Table of Contents
Executive Summary
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- The market
- Gross capital spending driven by asset replacement and refurbishment activity
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- Figure 1: UK gross capital expenditure by the electricity distribution network operators, 2010/11-2014/15
- Eastern Power Networks (EPN) and WPD East Midlands report highest level of capital expenditure
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- Figure 2: Total expenditure allowance for RIIOED1 in Great Britain, by company, 2015/162022/23
- Network investment set to fall during current price control period RIIO-ED1 2015-23
- Increased focus on the development of smart grids to facilitate the transition to a low-carbon economy
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- Figure 3: Forecast network investment of the electricity distribution network operators in Great Britain, 2015/16-2022/23
- Smaller suppliers making considerable inroads in electricity supply market
- Fixed tariffs becoming more popular, but many consumers remain on more expensive standard tariffs
- Wholesale costs account for largest proportion of electricity bill
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- Figure 4: Breakdown of average domestic electricity household bill, 2014
- Market factors
- DNOs subject to price controls set by industry regulator Ofgem
- Decarbonisation of UK economy to increase loads placed on distribution network
- Rapid growth in distributed generation due to rise in renewables generation
- Renewable Heat Incentive (RHI) promotes take-up of heat pumps
- Companies
- Electricity distribution industry
- Introduction of competition in network connections
- Electricity supply industry
- What we think
Key Insights
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- What are the key drivers for network investment by electricity distribution network operators (DNOs) over the coming years?
- What are the drivers behind the DNOs’ increased focus on developing smart grids?
- What opportunities do smart meters offer for energy suppliers?
- How does Ofgem intend to encourage competition for the installation of new connection assets?
Market Positioning
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- Great Britain
- Northern Ireland
Economy
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- Overview
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- Figure 5: UK GDP quarterly development, 2003-15
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- Figure 6: UK GDP in economic downturns and recoveries since 1979
- Inflation
- Interest rates
- Business investment
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- Figure 7: UK GFCF 2003-15
Market Factors
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- Price controls
- Environmental and legislative factors
- Climate Change Programme (including Climate Change Levy and Agreement)
- Carbon Plan
- Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP)
- Energy Company Obligation (ECO)
- Electricity Market Reform
- Renewables Obligation
- RO support closes two years early for large-scale solar developments and one year early for onshore wind farms
- Feed-in Tariffs (FITs)
- The Renewable Heat Incentive
- Combined Heat and Power
Distribution Industry Structure
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- Key points
- Industry overview
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- Figure 8: Ownership of the distribution network operators in the UK, as of November 2015
- Regional electricity demand
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- Figure 9: Electricity sales and customers, by region, Great Britain, 2013
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- Figure 10: Regional proportional importance of electricity consumed in Great Britain, 2012
- Electricity Consumption by end-use sector
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- Figure 11: Analysis of electricity usage, by type of industry, UK, 2009-14
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- Figure 12: Analysis of electricity usage, by the commercial sector, 2009-14
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- Figure 13: Analysis of electricity usage, by the commercial sector, 2014
- Scotland
- Northern Ireland
Electricity Distribution Sector Overview
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- Key points
- Overview
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- Figure 14: Distribution network operators in Great Britain, by region, 2015
- Size of UK distribution networks
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- Figure 15: UK distribution networks, 2014/15
Electricity Distribution Market Trends
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- Key points
- Introduction of competition in network connections
- Trends in UK electricity supply
- UK facing power capacity crunch
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- Figure 16: Analysis of electricity supply in the UK, 2010-14
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- Figure 17: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2010-14
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- Figure 18: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2014
- Smart Grid Development to Support Low Carbon Economy
- Renewable energy generation
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- Figure 19: Renewable electricity generation in the UK, 2010-15
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- Figure 20: Renewable electricity generation in the UK graph, 2010-15
- Distribution price control review
- The Low Carbon Network Fund (LCN)
- Electricity North West
- Northern Powergrid
- SP Energy Networks
- SSE
- UK Power Networks
- Western Power Distribution
Electricity Supply Sector Overview
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- Key points
- Market background
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- Figure 21: Proportion of domestic electricity customers by supplier type, by region, 2000 and 2015
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- Figure 22: Number of supplier switches in the domestic gas and electricity markets and share of small suppliers, Great Britain, Q1 2010-Q2 2015
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- Figure 23: Number of supplier switches in the domestic gas and electricity markets, Great Britain, January 2010-June 2015
Electricity Supply Market Issues
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- Key points
- Reforms promoting increased competition and supplier switching in retail energy market
