‘Half-baked’ green drive will hit dividends
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.”