Hydrogen Economy
19 Mar 2018
Telegraph RWE-E.ON deal trouble for UK's Big 6 [link] about how the SSE Innogy deal might play out amidst the German merger-"E.on will snap up RWE’s 76.8pc stake in the supplier Innogy, which owns Britain’s Npower. In exchange RWE will take a 16.7pc stake of E.on as well as ownership of its renewable assets, while keeping the wind farms and biomass plants held by Innogy. RWE also plans to pay E.on €1.5bn in cash to plug a gap in the value of the assets being swapped.The deal is complex, but Innogy is clearly at its centre. Meanwhile the owner of big six energy supplier Npower is already embroiled in plans to merge with the supply business of SSE to create a new mega-player in the UK energy market. But under the terms of the German deal Npower’s parent could soon be E.on, meaning the Germany utility would inherit a stake in the new SSE while still controlling its big six rival E.on UK.In a market already under scrutiny for failing to offer fair competition to consumers watchdogs are likely to object to a single player with such sway. The Competition and Markets Authority has already begun talks with the tangle of companies involved. One outcome, according to sources, could involve Innogy undertaking a speedy sale of its stake in the new SSE company once the merger is approved and before the E.on-RWE tie-up is sealed."After the German Government reaction to Fukushima, one might think their energy cos would not want more exposure to the UK market with Corbyn threatening a meltdown, but maybe not, would presumably be positive for SPs.... "RWE boss Rolf Martin Schmitz fuelled expectations that the company will target the UK energy market for future power generation acquisitions in an public statements made last year. For E.on, Britain’s retail energy market offers rich pickings. Despite Government misgivings over the “broken” market the landscape is littered with firms developing new technologies and homes service offerings which are ripe for deal hunters and – crucially – far more affordable than snapping up major generation assets."H2
Thedarkkn1ght
15 Mar 2018
Tory boost - polls Tonight’s Times has a YouGov poll conducted on Wednesday night and Thursday daytime, giving us our first steer on the public reaction to the poisoning in Salisbury.73% of people in the poll think that Russia is responsible for the poisoning, 21% are unsure, 5% don’t think it was Russia. There is also broad public support for the government’s reaction – 60% support the measures they’ve announced so far and 14% are opposed. Asking more specifically about the response of the party leaders, 53% think Theresa May has responded well to the incident, 23% badly; 18% think Jeremy Corbyn has responded well, 39% badly (and 43% don’t know).SkyData had a poll earlier on today which asked similar questions about how well respondents thought May and Corbyn were dealing with Russia, with very similar results. They found 61% thought May had done a good job, 29% a bad job; 18% thought Corbyn had done a good job, 57% a bad job.Returning to the YouGov/Times poll, the voting intention figures are CON 42%(+1), LAB 39%(-4),
marktime1231
12 Mar 2018
Switch hit and nPower I wasn't sure if I was confused before but now I definitely think I may be.Record switching last month. So is the market competing fairly without your interference Ofgem, or are you going to continue to meddle? nPower's results slightly less rubbish than last time, but still unable to deliver a profit or acceptable customer service even though its SVT was increased last year.nPower (a competitor) is sold to E.On (another competitor) but it was supposed to be lined up to merge with SSE. The RWE / Innogy announcement made no reference to SSE.Maybe E.On are looking to exit UK domestic retail themselves eg looking to sell nPower on and divest its own UK operations, but why to a rival like SSE when companies like RDSB are supposed to be in the market?A good time for SSE to clarify whether the Innogy deal has gasified.
