Weekend press round-up: SSE boss defies activist investors’ demands

In the latest round-up of industry news from the weekend, SSE's boss readies for a fight with activist investors over renewables; the tide of public anger over rivers continues to rise with grassroots protests; and Thames Water is fined for 2017 sewage leak.

SSE boss Alistair Phillips-Davies: Why I’m rejecting activist’s break-up calls

Alistair Phillips-Davies has the look of a man resigned to his fate — that he is about to get into a fight with an 800lb gorilla. The boss of FTSE 100 energy giant SSE has just defied calls for a break-up from Elliott, the activist American hedge fund that strikes fear into the hearts of boardrooms around the world.

Paul Singer’s firm wanted Phillips-Davies to spin off SSE’s renewables business, comprising its prized wind farms, from the rest of the company — electricity transmission networks and gas-fired power stations, hydroelectric plants, and carbon capture and storage projects.

The ruthless activist investor, which recently took a stake in the company, usually gets its way. Yet Phillips-Davies, 54, doubled down on SSE’s existing strategy last week and slashed the dividend to fund a £12.5 billion investment in renewables over the next five years.

Sitting in SSE’s rather dingy office behind Buckingham Palace a day after his strategy update, he is in no doubt that shunning Elliott means his neck is now on the line. “I think there’s a lot to like in [the strategy] — give us the time to persuade everybody,” Phillips-Davies pleads. “But, at the end of the day, if somebody wants to take a swing at me, so to speak, I’m sure they’ll do it and that’s it. I’ll have to duck or stick my chin out.”

Elliott has recently agitated for change at Glaxo Smith Kline, and even suggested that the pharmaceutical giant’s chief executive, Dame Emma Walmsley, should reapply for her job. But Phillips-Davies, a slender chap who you would not exactly want as back-up in a street fight, is playing it cool.

Splitting off renewables, he says, had “some significant downsides” and it was “very clear to us that it wasn’t the right thing to do” — although the company did consider all options ahead of Wednesday’s strategy update.

“We wouldn’t be able to embark on some of the biggest projects we’ve got. It would basically force us to sell them and we wouldn’t be able to deliver them ourselves,” he says of hiving off the wind farms arm, which includes giant projects such as Dogger Bank, the world’s largest wind farm, being built in the North Sea.

“I think also it’s a huge distraction. At this point, we’re really putting our foot down trying to get that ambition delivered as quickly as possible. If the whole organisation pivots to deciding, like, who’s going to get what job in what bit of the organisation — and how do we do that in the next 12 months — it’s just not the place to be if we’re trying to build a world-class renewables business and a world-class networks business.”

When asked how he felt when Elliott first popped up on the shareholder register, Phillips-Davies declines to discuss the activist directly (“I don’t think they’d thank me for doing it”). Instead, he offers a less-than-cryptic comment about “hedge funds”, which gives enough away. His bankers, he says, told him there was positive feedback from shareholders, but he admits he can’t please everyone. “I don’t want to comment on specific shareholders but there were a lot of positive comments. And I think, ultimately, you’re probably going to get some hedge funds who are going to be disappointed, because there’s perhaps not a short-term news and churn there,” he says.

Phillips-Davies shifts quickly from defence on Elliott to attack when it comes to more familiar territory: Ofgem, the industry regulator. While SSE still has gas-fired plants as part of its portfolio, which it is slowly winding down, he wants Ofgem to “step up to the plate” to help the country meet its target of going net zero by 2050. He claims the watchdog has been too focused on the energy-supply crisis and not enough on laying the groundwork for Britain’s green transition.

The grid, he argues, will come under strain from a huge increase in electricity demand in the coming years and needs bolstering. Wires will have to be upgraded or installed and Ofgem should help SSE and others to build — and build quickly. This could include using existing infrastructure rather than digging up fresh channels by installing cables in water pipes, he claims. “They’re [Ofgem] rightly looking at the consumer, but they’ve got to look longer term.”

Phillips-Davies continues: “They’ve talked about net zero, but when are they behaving like they’ve got a role to play within net zero? When we actually see it in their actions and deeds will be the interesting thing. And that would certainly be my challenge to Martin Cave [Ofgem’s chairman] and Jonathan Brearley [its chief executive] going forward.”

Read the full interview in The Sunday Times

All new buildings in England to have electric car charge points from 2022

Boris Johnson will seek to boost the UK’s clean energy credentials after a tricky UN climate crisis conference by announcing that all new buildings in England will be required to install electric vehicle charge points from next year.

