed water company, save money by using a battery to store energy from its on-site solar panels to use when grid prices were high.

“By driving the adoption of batteries across the transport, infrastructure and utilities sectors, we will help accelerate the uptake of renewable energy, ultimately enabling the transition to a green energy system, both in the UK and internationally,” said Nicholas Beatty, Zenobe’s founder.

The Financial 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 expressed are not those of Utility Week or Faversham House.