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On this page you will find industry news about electricity, renewable energy, gas, water, fixed and mobile telecoms, and other stories. Our news is updated once per month. We cover items such as developing technologies, price changes in the utility markets, takeovers and company collapses, changes in tariffs, the results of investigations by the regulators and market trends.
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‘Rogue broker’ blamed for oil spike
Friday, July 03, 2009
The startling spike in oil prices to their highest level this year on Tuesday was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m (€7m) of losses for his company.
PVM Oil Associates, the world’s largest over-the-counter oil brokerage, said on Thursday it had been the “victim of unauthorised trading”. The privately owned company said that as a result of the unauthorised trades it had been forced to close substantial volumes of futures contracts at a loss.
London-based PVM said it had informed the Financial Services Authority, the UK regulator. But officials at the Commodity Futures Trading Commission, the US regulator, claimed they had been kept in the dark for several hours in spite of an agreement between the watchdogs last year to exchange such market-sensitive information spontaneously.
Oil traders in London and New York said the “unauthorised trading” explained the exceptional spike in business activity and prices in the early hours of Tuesday that some initially thought must have been caused by a geopolitical event. “Trading volumes rose overnight and prices jumped more than $2 a barrel without apparent justification,” a senior oil trader in New York said.
Prices rose in one hour from $71 to $73.5, the highest level for the year, according to Reuters data. In total, futures contracts for more than 16m barrels of oil changed hands in that hour – equivalent to double the daily production of Saudi Arabia, the world’s largest oil producer, and far more than the traditional 500,000 barrels for that time of the day.
Traders said the broker implicated had allegedly accounted for at least half of the unusual activity, with the rest the result of others chasing the rally. Oil prices on Thursday fell to $66.5 a barrel, down almost 10 per cent from Tuesday’s peak.
The Financial Times has identified the PVM broker as Steve Perkins. PVM declined to comment and Mr Perkins could not be reached. Fellow traders said Mr Perkins was considered an experienced broker, well-regarded in the market.
This is the second episode of rogue trading in the oil market this year. In May, an oil trader at Morgan Stanley was banned by the City watchdog after he hid from his bosses potential losses on trades made under the influence of alcohol.
The incidents come as regulators are considering tougher oversight of the commodities markets after policymakers complained that speculators fuelled last year’s surge in oil and agriculture prices.
The involvement of PVM is ironic considering the company’s head, David Hufton, has been an outspoken critic of speculators in the oil market, calling some of the exchanges “electronic oil casinos”. In 2006, he said that “if futures exchanges did not exist, oil prices would be a lot lower”.
The $10m loss is a heavy blow for PVM, which reported profits of just $5.6m in the year to July 2008, according to its accounts.
This story was featured on The Financial Times Website.
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Bosses slam upfront energy bills
Wednesday, July 01, 2009
EXECUTIVES from Britain’s top companies will warn the Big Six utilities next week that draconian contract terms, imposed to insulate them against the failure of business clients, will lead to further job losses unless they are urgently reformed.
The Major Energy Users’ Council (MEUC), a cross-industry group that includes the likes of Tesco, Rolls-Royce, BT and the NHS, has convened a crisis meeting for Tuesday in the Guildhall to address the issue. Representatives from the Big Six and credit insurers including Coface, Atradius, and Euler Hermes are also expected to attend.
The problem developed because credit insurers, who pay the bills of companies that go under, have pulled out en masse from certain industries as business failures have piled up in the recession. The lack of cover has led energy suppliers to start demanding upfront deposits equal to up to six months of energy bills, or requiring payment of invoices in as little as five days. Some companies have been threatened with having the power cut off if they do not comply.
Our Business Development Director, Donnie Maclean had this to say - "Energy companies are asking for up to 9 months of payments in advance, as a bond, then the bills are paid as normal. The energy company keeps that money and doesn't pay interest. This is what the MEUC are reacting to".
Andrew Buckley, head of member services at MEUC, said: “This has become a huge cashflow problem, especially for small and medium-sized businesses. We need to sort this out because it is a block on Britain working.”
The problem first arose late last year as credit insurers withdrew from hard-hit industries such as construction, cars and ceramics. It has worsened in recent weeks, however, and has spread to all industries. In some cases long-term supply contracts have been torn up by the energy companies and replaced with much more onerous deals, Buckley said.