- ‘Big six’ suppliers come under fire for charging high prices in 2013
- Energy suppliers announce price cuts in 2014 and early 2015, reflecting falling wholesale costs, cuts to green levies, and increased competition
- Breakdown of average gas and electricity bill
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- Figure 24: Breakdown of average domestic electricity & gas household bill, 2014
- Figure 25: Breakdown of average domestic electricity bill, 2014
- Smaller suppliers gaining market share
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- Figure 26: Domestic gas supply market shares in Great Britain, by company 2010-15
- Figure 27: Domestic electricity supply market shares in Great Britain, by company 2010-15
- Lower prices, customer dissatisfaction with the ‘big six’, and differentiation strategies are driving the growth of small suppliers
- Poor customer service and complaints handling remains an industry-wide issue
- CMA Energy Market Investigation
- Smart Meter Roll-out programme
- Switching rates in the SME sector also set to increase
Capital Expenditure
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- Key points
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- Figure 28: UK gross capital expenditure by electricity distribution network operators, 2010/11-2014/15
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- Figure 29: UK gross capital expenditure by the electricity distribution network operators graph, 2010/11-2014/15
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- Figure 30: UK gross capital expenditure by the electricity distribution network operators, by company, 2010/11-2014/15
- Forecast capital expenditure
- Capital expenditure allowance 2010-15
- New price control framework based on Revenue = Incentives + Innovation + Outputs effective from April 2015
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- Figure 31: Total expenditure allowance for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
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- Figure 32: Total expenditure allowance for RIIO-ED1 in Great Britain graph, by company, 2015/16-2022/23
- Figure 33: Forecast network investment of the electricity distribution network operators in Great Britain, by company, 2015/16-2022/23
- DNOs
- Western Power Distribution
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- Figure 34: Core activity costs by Western Power Distribution, by type, 2011-15 and 2016-23
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- Figure 35: Asset replacement expenditure by Western Power Distribution, by type and company, 2016-23
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- Figure 36: Capital expenditure planned by Western Power Distribution for the West Midlands, by type, 2016-21
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- Figure 37: Capital expenditure planned by Western Power Distribution for the East Midlands, by type, 2016-21
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- Figure 38: Capital expenditure planned by Western Power Distribution for South Wales by type, 2016-21
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- Figure 39: Capital expenditure planned by Western Power Distribution for the South West by type, 2016-21
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- Figure 40: Activity costs by UK Power Networks, 2011-15 and 2016-23
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- Figure 41: Activity costs by UK Power Networks graph, 2011-15 and 2016-23
- Figure 42: Asset investment by UK Power Networks, by type, 2011-15 and 2016-23
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- Figure 43: Capital expenditure planned by London Power Networks, by type, 2016-21
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- Figure 44: Capital expenditure planned by Eastern Power Networks, by type, 2016-21
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- Figure 45: Capital expenditure planned by South Eastern Power Networks, by type, 2016-21
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- Figure 46: Activity costs by Northern Powergrid, by type, 2011-15 and 2016-23
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- Figure 47: Comparison of average annual activity costs by Northern Powergrid, 2011-2015 and 2016-23
- Figure 48: Network investment by Northern Powergrid, by type, 2011-15 and 2016-23
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- Figure 49: Capital expenditure by Northern Powergrid (Northeast), by type, 2011-15
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- Figure 50: Capital expenditure planned by Northern Powergrid (Northeast), by type, 2016-21
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- Figure 51: Capital expenditure by Northern Powergrid (Yorkshire), by type, 2011-15
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- Figure 52: Capital expenditure planned by Northern Powergrid (Yorkshire), by type, 2016-21
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- Figure 53: Activity costs by SP Energy Networks, 2011-15 and 2016-23
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- Figure 54: Comparison of average annual activity costs by SP Energy Networks, 2011-15 and 2016-23
- Figure 55: Asset replacement expenditure by SP Energy Networks, by asset type, 2016-23
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- Figure 56: Capital expenditure planned by SP Distribution, by type, 2011-15 and 2016-23
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- Figure 57: Capital expenditure planned by SP Manweb, by type, 2011-15 and 2016-23
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- Figure 58: Activity costs by Electricity North West, by type, 2011-15 and 2016-23
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- Figure 59: Comparison of average annual activity costs by Electricity North West, 2011-15 and 2016-23
- Figure 60: Asset investment by Electricity North West, by type, 2011-15 and 2016-23
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- Figure 61: Planned expenditure by Electricity North West, by type, 2014-21
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- Figure 62: Core activity costs by Scottish and Southern Energy Power Distribution, by type, 2011-15 and 2016-23
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- Figure 63: Comparison of average annual activity costs by Southern Energy Power Distribution, 2011-15 and 2016-23
- Figure 64: Asset Investment by Scottish and Southern Energy Power distribution, by type, 2011-15 and 2016-23
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- Figure 65: Capital expenditure planned by Scottish Hydro Energy Power Distribution, by type, 2016-23
