Table of Contents
Executive Summary
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- The market
- Water and sewerage sector
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- Figure 1: UK capital expenditure on water and sewerage services, 2010/11-2014/15
- Electricity transmission and distribution industry
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- Figure 2: Forecast network investment of the electricity distribution network operators in Great Britain, 2015/16-2022/23
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- Figure 3: Capital expenditure by the electricity transmission industry in Great Britain, 2011/12-2015/16
- Gas transmission and distribution industry
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- Figure 4: Total gas transmission and distribution capital expenditure, 2011/12-2015/16
- Market factors
- Utility industry regulation
- Legislative factors
- Companies
- What we think
Key Insights
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- What does the shift towards total expenditure (Totex) and long-term outcomes in AMP6 mean for the water and sewerage industry?
- What are the implications of Brexit on the UK water and sewerage sector?
- Will the UK’s decision to leave the EU affect the country’s renewable energy generation and decarbonisation targets?
- What are the key drivers for investment and challenges facing the electricity transmission sector?
- What are the key drivers for replacement expenditure by gas distribution network operators?
Introduction
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- Definitions
- Water and sewerage
- Electricity transmission
- Electricity distribution
- Gas distribution
- Gas transmission
- Methodology
- Abbreviations
Market Positioning
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- Customers
- Suppliers
- Market factors
UK Economy
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- Overview
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- Figure 5: UK GDP quarterly development, 2003-16
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- Figure 6: UK GDP in economic downturns and recoveries since 1979
- Inflation
- Interest rates
- House prices
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- Figure 7: UK house price changes, 2004-16
- Consumer spending
- Manufacturing
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- Figure 8: UK manufacturing, 2014-16
- Business investment
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- Figure 9: UK GFCF 2003-16
- Imports
- Exports
Water and Sewerage Industry
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- Key points
- Industry regulation
- Legislative environment
- European Water Framework Directive (WFD)
- Urban Waste Water Treatment Directive (UWWTD)
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- Figure 10: Sewerage treatment enhancement expenditure driven by UWWTD in England & Wales, 1990-15
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- Figure 11: Sewerage treatment enhancement expenditure driven by UWWTD in England and Wales, 1990-2015
- The Drinking Water Directive
- Revised Bathing Water Directive
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- Figure 12: UK coastal bathing water compliance with the 2006 Bathing Water Directive for 2015
- Implications of Brexit on the UK water and sewerage sector
- Transfer of private sewers in England and Wales
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- Figure 13: Capital expenditure on private sewers in England and Wales, by water and sewerage company, 2012-15
- The Flood and Water Management Act 2010
- Water Act 2014 to open up water and sewerage retail competition for all business customers in 2017
Water and Sewerage Capital Expenditure
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- Key points
- Total capital expenditure
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- Figure 14: Total capital expenditure by water and sewerage companies in England and Wales, 2005-10 and 2010-15
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- Figure 15: Total capital expenditure by water-only companies in England & Wales, 2005-2010 and 2010-2015
- Contracts for AMP5 tendered early to reduce boom and bust cycle
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- Figure 16: Actual UK capital expenditure on water and sewerage services, 2009/10-2014/15
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- Figure 17: UK capital expenditure on water and sewerage services, 2010/11-2014/15
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- Figure 18: UK capital expenditure on water and sewerage services, 2010/11-2014/15
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- Figure 19: UK capital expenditure on water and sewerage services, 2015/16
- Sewerage-related capital expenditure
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- Figure 20: Analysis of sewerage-related capital expenditure in England and Wales, by company, 2010/11-2014/15
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- Figure 21: Analysis of sewerage-related capital expenditure, by water and sewerage companies in England and Wales, 2010/11-2014/15
- Figure 22: Analysis of sewerage-related capital expenditure, by water and sewerage companies in England and Wales, 2015/16
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- Figure 23: Analysis of sewerage capital expenditure in England and Wales by water and sewerage companies, by type, 2011/12-2014/15
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- Figure 24: Analysis of sewerage capital expenditure in England and Wales by water and sewerage companies, by type, 2015/16
- Water-related capital expenditure
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- Figure 25: Analysis of water related capital expenditure, by water and sewerage companies in England and Wales, 2010/11-2014/15
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- Figure 26: Analysis of water-related capital expenditure, by water and sewerage companies in England and Wales, 2010/11-2014/15