The British Ceramic Foundation has warned that jobs are at stake if energy suppliers continue to deny power or offer only harsh terms. “ One of our members received a letter demanding £280,000 within seven days if he wanted the gas and lights to stay on. This is clearly untenable,” said Buckley.
This story plus comment from Donnie Maclean was featured on The Times Website.
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Ofgem Tells Suppliers To Improve Complaint Handling
Tuesday, June 30, 2009
Most consumers are unhappy with how suppliers deal with their complaints
Energy regulator Ofgem has urged suppliers to up their game in complaint handling as consumer research found less than one in four customers were satisfied with the way gripes were dealt with.
While an independent audit commissioned by Ofgem found that suppliers had made the necessary systems investments and updated their processes in preparation for new complaint handling standards introduced last year, customers remained dissatisfied.
Research commissioned by the regulator found that consumers were particularly unhappy with the number of times they had to contact the supplier, suppliers who promised to call back but didn’t, the attitude of some staff and the fact that suppliers often viewed the problem as resolved when in the customer’s eyes it was not.
While there were low levels of satisfaction across all suppliers some performed better than others. Out of the big six, SSE and E.ON rated joint highest for satisfaction (29%) and npower was rated lowest (16%).
In a letter to the Chief Executives of the big six energy companies today, Ofgem Chief Executive, Alistair Buchanan, said he was disappointed with the low level of customer satisfaction in complaint handling and that he expects to see improvements when the regulator looks at the issue again next year. He advised:
"It is in suppliers’ best interests to ensure that the service they provide is of a high standard. This is clearly an opportunity for them to raise the bar to retain existing customers and attract new ones.
With the systems and processes in place, the challenge now for companies was to really listen to what their customers were saying and look at how they could address their concerns."
In introducing the new standards Ofgem was also looking for suppliers to publish information on their complaint volumes to help customers in choosing supplier. An initial review of this information raised concerns as to whether EDF Energy was properly recording all complaints. Ofgem is investigating EDF Energy’s compliance with the new regulations in this area.
This was featured on The OFGEM Website.
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Russian move raises supply crunch fears
Wednesday, June 17, 2009
Alexei Miller, Gazprom's chief executive, warned in a speech in Italy last week of a looming "supply crunch" in the oil market after 2012, caused by under-investment today, which could send oil and gas prices soaring.
A few days later, he drove that warning home in the most vivid way possible, with Gazprom's investment cuts and production delays raising the spectre of a gas supply crunch in Europe.
The decision to defer the flow of gas from Gazprom's first development of the huge reserves in the Yamal peninsula, in northern Russia, makes perfect sense in the short term.
All the talk in the industry is of a global "gas glut", fostered by a surge in supplies of liquefied natural gas, particularly from the mega-projects in Qatar now coming on stream.
"Barely a year ago everyone was saying Gazprom would not be able to keep up with demand," says Jonathan Stern of the Oxford Institute for Energy Studies. "The speed of the turnround has been extraordinary."
The global recession has hammered Europe's gas consumption, particularly for industrial users. The car industry, for example, uses gas-fired heaters to dry paint, and many assembly lines have fallen silent.
Cedigaz, the gas industry association, has estimated that industrial demand in developed economies, including the European Union, the US and Japan, will be 17 per cent lower this year than last year.
Residential consumption is more stable, but the EU's overall demand could fall 5 per cent this year, even after an unusually cold January.
Gazprom, which is the biggest gas importer into the EU, has been forced to cope with that downturn at the same time as Russian demand has been plunging.
Prof Stern estimates that EU demand will be 20bn cubic metres lower than last year, Russian demand 40bn cu m lower and demand from Ukraine and other former Soviet states also 20bn cu m lower.
Gazprom has responded by cutting its own production and forcing independent Russian gas producers to cut theirs. It has also told Turkmenistan, one of its main central Asian suppliers, to cut its export price. An explosion in April cut the gas pipeline from Turkmenistan to Russia, and it has not yet reopened. The causes are disputed.
The rate at which gas demand picks up will depend on the pace of economic recovery.
Tony Hayward, chief executive of BP, said last week that although demand had steadied after dramatic falls earlier in the year, there were as yet no signs that it was rising again.
So Gazprom's forecast that even in 2012 its production is likely to remain lower than last year is a plausible assumption.
