•  Nick Walker Jonas Persson 

    Utilities – Sector focus

    Authors: Nick Walker and Jonas Persson, Relationship Directors
    Publication date: 01.08.2010

    The UK utilities industry continues to face enormous investment challenges over the next decade. In energy, the policy of the coalition government has yet to be clarified with regard to the lights going out in 2018, and whether nuclear is really the only answer. Speculation abounds that coal might be making a comeback, and further developments in carbon capture and storage (CCS) are expected. The outcome of the offshore wind transmission network (OFTO) auction process is awaited with interest, and the juggling act of securing critical generation and infrastructure capacity within a very strict low-carbon framework is set to continue for some time. Like most industry watchers, we are sceptical about the establishment of a powerful green investment bank, but we are following the development closely.

    Sale of EDF Energy is financing deal highlight of 2010

    Securing finance for large-scale capital investment projects relies upon the ability of utilities companies to access debt and equity finance, yet the past few months has seen precious little debt issuance activity in the debt capital markets. The main deal of the year has been the sale by EDF Energy of its electricity distribution networks. The preferred bidder, a consortium led by CKI of Hong Kong, was announced in late July. A small club of banks, which includes Lloyds Banking Group, is supporting the transaction.

    The utilities sector is highly regarded by investors in view of the predictability of its revenue streams. Yet beneath their steady exterior, the companies in the sector have complex financing needs in which the role of government policy, consumer protection and environmental factors are critically important.

    Changes to Ofgem’s overseeing of the sector 

    In the regulated space, there has been considerable interest in the proposals of the electricity and gas networks regulator, Ofgem, for a new template for overseeing the sector, with the rather unmemorable title of Revenue, Incentives, Innovation and Outputs (RIIO). In the water sector there appears to be a concerted effort to drive some sort of change in the competitive structure of the industry, both upstream (in sharing water resources) as well as at the consumer end. In our view, however, quite what investors will make of any changes does not seem to have been fully taken into account.

    Growing strength of Lloyds Bank Corporate Markets’s credentials

    Our sector coverage continues to grow in terms of clients and scope, with teams led by Nick Walker (Regulated Utilities) and Jonas Persson (Integrated Utilities). Jonas and Nick’s years of experience in the sector have helped build a leading franchise for Lloyds.

    As well as having two senior directors covering the industry, Lloyds Bank now also has specialised teams covering topics such as renewables, in all its forms, conventional generation, smart metering, as well as industry-specialised product teams covering debt capital markets and financial markets.

    Recently we have undertaken a significant internal strategic review, and we’re optimistic that further progress in the sector can be realised through both new and repeat businesses with our strong client base.

    Source: This article was first published in Lloyds Banking Group - Perspective Magazine Edition 2.


2/25/2018 1:26:42 AM