Grids praised as worthy investments

The energy regulator in Germany has recommended power and gas grids as lucrative investment opportunities. This came soon after E.ON took everyone by surprise when it announced that it was disposing of its high voltage power network.

Interested investors have begun scrutinizing E.ON assets for their worth but are cautious since E.ON’s chief executive said the decision to sell the high voltage power network was due to poor returns on investment.

Matthias Kurth, the president of the energy regulatory authority put a case forward for utilities arguing that the present financial market crisis had proved that even though the returns on investments in public infrastructure take a long time to mature, they generate returns on investments that are more secure and stable compared to investments in the financial sector. Matthias Kurth also added that there was no basis for doubting the attractiveness of the networks for private investors. He was speaking during the release of the annual report.

The energy regulator presently permits a 7.9 percent return on equity capital in newly constructed power networks, 6.5 percent on old grids and 9.2 percent on newly constructed gas grids.

Under a new regime from 2009 the energy regulator will initiate more caps on fees charged to users of the energy grids which could further erode the returns on investment for the operators.

Matthias Kurth also refuted claims that planned cables for transmitting the proposed wind power to the mainland from offshore turbines were not feasible. He was reacting to a comment from an E.ON executive who had said that the anticipated return was only 3.6 percent.

www.eon-uk.com