The alarming prospect for Russia is that western European demand will never recover. If the EU could meet its objective of raising energy efficiency by 20 per cent by 2020, then its gas consumption could fall through the decade. Cambridge Energy Research Associates, a consultancy, argued recently that even going halfway to the EU target could cut gas demand back to early 1990s levels by 2030.
However, other experts are sceptical those savings can be achieved, or that other fuels can substitute for gas in the next decade.
Colette Lewiner of Capgemini, the consultancy, argues that European gas demand is set to rise until at least 2020.
"I don't think renewables will be able to do enough," she says. "If you take all the other energy sources, you are still left with a rising need for gas."
European production, meanwhile, is in decline. The International Energy Agency estimates western Europe's gas production will fall by 30 per cent over the next two decades.
The search is on for new sources of gas to bring to Europe. The EU has high hopes for Azerbaijan and Turkmenistan, and recently there has been growing optimism about gas from northern Iraq. But the reality is that the EU cannot do without Russia, and sooner or later that gas from Yamal will be needed.
This story was featured on The Financial Times Website.
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Carphone and Vodafone reconnect
Thursday, June 11, 2009
VODAFONE is set to end a three-year dispute with Carphone Warehouse by resurrecting a sales agreement with the mobile-phone store chain.
Talks between Charles Dunstone, the Carphone boss, and Vodafone’s senior management are believed to be at an advanced stage, with an announcement expected imminently.
The deal would lead to Vodafone mobile contracts being sold in Carphone’s 800 UK stores for the first time since 2006.
Vodafone ended a previous deal with Carphone and switched to an exclusive agreement with rival Phones4U, which committed to signing up 30,000 Vodafone customers a month.
Dunstone was shocked by the decision at the time, and suggested that Vodafone had walked away from the negotiating table too quickly.
Carphone’s shares fell 14% on the day the contract loss was announced, with analysts estimating the chain could lose about £20m of annual earnings. The independent research house Arete predicted that the company’s shares would halve in value.
Dunstone has remained in on-off talks with Vodafone about resurrecting the deal. Carphone never lost the contract to sell Vodafone’s prepaid mobile phones.
Carphone’s business model has radically changed since the previous deal was agreed. Dunstone has spun off his retail business into a joint venture with the American electrical retailer Best Buy. The new chain will sell consumer electronics as well as mobile phones. As part of the deal, Carphone has a profit-sharing agreement with Best Buy’s American mobile business.
Dunstone has also created a large broadband internet business. Just days before losing the Vodafone contract, Carphone paid £370m to acquire AOL UK, the internet service provider. That business, rebranded Talk Talk, has now expanded into Britain’s second-biggest broadband provider, thanks in part to its £236m acquisition last month of Tiscali UK.
Last week, Dunstone confirmed plans to demerge the two businesses by July 2010. They will be named Best Buy Europe and Talk Talk Group.
He also announced that the group had raised pretax profits to £133m in the year to March 2008, up from only £4m last year.
This story waas featured on The Times Website.
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Landlords face liability for tenants’ unpaid water bills under government proposal
Wednesday, June 10, 2009
Residential landlords could be made liable for unpaid water bills left by departing tenants under a government review of water charges.
Landlords described the proposal, which has been submitted to the forthcoming Walker review on the social, economic and environmental aspects of water charging, as an “alarming prospect”. They said that it would push up rents.
The proposal comes amid plunging profits and rising bad debts at quoted water companies. Yesterday Northumbrian Water reported a 10.3 per cent fall in pre-tax profits to £152.7 million for the year to March 31. This was slightly ahead of analysts’ forecasts of £150.7 million.
The group, which provides water and sewage collection services in the North East, Essex and Suffolk, proposed a final dividend of 8.50p a share, compared with 8.07p last time.
John Cuthbert, its managing director, said that the company had increased its provision for bad debt from domestic users by £2 million to £30 million. Demand for water and sewage services fell by 1 per cent last year. He said that water companies were vulnerable to bad debts among consumers because they were not permitted to disconnect their supply for non-payment. This meant that their bills tended to be the last ones paid.
Recovering outstanding debt from tenants was particularly difficult. “Quite often by the time we have found out who the tenants are, they have gone,” Mr Cuthbert said. “We are talking to the Government about what help they can give us here. One proposal would be to make the landlord liable.”
Research for TDX Group, a provider of debt liquidation solutions for creditors, suggests that up to 5 per cent of all householders (representing 1.1 million homes) could default on their water bills this year, which would add a further £350 million of debt to water companies’ balance sheets by the end of 2009.
