‘Half-baked’ green drive will hit div­i­dends

The Daily Telegraph - Business - - Business - By Oliver Gill

IN­VESTORS could miss out on mil­lions of pounds in div­i­dends as elec­tric­ity and gas com­pa­nies are forced to slash pay­outs due to a green en­ergy crack­down by reg­u­la­tors, an­a­lysts have warned.

Share­hold­ers in the likes of Na­tional Grid and SSE face a ma­jor hit from plans by in­dus­try watch­dog Ofgem to halve the re­turns the com­pa­nies can make be­tween 2021 and 2026, ac­cord­ing to credit agency Fitch.

Firms have been mak­ing 7-8pc since 2013. Last year the watch­dog had pro­posed re­duc­ing this to 4.3pc. How­ever, Ofgem pub­lished a base­line rate of re­turn of 3.95pc ear­lier this month.

The reg­u­la­tor con­trols the amount of money power com­pa­nies can make to pre­vent them ex­ploit­ing their roles as near-mo­nop­o­lies by hik­ing prices.

Ofgem’s pro­pos­als were un­veiled on July 9 and in­clude £25bn of fund­ing to trans­form Bri­tain’s en­ergy net­works as part of a push to go carbon-neu­tral by 2050. Some £630m would be set aside for green in­no­va­tion.

Fitch said that share­holder pay­outs are un­der threat and job cuts are likely. The re­duc­tion in re­turns will mean less of con­sumers’ money goes to­ward prof­its and more is spent on im­prove­ments, Ofgem said.

Rob McDon­ald, the man­ag­ing di­rec­tor of trans­mis­sion at SSE, said: “The draft set­tle­ment does not strike the right bal­ance for all stake­hold­ers.”

Scot­tish Power said: “No­body ben­e­fits from this half-baked plan. It’s bad for jobs, bad for train­ing and bad for the UK sup­ply chain.”

Jonathan Brear­ley, Ofgem chief, said: “We are strik­ing a fair deal for con­sumers, cut­ting re­turns to the net­work com­pa­nies while mak­ing room for around £25bn of in­vest­ment.”

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