Hydrogen Economy
12 Mar 2018
Innogy RWE EON Deal Not clear if this will affect the Innogy SSE deal, I would think it could go ahead either within the new structure or as a hived off business as originally proposed."The deal will leave Eon as Europe’s largest operator of electricity grids and retail, while RWE will be the continent’s second-largest producer of green energy. "UK also reducing the vertical integration from a different starting point and in a somewhat different direction. H2[link] asset swap between Eon and longstanding rival RWE... expected to send shockwaves across Europe’s energy industry.Both Eon and RWE were hit hard by decision to phase out nuclear power in 2011 following the Fukushima nuclear disaster. They were also affected by the rapid growth of renewable energy in Germany, which sent wholesale electricity prices plummeting and dented utilities’ profits.The deal ends the era of integrated utilities that generate electricity, own the supply grid and control the relationship with the customer. “The transaction shows that the industry has given up on the value of vertical integration,” says one analyst, who adds that more deals of this nature are inevitable.The transaction will involve two stages.First, Eon will buy RWE’s 76.8 per cent stake in Innogy, the renewables energy business that was spun out in 2016, and table an all-cash offer worth €40 a share, a 15.6 per cent mark-up on Friday’s closing price to Innogy’s minority shareholders.Next, Eon will hand back Innogy’s renewable energy assets as well as its own to RWE. The deal will leave Eon as Europe’s largest operator of electricity grids and retail, while RWE will be the continent’s second-largest producer of green energy. “The transaction will create two European leaders,” says a person with knowledge of the discussions. The total value of both transactions stands at up to €60bn, with Eon’s takeover of Innogy accounting for €43bn and the assets handed over to RWE in the second tranche valued at €17bn.The asset swap — which still needs the approval of the each company’s supervisory board — comes after three frantic years of dealmaking among German utilities. Starting in 2014, both Eon and RWE carved out companies to manage renewable, grids and retail separately from its coal and gas power plants: RWE created a green energy business with Innogy, and Eon listed its fossil fuel assets as Uniper. Finnish utility Fortum acquired Eon’s 47 per cent stake in Uniper for just under €4bn earlier this year.Over the past year, Europe’s three biggest utilities Enel, Iberdrola and Engie were all reported to be considering a bid for Innogy, but pulled back.The news also marks a big strategic shift for RWE, reversing its move to pull out of renewables. “They are going to take back assets they carved out less than two years ago,” according to a person familiar with the transaction.Bankers working on the transaction expect few antitrust hurdles. As one puts it: “The bulk of the deal affects regulated assets, where the consumer is protected by regulatory authorities.”
tradingup
10 Mar 2018
Re: SSE v CNA excellent and very worrying post from reader61. All the young people clamouring for the return of socialism and nationalism can have little idea of just how grim and limited life was in the 60's and 70's until Maggie liberated us.Total power blackouts in the late 70's; winter of discontent with mountains of rubbishand bodies left unburied - you couldn't pick up the phone to complain because youhad to wait for months to get one installed and then it might have been a party lineshared with a neighbour. And if you wanted a new cooker you could only get onefrom one of the nationalised gas or electricity showrooms with long waitingtime for installation.And even up to the late 60' a £50 foreign currency limit when you had to get yourpassport stamped by the bank in order to get some francs. Until Maggie abolishedforeign exchange controls.And as for the railways..... As you say the Tories now are a total disaster. We're now much better off than we were 50 years ago but the real possibility ofa Socialist government underpinned by Momentum is a serious threat to our currentway of life. God help our children!
marktime1231
08 Mar 2018
Blocked merger Plan B I see that CMA have decided to assess whether an SSE-nPower tie up would affect domestic competition ... even though the combined entity would still be smaller than CNA ... the presumption is yes if just for political reasons, a preliminary CMA decision by end April.Let's assume that puts a block on SSE's first choice strategy. They have until 25 May to present Plan B ... how does SSE respond?Meanwhile joker brokers at DB have dropped their price target to 1150p (from 1250, from 1300 since last Summer). my maths SSE has physical assets per share on its books worth more than that. Let's hope a renewed appetite for utility shares sends us back up.
Stonka
03 Mar 2018
Re: So much for challenger tariffs I hate Ofgem by the way.Really, I couldn't tell!I enjoyed your rant though,Stonks
marktime1231
02 Mar 2018
So much for challenger tariffs This via the Torygraph ..."One industry source said that smaller suppliers may be forced to shut under the pressure of the market surge.Late on Thursday Big Six supplier E.on quietly pushed through a dual-fuel tariff increase of 2.6%, to drive the average bill up to £1,153 from 19 April.Energy supply minnow Bulb also increased prices by £24 a year for its 300,000 customers, blaming rising wholesale costs."Presumably all those challenger companies, the ones which Ofgem admitted last Summer would not survive stress tests, are suffering due to a surge in the wholesale price even if that is temporary. Into whose arms will it be ushering any challengers which fail?To borrow a phrase from Kevin Keegan "I would b...dy love it" if circumstances now teach Ofgem a lesson. Explain to me again why the Tories are bowing to a paleo-socialist policy idea of interfering in the highly competitive free market of retail energy supply?Ofgem literature still accuses the big 6 of operating a monopoly and over-charging households by an average of about £50pa in 2016 according to a CMA study which skipped over that the subsidy of renewables was costing households over £100 pa. I read its annual report earlier, Ofgem spends around £90M a year up from £30M five years ago and has several "partners" its senior pseudo-civil servants earning more than the PM, the SSE-hater Wright is on £200K+ and no doubt heading towards a very comfortable retirement. Guess who pays the bill ... you do, in your SVT!I hate Ofgem by the way.