John Telford, of TDX, said that last year water companies’ bad debt had grown by 11 per cent. “As economic conditions worsen, the situation for water companies is going to get a lot worse as competition among creditors to recover outstanding debts will intensify,” he added.
The proposals to make landlords liable for water bills at their properties have been drawn up by Ofwat. They would require property owners or managing agents to identify who is the “liable person” for water charges at any property. A spokesman said: “The occupier will always be the first person liable, but, as things stand, there is no incentive for the landlord to tell the water company who the occupier is and without this information the water company cannot bill anyone.”
The new rules, which would require primary legislation, would give landlords an incentive to provide details of the tenant or face paying an outstanding bill themselves.
Ofwat has submitted the proposals to Anna Walker, chief executive of the Healthcare Commission, who was asked by the Government last summer to conduct a review of charging and metering for water and sewerage services.
A draft report is expected to be published in the next few weeks with a final report later in the year. A spokeswoman for the Department for the Environment, Food and Rural Affairs confirmed that the Ofwat proposal was “one option being considered by the Walker review”.
Thames Water, which serves 8.5 million drinking water customers in London and the Thames Valley, welcomed the proposals and said that bad debt and write-off costs increase the typical household bill by £11 a year. “Landlords take damages deposits up front from their tenants and so they are in a better position to recoup outstanding debts if needed,” a spokesman said.
Richard Jones, secretary of the Residential Landlords’ Association, said that rents would have to rise to cover landlords’ extra exposure. “We are already concerned about how money can get held up in the new tenancy deposit regime. If you end up with a dispute resolution service, excessive procedural requirements are being put on landlords. Cases are being thrown out on technicalities,” he said.
This story was featured on The Times Website.
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Iberdrola to lead field in race for Sellafield site
Tuesday, June 09, 2009
Sellafield, Europe's most heavily contaminated industrial site, went under the hammer yesterday.
Iberdrola, the Spanish energy giant that owns ScottishPower, is expected to be among the bidders for a 250-hectare parcel of land adjoining the main site in West Cumbria where Britain mastered the technology to build the atomic bomb in the 1950s and later built the world's first commercial nuclear power plant.
John Clarke, the Nuclear Decommissioning Authority's commercial director, said that the plot - which is expected to raise at least £100 million for the Treasury - had “outstanding potential” as a site for development of a new reactor, likely to cost at least £4 billion to build.
Some experts have criticised Sellafield's suitability for a new reactor because it is a sprawling landscape of chimneys, storage ponds filled with nuclear waste and radioactive buildings awaiting demolition. “It is a very complex site,” one industry insider said. “It is not necessarily the simplest place to build a new power station.”
About 10,000 people work at Sellafield, mostly on decommissioning contaminated buildings, many of which date back to the 1950s.
The sale of Sellafield, and farmland stretching around the northern perimeter of the main site, follows the auction in April of three other government-owned sites for new nuclear plants to European utilities for a total of £387 million. A consortium comprising RWE and E.ON, of Germany, bought sites at Wylfa, on Anglesey, and Oldbury, in Gloucestershire, while EDF, of France, bought another site at Bradwell in Essex.
However, it is unclear whether there will be sufficient interest in Sellafield to ensure a formal auction. The site could be sold directly to Iberdrola if it is the only party to express an interest.The NDA expects to conclude the sale this year.
EDF is planning to build four reactors on two sites owned by British Energy, the UK nuclear generator that it bought last year for £12.1 billion.
Yesterday, shareholders in Centrica, the owner of British Gas, voted overwhelmingly in favour of the company acquiring a 20 per cent stake in British Energy from EDF.
British Energy's eight operational nuclear plants supply about 17 per cent of the country's electricity.
However, all but one of those are due to be retired from service over the next 15 years.
This story was featured on The Times Website.
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Smart meters essential to energy supply
Tuesday, June 09, 2009
The implementation of smart meters will be a huge challenge. There will need to be standards to support different types of meter and a national infrastructure to ensure that the data from the meters is available in the right place at the right time. Someone will have to finance this and a future generation will have to pay for it.
Despite these risks, the scale of the challenges we face means that smart metering has to be a vital part of our national energy infrastructure. How do we make it successful? First, we must get the level of competition correct. The UK did a brilliant job of creating the world's first truly liberalised domestic energy market. However, competition was driven down to very low levels, including segregation of the metering business. This incurred a cost wholly disproportionate to the benefit. We must not make the same mistake again.
