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PA IN THE MEDIA

Can Electricity North West command a premium in a tough market?

PA Consulting’s Mark Fitch, energy expert, is quoted in an article in Utility Week on the potential sale of Electricity North West. A report in late 2018, suggested that ENW might be planning to auction off the company in a sale which could fetch over £2 billion. 

The article explains that investor interest generated by deals like the mooted ENW sale do little to assuage public concerns about inflated profits in the sector, or consequently the regulator’s focus on the issue. 

Mark takes a positive view on this and while he acknowledges that there are some inflated premiums from utility deals, he suggests “persistent investor appetite for regulated businesses shows Ofgem has pitched the balance of risk and return well in its price control plans.” 

He goes on to say that the sector remains attractive compared with alternatives such as UK gilts – where real returns remain firmly in negative territory. 

“Recent transactions for Cadent, Affinity and Firmus in Northern Ireland have seen eye-watering premiums over the regulatory value – over one-and-a-half times in some cases – and the interest in the growing independent network providers market remains hot,” he adds. 

Mark continues: “The persistence of premiums over regulatory value means it is no surprise that regulators are slashing headline returns. As they raise the bar for rewards, they are also carefully managing the overall risk to keep it balanced with a ‘fair bet’, where companies believe they have a reasonable chance of attractive rewards. With the right leadership and organisational agility, they can continue to be confident of delivering attractive returns.”

Read the full article in Utility Week

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