marktime1231
26 Feb 2018
Caps, Cold Snaps and Back Slaps The parliamentary debate on tariff caps ... is it today, is it a law change in the making or just a proposal, is it right the implementation cannot be as soon as this Summer after all, why might it just affect 11 million ... just those on SVTs ... and why is one paper saying this will save consumers £100 pa ... surely prices will not go down, the only thing the regulator can do is restrict future increases, and that formula must allow for wholesale energy price volatility? I still don't understand what the govt thinks it is doing with this meddling, how it might work, and what side steps might be available.Talking of price volatility, this week's cold snap is said to have spiked wholesale gas. Who will be hit the hardest by that?And a big back slap to everyone brave enough to pick up a few SSE shares when the price dipped under 1200 earlier this month. Despite all the gloom the sp has recovered strongly, where is it going I wonder.Relations with Andrew Wright of Ofgem are so sour, this poisonous comment today over SSE's pursuit of a rebate from NG for charging in excess of EU limits ..."The Competition and Markets Authority has rejected an appeal from energy suppliers SSE and EDF over their request for lower electricity transmission charges. The pair had complained to energy industry regulator Ofgem that British generators paid more in transmission charges in 2015/16 than the maximum permissible under EU law and so requested a change to industry rules that would have resulted in generators receiving a £120m rebate from National Grid.Ofgem last November said the maximum permissible level of charges under EU law had not been breached.SSE and EDF appealed to the CMA, disputing whether there was an exclusion from the EU cap on transmission charges for the cost of connections between offshore wind farms and the onshore grid.The CMA concluded that there was such an exclusion and therefore there had not been a breach of the cap and Ofgem was entitled to reject the modification request.Andrew Wright, senior partner at Ofgem, said: "It is good news for consumers that the CMA has upheld Ofgem's decision. If the modification had gone ahead, it is likely that the rebate would have cost consumers up to £120 million and led to further payments to larger generators in the longer term."It is disappointing that SSE and EDF challenged our decision. The energy market is under close scrutiny and companies should be working hard to deliver a better deal for customers rather than seeking additional revenues that will add to customers' bills."
marktime1231
19 Feb 2018
Upstart customer service Does anyone have a link to the original of this morning's report that a survey by Uswitch ? or analysis of customer complaints report by Ofgem ? pointed to highest customer satisfaction at challenger energy companies. Something about nPower making improvements from a low base.Uswitch may have a bias against former Big 6 customers looking to switch, but it would be disappointing if Ofgem data says the resources available to SSE handling 8 million customers were delivering pro-rata worse service than a minnow with 100,000.The story I noticed late last week is Ofgem for the second time investigating a Midlands minnow Iresa over customer complaints. And a neo-populist committee of MPs saying general price caps can't come soon enough or hard enough, because the price of energy is too high don't you know and voters don't like it.