Second, we must apply the lessons from elsewhere. Work in Australia and the United States has identified that significant benefits accrue to distributors, the people who own the pipes and wires; in the US, savings of 30 per cent have been achieved. Our benefits are primarily identified at a consumer, supplier and metering level.
Smart metering is a prerequisite of a smart grid. Our energy supply has been driven top down by large power stations. In the future, it must support bottom-up demand management, local generation and consumers selling energy back to the grid. This 21st-century infrastructure will be achieved only with a solid smart meter base.
This story was featured on The Times Website.
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Gas pipelines
Monday, June 01, 2009
The politically charged race to build a new natural gas pipeline into southern Europe is hotting up.
An agreement this month by Gazprom and Italy’s Eni to double the capacity of their South Stream project to pipe Russian gas under the Black Sea would enable it to carry a 10th of annual European Union demand. Gazprom simultaneously signed deals with Bulgarian, Greek and Serbian partners to build onshore branches to central Europe. Two days later, the rival EU-backed Nabucco project, aimed at bringing gas from the Caspian Sea and Middle East, hit back. Austria’s OMV and Hungary’s MOL, two Nabucco partners, took stakes in two gas fields in Iraq’s semi-autonomous Kurdistan.
These might yet provide enough gas to get Nabucco – which has struggled to sign up suppliers and customers – off the ground. Years-old published reserves figures suggest that the Kurdish fields are of modest size. But the developers insist latest surveys indicate they could fill half Nabucco’s annual capacity. They say Iraqi oil ministry warnings that Kurdistan can export only with Baghdad’s consent are legally unfounded. If Nabucco can add the Kurdish gas to Caspian gas from Azerbaijan it has already contracted, it might start raising its $10bn financing. But getting there will be tortuous.
South Stream, by contrast, edges towards reality. It already has supplies and customers, and Gazprom has methodically stitched together agreements with transit countries. It is cheekily suggesting Brussels should designate South Stream, just as Nabucco, a “priority project”. The EU might have to consider it; after all, several member states – including those hardest hit by Russia’s New Year gas spat with Ukraine – are backing it. Neither project, however, will be completed for years. Russia, meanwhile, is hinting at another winter showdown if Kiev struggles to pay its gas bill. Alongside its Nabucco efforts, the EU needs to invest a lot more in storage capacity and connections between gas networks to avoid more January shivers.
This story was featured on The Financial Times Website.
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Striking a balance between urgency, climate change and energy security
Monday, May 25, 2009
Britain's power infrastructure is on the brink of what may be its biggest transformation. Underinvestment in the network for decades mean that a big overhaul is long overdue, but the changes are being accelerated by a string of other influences.
Tough new European Union pollution rules mean that nine of Britain's biggest coal and oil-fired power stations are due to be retired from service in 2015, while a string of other ageing nuclear stations built in the 1960s and 1970s are being decommissioned at the same time. Together, these plants represent about 25 per cent of UK power-generating capacity. They are the steady workhorses of Britain's energy system that have churned out heat and light to millions of homes for decades.
To avoid future supply disruptions and blackouts, they need to be replaced urgently — yet in an era of growing alarm over climate change and energy security, there is much debate over what should take their place. The industry has pledged to build a fleet of new nuclear power stations, but the first of these will not be ready before 2017, at the earliest.
At the same time, Britain has signed up to an ambitious EU plan to generate 35 per cent of its electricity from renewable energy, such as wind and wave power, by 2020 — a dramatic increase from today's figure of less than 5per cent.
Many in the industry doubt that this target is achievable, given the funding and planning wrangles faced by the wind developers and the complexity of linking schemes to the National Grid. Nevertheless, the Government is pushing hard for as many of these schemes to be built as possible.
Meanwhile, a host of new gas-fired power stations is also on the way. The share of Britain's electricity produced by burning gas has already risen from 2 per cent in 1992 to 35 per cent. The figure is expected to rise further, with gas-fired plants under construction at Pembroke in West Wales, the Isle of Grain in Kent and Langage, outside Plymouth.
Cheap and relatively quick to build, they may emit carbon but tend not to stoke the public ire against new coal plants. However, they do raise other problems. With domestic supplies of North Sea gas being depleted fast, the UK is becoming increasingly reliant on imports of the fuel from countries such as Russia, Qatar and Algeria, a trend that has raised concern about UK energy security.