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- Figure 66: Capital expenditure planned by Southern Energy Power Distribution, by type, 2016-23
- Northern Ireland Electricity
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- Figure 67: Capital expenditure by NIE Transmission and Distribution, 2010/11-2014/15
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- Figure 68: Capital expenditure determination for NIE Transmission and Distribution, 2012/13-2016/17
Company Profiles Introduction
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- Key points
Western Power Distribution
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- Western Power Distribution (East Midlands)
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- Figure 69: Financial analysis of Western Power Distribution (East Midlands), 2010-15
- Western Power Distribution (West Midlands)
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- Figure 70: Financial analysis of Western Power Distribution (West Midlands), 2010-15
- Western Power Distribution (South West)
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- Figure 71: Financial analysis of Western Power Distribution (South West) 2011-15
- Western Power Distribution (South Wales)
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- Figure 72: Financial analysis of Western Power Distribution (South Wales) 2011-15
UK Power Networks
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- UK Power Networks: Eastern Power Networks
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- Figure 73: Financial analysis of Eastern Power Networks, 2010-14
- UK Power Networks: London Power Networks
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- Figure 74: Financial analysis of London Power Networks, 2010-14
- UK Power Networks: South Eastern Power Networks
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- Figure 75: Financial analysis of South Eastern Power Networks, 2010-14
Northern Powergrid
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- Northern Powergrid (Northeast)
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- Figure 76: Financial analysis of Northern Powergrid (Northeast), 2010-14
- Northern Powergrid (Yorkshire)
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- Figure 77: Financial analysis of Northern Powergrid (Yorkshire), 2010-14
SP Distribution
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- SP Manweb
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- Figure 78: Financial analysis of SP Manweb, 2010-14
- SP Distribution (South & Central Scotland)
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- Figure 79: Financial analysis of SP Distribution, 2010-14
SSE
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- Company strategy and outlook
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- Figure 80: Financial analysis of SSE, 2011-15
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- Figure 81: Turnover analysis of SSE, by business segment, 2014-15
- Southern Electric Power Distribution
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- Figure 82: Financial analysis of Southern Electric Power Distribution, 2011-15
- Scottish Hydro Electric Power Distribution
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- Figure 83: Financial analysis of Scottish Hydro Electric Power Distribution, 2011-15
Electricity North West
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- Figure 84: Financial analysis of Electricity North West, 2011-15
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Northern Ireland Electricity
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- Figure 85: Financial analysis of Northern Ireland Electricity, 2010-14
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British Gas Trading
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- Figure 86: Financial analysis of British Gas Trading, 2010-14
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EDF Energy
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- Figure 87: Financial analysis of EDF Energy, 2010-14
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- Figure 88: EDF Energy revenue segmental analysis, 2014
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RWE Npower
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- Company strategy and outlook
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- Figure 89: Financial analysis of Npower, 2010-14
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- Figure 90: RWE – UK revenue segmental analysis, 2014
E.ON Energy
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- Company strategy
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- Figure 91: Financial analysis of E.ON Energy Solutions, 2010-14
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- Figure 92: E.ON revenue segmental analysis, 2014
ScottishPower Energy Retail
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- Company strategy and outlook
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- Figure 93: Financial analysis of ScottishPower Energy Retail, 2010-14
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- Figure 94: ScottishPower revenue segmental analysis, 2014
Ecotricity group
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- Company strategy
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- Figure 95: Financial analysis of Ecotricity Group, 2010-14
First Utility
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- Company strategy and outlook
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- Figure 96: Financial analysis of First Utility, 2010-14
Good Energy Group
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- Company strategy
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- Figure 97: Financial analysis of Good Energy Group, 2010-14
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- Figure 98: Turnover analysis of Good Energy Group, by segment, 2012-14
Further Sources and Contacts
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- Trade associations and regulatory bodies
- Association of Electricity Producers
- Energy Networks Association
- Energy Industries Council
- Energy Retail Association
- Office of Gas and Electricity Markets (Ofgem)
- Office of Gas and Electricity Markets – Scotland (Ofgem Scotland)
- Office of Gas and Electricity Markets – Wales (Ofgem Wales)
- Trade magazines
- Modern Power Systems
- Modern Utility Management
- Utility Week
- Trade exhibitions
- Energy4PowerLive 2015
- Offshore Europe 2017
- edie2016
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