Energy Update 25 April 2013
Welcome to this edition of Fieldfisher's Energy Update. The last couple of weeks in the sector has seen a number of court decisions and advancements in regulations. In addition, a report has been issued on the performance of the Big 6 and how the focus on renewables has effected worldwide energy generation emissions.
New transparency and accounting regulations for oil, gas and logging companies
On 25 October 2011 the European Commission (EC) adopted a legislative proposal requiring the disclosure of payments to governments on a country and project basis by listed and large non-listed companies with activities in the extractive industry (oil, gas and mining) and loggers of primary forests (the so-called country by country reporting – CBCR) This puts the EU on a level playing field with the US which also adopted disclosure requirements in July 2010 (Section 1504 of the Dodd-Frank Act).
On 9 April 2013, the Commission announced changes to how the proposal will be implemented.
For further information, please see Fieldfisher's commentary on the regulations here.
UK High Court allows for disclosure of material in follow up action
On 11 April, Mr Justice Roth gave his latest judgment in National Grid Electricity Transmission plc v ABB Limited and others. The case was part of the long running follow-on damages claim being brought by National Grid against members of the Gas Insulated Switchgear cartel. In 2008, National Grid commenced proceedings against the Switchgear cartel members to seek approximately £108 million compensation plus interest for damages from being forced to pay increased prices for relevant products in the UK transmission system than would have been the case in a competitive market.
For further information, please see Fieldfisher's commentary on the judgment here.
Ofgem's financial information reporting on the Big 6
On 11 April, Ofgem published its financial information report on the "Big 6" energy companies operating in the UK (Centrica, E.On, EDF, RWE nPower, ScottishPower and SSE) for the year ending December 2011. Averaged across the six companies, the report shows:
- For the four supply segments, profit margins reduced to 3.1%, down from 3.8% in 2010.
- There was a reduced profit margin for domestic gas supply of 4.3%, down from 5.7% in 2010, and for electricity supply to non-domestic customers of 3.3%, down from 4.7% in 2010.
The only supply segment showing a sizeable increase in profit margin was domestic electricity: 1.5% in 2011, compared with 0.3% in 2010.
Generation produced the highest profit margins at 24.4%, an increase from 21.9% in 2010.
Generation and supply together, profit margins increased to 7.6%, relative to 7.2% in 2010.
For more infromation, please click here.
RWE nPower successful in claim over wind farm buffers
Local Authorities will be looking carefully at a key decision recently handed down by the High Court. Milton Keynes Council had set a distance from homes within which wind turbines could not be built. A number of Local Authorities have imposed such "buffer zones" in their local plans. The judgment was eagerly anticipated and could be used as a precedent for Local Authorities across the country. The judge noted that although Milton Keynes had set a minimum distance of 350 metres in its local plan it subsequently introduced a sliding scale, and he quashed this subsequent scale given it contradicted the previous distance in the local plan. Renewables companies have been encouraged by the decision. Local Authorities will now need to be careful how they impose such buffer zones.
Energy generation no cleaner now than 20 years ago
After years of investment in renewable power the International Energy Agency has reported that the world’s supply of energy is not significantly cleaner than it was 20 years ago. A key reason for this, the Agency reported, was due to the continued dominance of coal-fired power plants particularly in China and India. Further, coal-fired generation rose by an estimated 6% from 2010 to 2012 and continues to grow faster than non-fossil energy sources, and around half of the coal-fired plants built in 2011 use inefficient technologies.
For the full report, please click here.
Methane and Natural Gas, not such a problem
Data from the U.S. Environmental Protection Agency strongly suggests that arguments about methane leaking from natural gas systems and such "leaks" reducing the greenhouse gas advantages of natural gas, are largely without merit. The U.S. Environmental Protection Agency also states that methane emissions are decreasing.
The All-Energy Exhibition & Conference is the UK’s largest renewable energy event taking place in ‘Europe’s Energy City’, Aberdeen, on 22 & 23 May 2013. David Haverbeke from our Brussels office will be at the event on both days. If you are attending the event, please let us know as it would be good to catch up and discuss some of the many issues being considered.
Please click here to email the Energy Team.