UK energy regulator Ofgem on Wednesday set out its price control plan for the next five years, saying most consumers could see a small drop in costs related to electricity network charges.
Ofgem noted the average customer in the UK pays £100 per year toward the costs of operating local grids, which is in addition to what they pay for the electricity itself. The new price controls for 2023 to 2028 set the revenue that Britain’s 14 distribution network operators can earn from these charges.
Ofgem also proposed a £20.9 billion package of funding to build greener power grids.
This will come at the expense of investors, rather than consumers, the regulator vowed.
‘Increased investment for net zero [will] be delivered without increasing network charges on consumer bills, achieved through tough efficiency challenges on network companies and lower returns for investors,’ Ofgem said.
Commented Ofgem Chief Executive Jonathan Brearley: ‘These are challenging times, and this is the path out of relying on expensive and polluting imported fossil fuels and moving to a home-grown energy system, that exploits the best of modern technology to level out demand and reduce costs for consumers.
‘We’re determined to get the best possible deal for consumers and the proposals we’ve published today will mean that substantial additional investment can be made to deliver net zero without placing any further pressure on bills.’
In response, power utility SSE called Ofgem’s initial determination ‘tough and stretching’. It said it will review the plan and engage with Ofgem ahead of its final determination.
National Grid also said it will work with Ofgem in the coming months, saying final determinations are expected in December.
SSE was down 0.2% and National Grid up 1.2% early Wednesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.3% at 7,299.12
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Hang Seng: down 2.0% at 21,976.50
Nikkei 225: closed down 0.9% at 26,804.60
S&P/ASX 200: closed down 0.9% at 6,700.20
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DJIA: closed down 491.27 points, or 1.6%, at 30,946.99
S&P 500: closed down 2.0% at 3,821.55
Nasdaq Composite: closed down 3.0% at 11,181.54
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EUR: down at $1.0492 ($1.0531)
GBP: down at $1.2178 ($1.2191)
USD: down at JP¥135.90 (JP¥136.22)
Gold: down at $1,816.55 per ounce ($1,820.14)
Oil (Brent): up at $117.90 a barrel ($117.21)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday’s key economic events still to come
OPEC meeting begins
1000 CEST eurozone consumer confidence
1400 CEST Germany consumer price index
0830 EDT US gross domestic product
0830 EDT US personal consumption expenditures price index
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NATO leaders are expected to sign off on a major reinforcement of the alliance’s Eastern European members on Wednesday when they meet in Madrid to project a united stance amid the Russian invasion of Ukraine. The decision is a ‘fundamental shift of deterrence and defence’ in the alliance, NATO Secretary General Jens Stoltenberg said as the three-day summit began on Tuesday. Stoltenberg was echoing previous comments ahead of the summit that described the move as ‘the biggest overhaul of [NATO’s] collective deterrence and defence since the Cold War.’
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BROKER RATING CHANGES
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Berenberg starts Just Eat Takeaway.com with ’sell’ - price target 16.30 EUR
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BofA cuts Workspace to ’underperform’ (neutral) - price target 450 (690) pence
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JPMorgan cuts Travis Perkins to ’neutral’ (overweight) - price target 1,200 (2,000) pence
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COMPANIES - FTSE 100
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B&M European Value Retail said revenue declined in its financial first-quarter as the variety goods retailer left guidance unchanged. For the 13 weeks to this past Saturday, group revenue was down 2.2% to £1.16 billion from £1.19 billion in the first quarter last year. For B&M UK, revenue was down to £957 million from £1.02 billion. Looking ahead, B&M said there is no change to the guidance issued at its annual results in May, with financial 2023 adjusted earnings before interest, tax, depreciation, and amortisation expected to be in the range of £550 million to £600 million. Adjusted Ebitda in financial 2022 came in at £619 million.
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Parker-Hannifin said it welcomed that UK Secretary of State for Business, Energy and Industrial Strategy Kwasi Kwarteng was ‘minded to accept’ its proposed undertakings on competition and national security matters, to allow its acquisition of UK defence contractor Meggitt. Late Tuesday, the UK government said the US engineering and aerospace company has addressed competition and national security concerns over its £6.3 billion takeover of its UK rival. ‘The business secretary is minded to accept undertakings offered by Parker-Hannifin to address the concerns. This decision follows advice from the Ministry of Defence and the Competition & Markets Authority,’ the UK government said. The government said Secretary of State for Business, Energy & Industrial Strategy Kwasi Kwarteng proposes to accept Parker’s undertakings but has launched public consultations and will wait until the consultation period concludes on July 13 before making a final decision.
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COMPANIES - FTSE 250
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Moonpig hailed its ‘transformational first full year’ as a listed company saying it ‘significantly outperformed’ the targets set out at its IPO. For the financial year that ended April 30, revenue was down 17% at £304.3 million from £368.2 million the year before, but pretax profit rose 21% to £40.0 million from £32.9 million. The retailer said it has seen ‘no material impact’ on gross margin rate from cost inflation. Moonpig said it does not intend to pay dividends as it invests in growth. ‘We intend to keep capital structure and dividend policy under review and may revise these from time to time,’ the company said. Looking ahead, Moonpig said it was satisfied with the start made to the new financial year and remains confident in existing expectations for trading in financial 2023. Based on the anticipated completion of the acquisition of Buyagift by the end of July 2022, it expects annual revenue for the enlarged Moonpig group of £350 million.
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COMPANIES - GLOBAL
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Toyota Motor’s sales and production drop in May, with the Japanese auto maker blaming Covid restrictions, which have caused a shortage of parts, particularly of semiconductors. Production was lower than planned in May due to the impact from the lockdown in Shanghai, it said. Worldwide sales in May fell 9.5% year-on-year to 818,972. Sales in Japan fell 21% to 123,050, while sales outside Japan were down 7.1% to 695,922. From January to May, worldwide sales were down 6.5% to 4.25 million. Worldwide production dropped 9.0% to 700,331 in May, with production in Japan down 33% to 183,057 and production outside Japan down 4.4% to 517,274. From January to May, worldwide production was down 3.5% to 4.18 million.
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Wednesday’s shareholder meetings
Africa Opportunity Fund Ltd - AGM
Argo Blockchain PLC - AGM
Atome Energy PLC - AGM
Brave Bison Group PLC - AGM
Concurrent Technologies PLC - AGM
Eden Research PLC - AGM
Facilities by ADF PLC - AGM
Gemfields Group Ltd - AGM
Golden Prospect Precious Metals Ltd - AGM
HeiQ PLC - AGM
Helios Underwriting PLC - AGM
Hurricane Energy PLC - AGM
i(x) Net Zero PLC - AGM
Lords Group Trading PLC - AGM
MaxCyte Inc - AGM
Meggitt PLC - AGM
Mobile Tornado Group PLC - AGM
NB Distressed Debt Investment Fund Ltd - AGM
NetScientific PLC - AGM
Provident Financial PLC - AGM
RA International Group PLC - AGM
Reabold Resources PLC - AGM
Symphony Environmental Technologies PLC - AGM
Team17 Group PLC - AGM
ThinkSmart Ltd - GM re approval for capital return
Trinity Exploration & Production PLC - AGM
URA Holdings PLC - AGM
XP Factory PLC - AGM
Zaim Credit Systems PLC - AGM
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