This was featured on the Business Times Website.
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Global electricity use forecast to fall
Thursday, May 21, 2009
Global electricity consumption will fall this year for the first time since 1945, according to the International Energy Agency.
The watchdog for developed energy consuming countries will tell energy ministers from the Group of Eight leading economies on Sunday that electricity demand will fall 3.5 per cent in 2009.
n China, where power use is seen as a more reliable barometer of economic activity than official economic measures, consumption will be more than 2 per cent lower than 2008. Russia will see a fall of almost 10 per cent, while countries in the Organisation for Economic Co-operation and Development will see a fall of almost 5 per cent.
Three-quarters of the global decline in consumption is accounted for by industrial rather than household demand, reflecting the fall in demand from China’s manufacturing-heavy economy. Consumption in India, by contrast, is expected to increase 1 per cent.
“This shows how deep a recession we are in,” said Fatih Birol, IEA chief economist. “Oil demand has declined in the past due to oil price shocks, financial crises – but electricity consumption has never decreased.”
In a report published last year, before the extent of the financial crisis was clear, the IEA forecast that electricity consumption would rise 32.5 per cent between 2006 and 2015. World electricity demand grew almost a quarter between 2000 and 2006. In 2007 it rose 4.7 per cent and in 2008, the year the crisis set in, it grew 2.5 per cent.
“It’s a good barometer of economic activity,” said David Rosenberg, chief economist at Gluskin Sheff. “It’s very cyclical and often early.”
Global oil demand, which is more sensitive to consumer sentiment than electricity, has fallen several times since the second world war. The IEA this month forecast oil consumption would be 3 per cent lower in 2009 than 2008, the ninth consecutive lowering of its forecast for this year.
The agency will also tell ministers that its calculation of the stimulus spending required from G20 nations on renewable energy was inadequate and should rise by a factor of six if greenhouse gas emissions targets set by the United Nations were to be met.
The IEA will also warn that a fall in investment in oil production could lead to a supply squeeze in 2012. The agency said about 2m barrels per day in capacity were cancelled, and another 4.2m bpdwere delayed by at least 18 months.
This story was featured on the Financial Times Website.
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New cuts on the way as Vodafone’s profit plunges
Wednesday, May 20, 2009
Vodafone is planning fresh cost cuts as nearly £6 billion of writedowns and the effects of recession led to its full-year profits being more than halved.
The group, which has already cut 500 jobs in Britain, took a hit of £3.4 billion on its Spanish business and a fresh £500 million hit in Turkey as it struggled with the downturn and intense competition.
Service revenue across the group’s European markets fell 1.7 per cent as consumers and businesses sought to rein in their spending on calls, text messaging and use of their phones abroad amid the recession.
The company insisted further UK job cuts were “not on the horizon” and said it would look to squeeze savings from areas such as IT and distribution as it tries to meet a £1 billion cost-cutting target — and possibly exceed it.
In the UK, where the group lost 450,000 customers in the three months to the end of March, turn-around plans include relaunching its contract offering in Carphone Warehouse stores. Carphone’s share price was hammered in 2006 when Vodafone transferred its business to Phones 4 U.
Vodafone expects no let-up in the “challenging” environment. It prepared investors for possible losses in the year ahead, adding that profits for 2010 would be flat at best at £11 billion to £11.8 billion.
Analysts noted the group was facing “widespread pressure”, with the rate of service revenue growth falling in every major market, including Britain, Germany, Italy and Spain. And despite the promise of further cost cuts, investors sent the shares down by 5¾p, or 4.5 per cent, to 121.7p.
Vodafone has suffered in Spain in part from the make-up of its customer base, including huge numbers of migrants who left the country to return home when the property bubble burst.
In Turkey, which Vodafone entered in 2005 through the $4.55 billion (£2.94 billion) acquisition of Telsim, it has been hit in part by fierce competition from Turkcell, the leading operator. The deal was criticised at the time by investors, who said that Vodafone had overpaid massively.
The steep writedowns contributed to a 53.5 per cent plunge in profits to £3.08 billion for the year to March 31, from £6.6 billion in the previous year.
Michael Kovacocy, a Daiwa analyst, said: “With Spain — one of the company’s most profitable franchises — now impaired and further stagnation and decline in Europe in store, the case for future consensus downgrades has probably increased.”