Hydrogen Economy
19 Feb 2018
Re: SSE v CNA Ripley"He has a point a P/e around 10 usually considered cheap anything above 20 expensive.Here it is 7.75 ... centrica , Nat grid, M&S all under 10.Just eat 70 ?? up 40% over 3 years."PE 10 may be expensive and PE 50 may be cheap, a flat income is cheaper than one with high growth.Just eat EPS is forecast to grow 32%, 47% and 34% over next 3 years. SSE is forecast to have same adjusted EPS in 2020 as 2017. "Just eat 70 ?? up 40% over 3 years" confirms that the market saw growth coming, bought in and expects high growth to continue.That does not make JE a buy, it depends on the future growth trajectory which may tail off as markets saturate. I have no idea what JE penetration have achieved and whether saturation is approaching or if they have some strategy to expand geographically or market offering to mitigate. That says nothing about other risks, understandably a big focus for SSE with talk of nationalisation. Just Eat, I have not looked into but rapidly growing companies often seem to run into difficulties due to debt or the challenges of managing a larger more complex business.PE on its own is way too blunt a tool to judge company market valuation. I am a chastened holder of SSE and NG, having not foreseen the risk of Labour clawing back into contention and Tories shooting themselves in both feet and utility investors in the wallet. I don't hold JE.H2
picstloup
18 Feb 2018
Re: SSE v CNA IMHO still avoid - plenty of better risk/reward opportunities also down 8% or so YTD, and - more to the point - there are quite a few equally compelling divi yields available, without anything like the same existential threat (albeit that most high yielders do have their own peculiar risks and pressures).__________ _______More or less my views. The upside seems large, but so it did at times with Northern Rock and Railtrack, and indeed Polly Peck, although I doubt CNA will go all the way down the pan. So far the small amount of free cash I've got has gone into topping up BP and GSK, and thinking about Taylor Wimpey, Templeton Far Eastern, Tarsus, some more Sirius (I'm relatively local to that one) and perhaps a few more BRK/Bs now the £ is (I suspect temporarily) down on the $. The last two are against my divi hunting instincts, but the latter have done me proud over 6 years, and I'm sanguine abut SXX's future divi flow, even if it is 4-5 years down the line.Decisions, decisions.
Bill1703
18 Feb 2018
Re: SSE v CNA "... both down c8% ytd, both paying a stonking divi (assuming CNA doesn't cut its)... Or should I keep out of this while the Tories seem determined to land us with Corbyn as PM?"IMHO still avoid - plenty of better risk/reward opportunities also down 8% or so YTD, and - more to the point - there are quite a few equally compelling divi yields available, without anything like the same existential threat (albeit that most high yielders do have their own peculiar risks and pressures).I also think that, leaving aside the worst threats of wholesale asset renationalisation, the issue of utility costs - and profits and dividends - will remain a political hot potato for the foreseeable, whatever the colour of the government. There will be few tears to be shed - and very few votes to be lost - if utility dividends end up sacrificed on the altar of lower consumer prices... something to think about."... Pointed out the interesting disparity in valuations , claiming markets are rigged & major fundamentals "out of the window ".... He has a point a P/e around 10 usually considered cheap anything above 20 expensive..."Ripley - yes to the points about "interesting" valuation disparity and fundamentals being "out of the window", and I think it is key to the opportunity currently available to patient investors, at least in the UK. But it is at least understandable - why would many investors, particularly those overseas, invest in the UK right now, with our Brexit outlook so clouded and mired in controversy and bitter recrimination?But no to the point about markets being rigged. It's a familiar refrain from private investors who know no better, but never stands up under any real scrutiny. And I often wonder, why do such people choose to play in a game which is fundamentally rigged against them? As always, easier to cry "conspiracy" than accept the fault of their own limitations and investment prowess...
Ripley94
18 Feb 2018
Re: SSE v CNA Good post from Mulder (LSE )Pointed out the interesting disparity in valuations , claiming markets are rigged & major fundamentals "out of the window ".He has a point a P/e around 10 usually considered cheap anything above 20 expensive.Here it is 7.75 ... centrica , Nat grid, M&S all under 10.Just eat 70 ?? up 40% over 3 years.BTG 35.Any views on it ?
reader61
16 Feb 2018
Re: SSE v CNA It's a risk but what isn't in life. Of the two my call would be SSE, think they've been more tradeable in terms of range whereas CNA have just kept dropping? Corbyn is unlikely but he is nothing if not tenacious although not credible. However credibility is not something youngsters and left leaning require, they just want in at any cost. Maybe they deserve what they wish for, the economic damage would visit them very shortly afterwards and mum and dad would be bereft of funds to bail them out if they've been rinsed, certainly us shareholders would be hit and have less funds. Labour have a fantastic social media bandwaggon soliciting votes from every facebook, twitter, linkedin, or indeed connected person. Even if they get a no, they are reaching millions more than doorstepping ever could, this is the modern battlefield which Tories completely ignored last time. Not that the Tories are any good, I've seen more strength, panache and downright gall in all the European negotiators than our spineless crew. I wish she'd employ Farage, Dyson, Sugar to do their negotiating. Haha anyway just looked at the length of post and realised I'd slipped into rant mode. Getting back to the point, I'd avoid both until after the toughest darkest yards are complete with the politics. There are likely to be significant knocks going forwards and that's the time to pounce - say £10 for SSE and 99p for CNA maybe?