In a speech to the Confederation of British Industry (CBI) in the north-east of England on Monday, the prime minister will reveal plans, briefed as “world-leading”, to toughen up regulations for new homes and buildings.

From next year developers on sites such as supermarkets and office blocks will be required to install electric vehicle charging points, in an attempt to help phase out the use of petrol and diesel cars before sales of them come to an end in 2030. The government expects the move to lead to 145,000 new charging points each year.

Buildings undergoing renovations that leave them with more than 10 parking spaces will also be subject to the new measures.

Heralding the importance of clean energy just weeks after the UK hosted Cop26, Johnson will say the country is at a pivotal moment, adding: “We cannot go on as we are.”

He will tell business leaders that it should not just be public spending that is used to “adapt our economy to the green industrial revolution”, but that the government will focus on investment in science and technology, raise productivity and “then get out your way”.

Defending the new requirements, Johnson will add: “We must regulate less or better and take advantage of new freedoms.”

The government will also support a new loan programme worth £150m, distributed by Innovate UK over three years, to help British small and medium-size enterprises commercialise their latest research. The “innovation loans” will be accessible to a variety of sectors – including green businesses – and follow a pilot with businesses.

A further £9.4m in funding has been confirmed for what Downing Street said was a first-of-a-kind hydrogen project in the UK’s largest onshore windfarm, near Glasgow. The money will go to the Whitelee green hydrogen initiative to develop the country’s largest “electrolyser” – a system that converts water into hydrogen gas. It is used to store energy and supply local transport providers with zero-carbon fuel.

As part of the government’s bid to reach net zero by 2050, almost 26,000 publicly available electric vehicle charging devices have been installed – including 4,900 rapid ones. A total of 250,000 points in homes and workplaces have already been put in place.

The Guardian

Thames Water fined £4m after Oxford sewage leak

Thames Water has been fined £4 million after an estimated 500,000 litres of raw sewage poured into a stream in Oxford.

The Environment Agency said 3,000 fish died after a leak flowed for 30 hours and polluted a 1.8 mile (3km) stretch of Hinksey Stream in July 2016.

The company admitted the system that failed had not been checked for 10 years, Aylesbury Crown Court heard.

It said it was “deeply sorry” for the “entirely unacceptable” incident but said “things have changed”.

The leak was caused by an emergency overflow pouring into the stream. It should have been checked every six months.

Robert Davis, a senior environment officer at the Environment Agency, said the company had failed to undertake “basic and essential maintenance”.

Sentencing the company, Judge Francis Sheridan said the pollution was “avoidable” and was a “serious failure”.

Richard Aylard, Thames Water’s sustainability director, said: “We pleaded guilty at the first opportunity and accept the judgement of the court that we failed badly by not inspecting and cleaning this part of the sewer system.

“But things have changed. As part of the comprehensive turnaround programme we are doing five times as much sewer cleaning as we were in 2016.”

The company was fined £20.3m in 2017 after it pumped 1.9bn litres of untreated sewage into the River Thames in Oxfordshire and Buckinghamshire, killing fish and birds, in 2013 and 2014.

It was fined £2m in December 2018 for a “reckless failure” after raw sewage flowed into a brook near Milton-under-Wychwood in 2015.

And it was fined a further £2.3m in March for polluting a stream with sewage in Fawley Court Ditch in Henley-on-Thames in 2016.

BBC 

Johnson Matthey plots £50m hydrogen gigafactory

Engineering group Johnson Matthey is planning a £50 million hydrogen fuel cell gigafactory that would build components for a new generation of vehicles.

The FTSE 100 maker of catalytic converters has won £12 million in funding from the Department for Business, Energy and Industrial Strategy to put towards development of the factory, which is likely to be built within its existing site at Royston, Hertfordshire.

The factory would have the capacity to produce 3GW of materials and would create hundreds of jobs in the coming years.

It comes as the £4 billion company looks to win back investors after shocking the market earlier this month with the announcement that it would pull out of developing battery materials for electric cars.

Johnson Matthey had set aside about £1 billion to bankroll its push into electric vehicle batteries, but declared it would put the venture up for sale after deciding it could not make enough of a return.

The shares fell 19 per cent after the announcement and its chief executive, Robert MacLeod, said he would step down early next year.

It is thought that Johnson Matthey wants to redeploy some of the capital it will save on its battery division and put it into hydrogen, which has been championed as a zero-emission fuel.

The Hertfordshire plant would produce proton exchange membranes — essential components in hydrogen fuel cells. These cells provide power to motors via an electro-chemical process that burns the hydrogen and releases it as electricity. Johnson Matthey already produces technology to make blue hydrogen from gas and green hydrogen from renewable energy.