- Figure 27: Analysis of water-related capital expenditure, by water and sewerage companies in England and Wales, 2015/16
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- Figure 28: Analysis of water capital expenditure in England and Wales, by water and sewerage companies, by type, 2011/12-2014/15
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- Figure 29: Analysis of water capital expenditure in England and Wales, by water-only companies, by type, 2011/12-2014/15
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- Figure 30: Analysis of water capital expenditure in England and Wales by water and sewerage companies, by type, 2015/16
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- Figure 31: Analysis of water capital expenditure in England and Wales, by water and sewerage companies, by type, 2015/16
- Figure 32: Analysis of water capital expenditure in England and Wales by water only companies, by type, 2015/16
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- Figure 33: Analysis of water capital expenditure in England and Wales, by water-only companies, by type, 2015/16
- Scottish Water capital expenditure
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- Figure 34: Analysis of Scottish Water capital expenditure on water and sewerage services, 2011/12-2015/16
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- Figure 35: Analysis of Scottish Water capital expenditure on water and sewerage services, 2011/12-2015/16
- Figure 36: Progress of Scottish Water to date in the five year investment programme 2010/15
- Northern Ireland capital expenditure
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- Figure 37: Analysis of Northern Ireland Water capital expenditure on water and sewerage services, 2011/12-2015/16
Water and Sewerage Future Capital Expenditure
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- Key points
- Future challenges facing the water and sewerage sector
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- Figure 38: UK population, by region, 2014-36
- Water Act 2014 to provide new opportunities for water and sewerage companies
- Forecast capital expenditure
- England and Wales - AMP6 2015-20
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- Figure 39: Average expected combined household bill, by water and sewerage companies, 2014/15 and 2019/20
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- Figure 40: Average expected household water bill, by water-only companies, 2014/15 and 2019/20
- AMP6 Expenditure Allowances
- Move towards long-term alliances and frameworks across industry
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- Figure 41: Total expenditure (Totex) allowance for AMP6 in England & Wales, by water and sewerage company, 2015/16-2019/20
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- Figure 42: Total expenditure (Totex) allowance for AMP6 in England and Wales, by water and sewerage company, 2015/16-2019/20
- Figure 43: Forecast capital expenditure for AMP6 in England and Wales, by water and sewerage company, 2015/16-2019/20
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- Figure 44: Forecast capital expenditure for AMP6 in England and Wales, by water only company, 2015/16-2019/20
- Thames Tideway Tunnel
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- Figure 45: Estimated cost of Thames Tideway Tunnel, 2014/15-2021/22+
- Other capital investment plans by water and sewerage companies during AMP6 include:
- Scotland Investment Programme 2015-2021
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- Figure 46: Forecast capital expenditure for Scottish Water, 2015/16-2020/21
- Northern Ireland Investment Programme 2015/16-2020/21
Electricity Industry
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- Key points
- Electricity industry market factors
- Price controls
- UK committed to reduce carbon emissions by 80% below 1990 levels by 2050
- Carbon budgets
- Brexit vote raises uncertainties over UK carbon reduction and renewables targets, though the government remains committed to tackling climate change
- Climate Change Levy
- Climate Change Agreements
- Emissions Trading Scheme
- Renewables Obligation (RO)
- Feed-in Tariffs (FITs)
- The Renewable Heat Incentive
- Combined heat and power
- Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP)
- Energy Company Obligation (ECO)
- Electricity retail market - Reforms to promote increased competition
- CMA energy market investigation
Electricity Distribution Capital Expenditure
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- Key points
- Capital expenditure
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- Figure 47: UK gross capital expenditure by electricity distribution network operators, 2011/12-2015/15
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- Figure 48: UK gross capital expenditure by the electricity distribution network operators, 2011/12-2015/16
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- Figure 49: UK gross capital expenditure by the electricity distribution network operators, by company, 2011/12-2015/16
- DNO’s total spending in DPCR5 is lower than set by Ofgem
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- Figure 50: Breakdown of total expenditure by DNOs during DPCR5, by area 2011-15
- DPCR5 witnesses launch of Low Carbon Networks Fund
- Rapid increase in distributed generation connected to DNOs’ networks
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- Figure 51: Distributed Generation connected to the distribution network during DPCR5, 2011-15
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- Figure 52: Distributed generation connected to the distribution network during DPCR5, 2011-15
Electricity Distribution Future Capital Expenditure
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- Key points
- New price control framework based on Revenue = Incentives + Innovation + Outputs effective from April 2015
