Energy and Utility Management Consultants

Eon Energy post profits, BP sell more stock, Welsh wind farm nearing completion

August 2012


More ‘good’ news for suppliers as Eon Energy become the latest of the ’Big-6’ to post massive profits for the first half of 2012, coming in at £245 million. Being a major player in both electricity and natural gas, Eon have reported gains in both markets with the cooler summer driving up gas demand and electricity sales up marginally on the previous year. Eon Energy as a group made some €2.4 billion NET, thanks largely to renegotiations of their Gazprom contract - from whom they procure natural gas fromRussia– which added ca.€1bn to the gains. These profits are despite the fact that they recently sold off the profitable Networks arm of the company to Chinese firm Cheung Kong Group. In the light of climbing wholesale markets, it can be expected that customers will again ask questions about paying a fair price for their energy – and Ofgem may have struck a pre-emptive blow by reporting that the profit of the Big-6 suppliers comes in at just £40 per annum for the typical dual-fuel customer paying £1,300 per annum. Not a great deal of profit, but when you consider the huge number of customers – it certainly builds up to huge profits.


Continuing their fund-raising as the fines for the Deep Water Horizon oil spill roll in, BP are set to sell more assets in the States as they look to secure their long-term future. Next on the ‘For Sale’ pages are two Texan processing plants, valued at $227.5m, and the Carson Refinery inCalifornia, worth some $2.5bn. With both sales expected to complete within a year, the extra revenue should go some way to expanding the revenue of the oil giant which is likely to be re-invested in exploration plans elsewhere, such as earmarking some £60m to be put into UK research for deep-drilling over the next ten years.   Tensions betweenIranandIsraelstill dominate headlines, and energy wholesale market prices, this week.Israelstate that “Iranmust not be allowed to obtain nuclear weapons” as they fear for the security of the country shouldIranbecome nuclear enabled. The Iranians still maintain that their enablement is just for energy purposes, but suspicions are still commonplace. This tension has caused an upward spike in the wholesale price of Brent crude oil as supply disruptions are feared.


A decline inNorth Seaoil has also been seen, but this is not expected to be an ongoing fall and is mostly due to maintenance. Despite reduced demand fromChina, Europe and theUnited States, as always bad news impacts the markets quicker than good news, and so increases are more prevalent than falls   Significant increases in wind generated power are being undertaken as we write, with the RWE & Siemens huge 576MW Gwynt y Mor (off the North Wales coast) wind farm coming one step closer – the first of two offshore substations are being deployed on giant barges to be installed and connected to the grid. Generating enough renewable electricity to power over 30% of Welsh homes and using technology in advance of the typical for an offshore substation, these substations weigh almost a quarter less than the norm and so overall price for transport and installation will fall. It is pioneering incentives such as this that allow investment in future installations all the more attractive. All 160 turbines are expected to be fully operational and exporting by the end of next year, with the first connecting to the grid at the start of 2013.


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