See the full article in The Sunday Times

The great eco con: why homeowners are being punished for going green

Homeowners risk spending tens of thousands on eco works that could make their homes less valuable thanks to the Government’s “flawed” Energy Performance Certificate system.

A senior banking source said that in 10 years’ time there could be a group of “property prisoners” because their homes have fallen in value as they are not deemed green enough. Others could be unable to access cheaper mortgages despite making their homes more energy efficient.

The energy sector has derided the EPC system – which rates homes from A to G – as “not fit for purpose”. The grading is based on bills, not on carbon output, meaning it can punish people for installing heat pumps and incentivises the use of gas over electricity. Inconsistencies in the system mean that homeowners can pay thousands of pounds for work that they later find actually lowered their EPC rating.

Tom Spurrier, of the UK Green Building Council, an industry body, said: “We have currently got a metric that incentivises gas because it is cheaper.” If you install a heat pump, which is powered by electricity, your EPC rating may fall.

The Government wants all homes to be EPC band C by 2035. Landlords will be affected first, with plans to introduce a band C requirement for new lets by 2025 and for existing lets by 2028. But owner occupiers will also be hit. Lenders will be required to have an average band C ranking for their portfolios by 2030, landing those homeowners in worse-performing properties with higher mortgage costs.

There is a risk that homes that cannot meet the target could become unmortgageable.

The Daily Telegraph

Martin Lewis furious at ‘monumental shift’ seeing energy bills soar £420 ‘no solution!’

Martin Lewis has warned that the Government has “no solution” for the energy bills crisis the UK currently faces. Bills will rise yet again at the beginning of next year.

Martin Lewis regularly appears on television to inform Britons about financial issues, offering viewers advice on how to save money on bills, amongst other necessities. Martin spoke to Andrew Marr on BBC this morning about the energy bills crisis.

The cost of living in the UK has increased in only a few months.

Martin explained one of the reasons for this is the increase in the energy price cap.

This happened in October due to a rise in energy wholesale prices.

Speaking to Andrew Marr today (Sunday), Martin said: “So, the totem for the cost of living problem is energy bills.

“And people will know in October we saw the price cap increase by 12 percent.”

Martin warned that next year energy bills will rise again.

He explained: “But because of the energy crisis, there is this looming date of April 1, when it’s likely the current price cap – around £1,280 a year for someone with typical use – is going to move to £1,700 a year.”

This, Martin said, is “a monumental shift and incredibly damaging for people’s pockets”.

The Express 

Wild swimmers fight the tide of pollution

Environmental groups are seeking to enlist outdoor swimmers to pick up beach litter and monitor water quality

Millions of wild swimmers across the UK could become “an army of marine activists” to keep governments and the public accountable for conservation, Scottish campaigners have claimed.

The authors of two popular wild swimming guidebooks want them to tackle pollution, monitor water quality and protect wildlife as UK bathing areas remain among the most polluted in Europe.

Wild swimming has become a major movement in the UK as an estimated two million people enjoy the health spin-offs, even in winter. The authors of Taking the Plunge and The Art of Wild Swimming: Scotland believe that they are well placed to pressurise decision makers with information from daily swims.

Their call comes before publication next week of a report on the state of UK bathing waters from the environmental charity Surfers Against Sewage (SAS). The report is expected to be damning. Last year’s figures ranked the UK 25th out of 30 European countries for bathing water quality, leaving swimmers vulnerable to gastroenteritis and infections from antibiotic-resistant strains of bacteria carried in raw sewage pumped into waterways. Poor investment in infrastructures was cited as part of the problem.

Vicky Allan, a co-author of the guidebooks, said that it was “absolutely worthwhile” for swimmers to do daily litter picks. She wants them to join bigger beach cleans with organisations such as Fidra, a charity that works to reduce plastic waste and chemical pollution, and the Marine Conservation Society.

“Let’s make a difference to how this stuff is getting in our waters and prevent it getting there,” she added. Allan urged swimmers to flag up environmental issues to MSPs to accelerate changes such as the ban on plastic cotton buds in 2019.

Every year between nine and 14 million tonnes of plastic are released into the sea. Microplastics leach toxic chemicals that can be ingested by marine animals and enter the food chain.

Hugo Tagholm, chief executive of SAS, said that bathers were “exposing themselves to myriad health threats, from minor infections to colonisation by antibiotic-resistant bacteria thanks to shocking levels of raw effluent being discharged into the blue arteries of this country on a daily basis”.