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- Figure 53: Total expenditure allowance for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
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- Figure 54: Total expenditure allowance for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
- Figure 55: Forecast network investment of the electricity distribution network operators in Great Britain, by company, 2015/16-2022/23
Electricity Transmission Capital Expenditure
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- Key points
- Capital expenditure
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- Figure 56: Size of electricity transmission network in Great Britain, 2016
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- Figure 57: Capital expenditure by the electricity transmission industry in Great Britain, 2011/12-2015/16
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- Figure 58: Capital expenditure by the electricity transmission industry in Great Britain, 2011/12-2015/16
Electricity Transmission Future Capital Expenditure
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- Key points
- New price control period RIIO-T1 2013-21
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- Figure 59: Baseline capital expenditure allowance for NGET, 2013/14-2020/21
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- Figure 60: Baseline capital expenditure allowance for SHETL 2013/14-2020/21
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- Figure 61: Baseline capital expenditure allowance for SPTL, 2013/14-2020/21
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- Figure 62: NGET annual capital expenditure, actual 2014-15 and forecast 2016-21
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- Figure 63: SHET annual capital expenditure, actual 2014-16 and forecast 2017-21
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- Figure 64: SPTL annual capital expenditure, actual 2014-16 and forecast 2017-21
- Drivers for future capital investment
- Lack of clarity and frequent policy changes have created investment uncertainty in renewables
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- Figure 65: Renewables capacity development pipeline, as of September 2016
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- Figure 66: UK renewable energy market share, by installed capacity, as of end of June 2016
- National Grid’s future energy scenarios
- Offshore transmission projects and HVDC transmission to play a big part in the delivery of future transmission capability
- Shift from transmission to distribution connections
- Future potential energy mix
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- Figure 67: Forecast power generation installed capacity under “slow progression” scenario, by source, 2016-40
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- Figure 68: Forecast power generation installed capacity under “gone green” scenario, by source, 2016-40
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- Figure 69: Forecast power generation installed capacity under “no progression” scenario, by source, 2016-40
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- Figure 70: Forecast power generation installed capacity under “consumer power” scenario, by source, 2016-40
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- Figure 71: Future potential energy mix in 2036, by scenario
- Interconnectivity between European countries to increase
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- Figure 72: Existing and planned interconnectors, as of June 2016
Gas Industry
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- Key points
- Social factors
- Economic factors
- The UK’s increased reliance on gas imports
- Potential for shale gas extraction
- Wholesale gas prices
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- Figure 73: Average wholesale gas prices, 2002-15
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- Figure 74: Average wholesale gas prices, 2002-15
- Environmental and legislative factors
- Emissions Trading Scheme
- Carbon Plan
- Combined heat and power
- EU Renewables Directives
- Climate Change Act 2008
- Renewables Obligation (RO)
- Feed-In Tariffs (FITs)
- The Renewable Heat Incentive
- National Emission Ceilings Directive
- Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP)
- Energy Company Obligation (ECO)
- Reforms to promote increased competition in retail energy market
- CMA energy market investigation
Gas Capital Expenditure
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- Key points
- The market 2012-16
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- Figure 75: Total gas transmission and distribution capital expenditure, 2011/12-2015/16
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- Figure 76: Total gas transmission capital expenditure, 2011/12-15/16
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- Figure 77: Total gas distribution capital expenditure, 2011/12-2015/16
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- Figure 78: Total gas transmission and distribution capital expenditure, 2011/12-2015/16
- Replacement expenditure (Repex)
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- Figure 79: Length of gas mains replaced, by distribution network operator, 2009-13
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- Figure 80: Cumulative replacement expenditure during GDPRC1 2008-13, by GDN and type
Gas Future Capital Expenditure
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- Key points
- Overview
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- Figure 81: Ofgem’s required expansion of the number of properties to alleviate fuel poverty, 2013-21
- Innovation at centre of new price control model for gas distribution and transmission network
- Transmission network
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- Figure 82: Capital expenditure plans by National Grid Gas under RIIO-T1, by category, 2014-21
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- Figure 83: Annual capital expenditure plans by National Grid Gas under RIIO-T1, by category, 2014-21