But Vittorio Colao, who succeeded Arun Sarin as Vodafone’s chief executive nine months ago, insisted the business had performed well, softening the impact of the slump and making “good progress” in cutting costs. The Italian reaffirmed his pledge to focus on operational performance and tight financial discipline, rather than big spending on acquisitions. He was, he said, “a delivery person”.
But Mr Colao raised the possibility of a tie-up in the UK, where the group is an “active supporter” of market consolidation. He said it was duty-bound to consider any opportunities.
Analysts believe T-Mobile and 3, the fourth- and fifth-ranked operators, are potential merger or acquisition targets for bigger rivals.
This story was featured on the Financial Times Website.
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Green feed-in tariff needs to maximise solar power
Thursday, May 14, 2009
MPs and others are now starting to recognise the potential of solar power technology in the UK, but we are still only scratching the surface
April 2010 could be a major milestone in the UK's attempts to deliver a low-carbon economy. Assuming all goes well, that is the date when the government will introduce new "feed-in tariffs", where a price premium is paid to homeowners, schools and businesses for every unit of electricity they generate from small-scale renewable technologies, such as solar photovoltaics (PV), wind and micro hydro power.
All of these technologies have immense potential in the UK. However, there is still a very real danger the government will lose its bottle and go for a tariff that will at best make a very marginal difference to uptake. If that happens, it will be a massive lost opportunity at a time when the government needs all the help it can get in meeting its 2020 renewable energy targets.
For solar PV, the government has already come a long way from its dismissive treatment of the technology in the 2008 Renewable Energy Strategy consultation, and with good reason. Under the level playing field of the government's own grants programme, for example, solar PV has been the technology of customer choice, accounting for 70% of completed projects to date.
But currently, we are only scratching the surface of the potential of this technology in the UK. The absolute resource potential of solar PV is 460 terrawatt hours each year, more than current total demand for electricity in the UK. That message is beginning to get through to MPs and others, helped by the launch of the "We Support Solar" campaign, which is backed by the Federation of Master Builders, Friends of the Earth, RSPB, and more than 220 MPs.
MPs and others now recognise one of the prizes of a well-structured and properly implemented feed-in tariff will be green jobs, and lots of them. Our own modelling, which reflects assumptions made by the government's own independent consultants, shows that by 2020 the tariff could create more than 100,000 solar PV services and installation jobs.
So how are we going to ensure that the feed-in tariff really does maximise the jobs potential in solar PV, but also in the other small-scale renewable electricity technologies? Here's how we think the UK feed-in-tariff should operate.
The government must keep it simple. The tariff should be structured to pay for generation not export to the national grid, to encourage the broadest range of take-up in small-scale renewable energy, from homeowners to investors. They must ensure it's easy for people with small green energy systems to connect to the grid.
Secondly, the tariff needs to encourage investment. That means setting the price for each unit of green electricity generated high enough to allow suitable returns for investors. We also need support for low- or zero-interest loans, to help people get beyond the up-front cost of many small-scale renewable technologies.
Lastly, the UK's feed-in tariff must create green jobs. The tariff should be structured to encourage microgeneration on buildings. For example, solar PV on buildings is more job-intensive than mounting PV on the ground and involves a broad range of skills from the construction industry (roofers, surveyors and consultants). In hand with this job creation, government should subsidise the re-training of electricians, roofers, engineers and others whose jobs are now lost or under threat from the construction industry's decline.
This story was featured on the Gaurdian Website.
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EDF considers selling UK distribution network
Sunday, May 03, 2009
EDF, France’s state-controlled utility, is considering the benefits of selling its regulated electricity distribution business in the UK as it seeks disposals to help it cut the debt built after a year of costly foreign acquisitions.
The question of whether EDF, which will spearhead Britain’s nuclear revival after its recent €15bn ($20bn) takeover of British Energy, should sell the UK’s largest distribution network was raised at a recent board meeting.
No decision has been taken. However, the reflection is part of a wider strategic review of the nuclear power operator’s industrial future as it faces unprecedented investment requirements in France and abroad to meet the challenges of the nuclear revival.
People close to EDF’s board said management was considering whether to focus purely on power generation internationally.
The recent acquisitions of British Energy and of 50 per cent of the nuclear assets of US partner Constellation for $4.5bn have strained group finances and EDF is already planning €5bn in disposals. Net debt was almost €25bn last year, nudging the record €27bn from 2002, and compared with equity of €23.1bn.