The Times 

Energy suppliers reject new customers amid crisis in market

Homeowner trying to get meter faced winter without heating because firms fear making a loss

Sarah Greaves, a single mother who has spent the last six months renovating a home near Stroud, was left facing a winter without proper heating because no energy supplier was prepared to take her on as a customer and install a meter.

Over the last few months the UK energy market has seized up. Spiralling wholesale gas prices have led to the demise of 21 energy suppliers – two failed this week – and about 2 million customers having to be switched to a new supplier appointed by the energy regulator, Ofgem.

For most of those affected, it has been a story of big price increases as they have found themselves switched to a price-capped tariff. However, a new problem has emerged that could affect anyone connecting a home to the grid for the first time: suppliers are refusing to take on new customers in case they end up making a loss.

As part of the plan to modernise her home, Greaves asked builders to rip out the old, inefficient electric storage heaters and replace them with gas central heating. While the house is set to be connected to the mains at the beginning of December – with most of the building work finished about the same time – she says there is no prospect of having a working gas supply any time soon.

“To my horror, I’ve discovered that no suppliers or independent installers are installing gas meters at the moment,” she told Guardian Money. “They are all blaming the current situation in the market and refusing to take us on as a customer. My daughter and I are supposed to be moving in when the work’s finished but I have no idea how we are expected to heat the place this winter, if no company will supply us with gas.”

She says she first approached SSE, which already supplies the property’s electricity, but was told that it was not currently taking on new customers because of the “strain the fuel market is under”. Since then she has approached British Gas, Ecotricity, E.ON, EDF, Octopus and two smaller suppliers, which have all refused.

E.ON told her via Twitter that it had taken the difficult decision to “pause new connections due to the market conditions”.

Wales & West Utilities, the company responsible for connecting the property to the gas network, told her it could not intervene as only her supplier could install the meter.

“I can’t be the only person in this position – lots of people renovate old homes and put in modern heating – but there appears to be no solution,” she said. “We will have no hot water and are going to have to use portable electric heaters during the coldest time of the year. Surely there is some obligation on firms to connect customers who need heating?”

After Guardian Money’s intervention, SSE, which is now part of Ovo, told Greaves that it will now connect her home, and install the meter on 10 December. It is also reviewing why her request was not escalated to the correct team internally, and the messages she was sent.

An Ofgem spokesperson says suppliers are obliged to take on customers when requested: “We’ve been clear that suppliers must comply with licence conditions despite the challenging market situation.

“Suppliers must offer to supply a domestic household once approached by a customer, including where this necessitates the installation of a meter to enable supply. If supplier actions leave consumers at risk of going off supply, and where we have evidence that this is the case, we will take action.”

The Guardian 

River Severn sewage: Protesters march in Shrewsbury

About 100 protesters have marched in Shrewsbury to highlight the issue of sewage being discharged into the River Severn.

The event on Saturday, organised by local campaign group Up Sewage Creek, followed the river’s route to points where raw sewage is discharged.

The protest comes in the wake of a nationwide uproar over the dumping of sewage in the UK’s waterways.

Severn Trent said it was “working hard to use overflows less”.

Claire Kirby, from the protest group, said: “As Shrewsbury residents, we’re fed up of seeing our beautiful river, and the footpaths around it, ruined by human excrement and sanitary waste.

“The Severn is the jewel in Shrewsbury’s crown and loads of people, including children, swim, canoe and paddleboard on it… we have had enough.”

The protesters also said they were frustrated that local MP Daniel Kawczynski “hasn’t done more to protect the Severn” during recent Commons debates on the Environment Bill.

The House of Lords had proposed putting a legal duty on water firms to reduce untreated sewage discharges, but ministers rejected the amendment and the government’s Environment Bill was approved earlier in the month,

Following pressure from peers and campaigners, the government put forward its own alternative, which was voted through.

Mr Kawczynski said: “I remain adamant that the amount of sewage discharged by water companies into our rivers is unacceptable. Water companies must significantly reduce sewage discharges from storm overflows as a priority.

“If we do not start to see significant improvements, government will also have powers to order water companies to act at a faster rate.”

Mark Cheetham, one the people who took part in the march, said: “There’s an overwhelming awareness in the country and locally, that there’s unacceptable rates of dumping of raw sewage in our river systems.

“In 2020 there were 500,000 discharges of raw sewage of rivers in England and Wales, and that’s quite frankly unacceptable.”

Severn Trent added: “The current debate is around the use of storm overflows which are used in heavy rain and are made up of almost all rainwater and only account for 3.5% of rivers not achieving good ecological status.

“We are working hard to use overflows less and we are investing £100m a year to go even further in improving rivers so that nature can continue to thrive.”

BBC 

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.