- Distribution network
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- Figure 84: Controllable cost allowances for gas distribution companies under (RIIO-GD1), 2014-21
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- Figure 85: Annual capex plans under RIIO-GD1, by GDN, 2014-2021
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- Figure 86: Annual repex plans under RIIO-GD1, by GDN, 2014-2021
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- Figure 87: Forecast total capex and repex during RIIO-GD1, 2013/14-2020/21
- Individual companies
- Northern Gas Networks
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- Figure 88: Northern Gas Networks capex and repex, 2014- 16 (actual) and 2017-21 (planned)
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- Figure 89: Northern Gas Networks capex and repex Workload, 2014-16 (actual) and 2017-21 (planned)
- Scotland Gas Networks
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- Figure 90: Scotland Gas Networks capex and repex, 2014-16 (actual) and 2017-21 (planned)
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- Figure 91: Scotland Gas Networks capex and repex workload, 2014-16 (actual) and 2017-21 (planned)
- Southern Gas Networks
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- Figure 92: Southern Gas Networks capex and repex, 2014-16 (actual) and 2017-21 (planned)
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- Figure 93: Southern Gas Networks capex and repex Workload, 2014-16 (actual) and 2017-21 (planned)
- Wales and West Utilities (WWU)
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- Figure 94: WWU capex and repex, 2014-16 (actual) and 2017-21 (planned)
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- Figure 95: WWU capex and repex Workload, 2014-16 (actual) and 2017-21 (planned)
- NGG East of England
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- Figure 96: NGG East of England capex and repex, 2014-16 (actual) and 2017-21 (planned)
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- Figure 97: NGG East of England capex and repex workload, 2014-16 (actual) and 2017-21 (planned)
- NGG London
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- Figure 98: NGG London capex and repex, 2014-16 (actual) and 2017-21 (planned)
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- Figure 99: NGG London capex and repex workload, 2014-16 (actual) and 2017-21 (planned)
- NGG North West
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- Figure 100: NGG North West capex and repex, 2014-16 (actual) and 2017-21 (planned)
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- Figure 101: NGG North West capex and repex workload, 2014-16 (actual) and 2017-21 (planned)
- NGG West Midlands
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- Figure 102: NGG West Midlands capex and repex, 2014-16 (actual) and 2017-21 (planned)
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- Figure 103: NGG West Midlands capex and repex workload, 2014-16 (actual) and 2017-21 (planned)
Supply Industry Structure
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- Key points
- Companies
AMEC Foster Wheeler
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- Company outlook
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- Figure 104: Financial analysis of AMEC Foster Wheeler, 2011-15
Balfour Beatty
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- Balfour Beatty announces several profit warnings during 2014 and 2015 as it faces major challenges from construction contracts
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- Figure 105: Financial analysis of Balfour Beatty, 2011-15
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- Figure 106: Financial analysis of Balfour Beatty by segment, 2014-15
Kellogg Brown & Root Holdings
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- Figure 107: Financial analysis of Kellogg Brown & Root Holdings, 2010-14
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The Costain Group
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- Company performance and strategy
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- Figure 108: Financial analysis of Costain Group, 2011-15
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- Figure 109: Turnover analysis of Costain Group, by division, 2014-15
Laing O’Rourke
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- Focus on modern methods of construction
- Strategic review 2015-16
- Australian business put up for sale
- Company performance:
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- Figure 110: Financial analysis of Laing O’Rourke, 2011-15
Morrison Utility Services
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- Company performance:
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- Figure 111: Financial analysis of Morrison Utility Services, 2012-16
McNicholas Construction Holdings
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- Company performance:
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- Figure 112: Financial analysis of McNicholas Construction (Holdings), 2012-16
Forefront Utilities
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- Figure 113: Financial analysis of Forefront Utilities, 2011-15
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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)
- Energy Networks Association
- Society of British Gas Industries
- Association of Consulting Engineers
- British Water
- British Waterways Board
- Chartered Institution of Water & Environmental Management
- International Water Association
- OFWAT
- Society of British Water & Wastewater Industries
- National Joint Utilities Group
- Trade magazines
- The Engineer
- European Process Engineer
- Modern Utility Management
- Plant Engineer
- Plant and Works Engineering
- Professional Engineering
- Utility Week
- Trade exhibitions
- Utility Week Live incorporating IWEX 2017
- edie live 2017
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