In addition, EDF has said it wants to build 10 new generation reactors, the first of which is already 20 per cent over budget at €4bn. Though it will be able to share costs with partners – rival GDF Suez will have a third of France’s second so-called EPR reactor – returns take years to materialise.
One person close to the group said: “They are having a real internal debate. It is driven by capital constraints because they have bitten off more than they can chew.”
Politically it would be much easier for EDF to consider selling UK distribution as this might allay concerns at home that its international expansion could harm French investment.
But EDF’s UK management is strongly opposed to selling the network, which transports power from high voltage lines to 7.8m homes and businesses in the southeast and east of England.
The division contributed 75 per cent of the UK arm’s €1.2bn earnings last year and its assets are estimated to be worth about £3bn.
It is also unlikely that such an important decision would be taken before the government decides whether to keep Pierre Gadonneix, chief executive, beyond his November retirement date.
Analysts suggested, however, that quitting the regulated UK businesses would make sense and could help to damp fears over the need for another capital increase.
Adam Dickens, utilities analyst at HSBC said: “RWE has never invested in UK regulated activities and it has still achieved consistent profits”.
The problem would be to find a buyer, he said, with utilities around Europe looking to shed non-core activities.
This story was featured on the Financial Times Website.
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What smart meters will do for you
Thursday, April 30, 2009
A revolution in the way you think about and use energy in your home is about to get underway.
The government is poised to announce how it intends to roll out electricity and gas smart meters to every household in the UK by 2020.
Calling this a revolution may seem overly dramatic.
However, this will be the impact of the transfer from existing "dumb" meters to new, smarter alternatives.
Quite simply, keeping your existing meters is like sending a telegram instead of installing wireless broadband.
The government, along with the energy industry, is now involved in devising the best way of getting this massive project underway to replace 46 million meters - in 25 million British homes - by the year 2020.
This is a huge undertaking, ranking alongside the digital switch-over and the introduction of North Sea gas to homes in the early 1970s.
So what are smart meters?
Smart meters are fundamentally different from ordinary gas and electricity meters.
They provide a real-time, accurate, record of the gas and electricity you are using, day and night, and how much it costs.
Crucially, your new smart meter will include a display device that will tell you how much energy you are using at any given time, and how much it is costing you - and even how much carbon that equates to.
This display will put you in total control of your energy use - which is vital when more and more of us are becoming more energy efficient on financial and environmental grounds.
Some display devices even incorporate a red, amber and green traffic light system that shows you clearly how your usage changes when you turn various appliances on and off.
You will be able to see how much energy you used the day before, the week before and even the year before, and how your consumption changes in real time.
Smart meters will also make it easier for people who generate their own energy to measure how much they are exporting back to the national grid.
No more estimated bills
This new technology will also spell the end of estimated bills and meter readings.
With smart metering, electricity and gas bills will be accurate.
There will not be any need for your energy company to estimate your consumption as the smart meter can tell the supplier how much energy is being used and when.
Smart meters also provide an exchange of information between you and your energy company.
This means the company will be able to communicate directly with you and enable you to receive up-to-date readings from the meter without having to send someone out to your home.
This interactivity also means energy companies can send messages to your smart meter and, where required, instantly update products such as energy tariffs at your request.
Paving the way for innovation
As well as helping all of us save money, smart meters will also pave the way for a number of innovations aimed at saving energy.
For example, using the information from your meter, new tariffs could be offered encouraging off-peak energy use.
The meter would also be capable of providing information on which appliances you use most, allowing companies to subsequently offer energy saving tips via the meter and its display device.
In the future, it is possible that smart meters could link up with other household appliances - for example freezers, washing machines, kettles.
You could time their operation to take advantage of cheaper off-peak tariffs - again saving you money, while simultaneously reducing your carbon footprint.
Energy companies are already legally required to reduce the amount of carbon they produce and smart meters will help their customers contribute to the wider effort.
Maintaining momentum
The potential benefits of smart metering are clear.
Britain is no longer self-sufficient in terms of energy and supplies of North Sea oil and gas are depleting.
Smart meters have to be part of the solution to the problem of drastically reducing our energy consumption.
Momentum is gathering towards making smart meters a reality for all of us by 2020.
It is important that this momentum is not lost, as it is in our power to make a real change in the way we all use our vital resources.
This story was featured on the BBC News Website.
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