Quadgas Finance PLC Ofgem's Draft Determination: Consultation Response (8917Y)
September 14 2020 - 5:29AM
UK Regulatory
TIDM40KY TIDMTTM TIDMTTM
RNS Number : 8917Y
Quadgas Finance PLC
14 September 2020
QUADGAS FINANCE PLC
(LEGAL ENTITY IDENTIFIER: 549300VISZ55A4JZIN65)
Ofgem's Draft Determination: Consultation Response
14 September 2020
Cadent Gas Limited ("Cadent"), the principal operating
subsidiary of Quadgas MidCo Limited ("MidCo") (the guarantor under
the Company's GBP5,000,000,000 Secured Debt Issuance Programme (the
"Programme")), submitted its response to the RIIO-2 Draft
Determination to Ofgem on 4 September 2020. The summary of Cadent's
response (the "Cadent Summary of Response") can be found at:
https://cadentgas.com/news-media/document-library
In the Cadent Summary of Response, Cadent stated that:
-- their customers and stakeholders have worked with them to set
out an ambitious, but achievable plan, and Cadent was very
surprised by Ofgem's initial response to it as set out in the Draft
Determination;
-- the cost challenge proposed in the Draft Determination is unachievable and unrealistic; and
-- the proposed GBP701m additional efficiency challenge, on top
of the GBP505m of totex efficiencies contained in Cadent's plan is
neither in customers' short, or long-term, interests.
Cadent further stated that:
-- they believe that the cost challenge proposed in the Draft
Determination is a result of a significant number of material
errors, including basic data and arithmetic errors - combined with
the adoption of a benchmarking methodology that is not robust; a
lack of allowance for regional factors; and errors in the
calculation of ongoing efficiency; and
-- the result of these errors and lack of consistency across
networks presents Cadent with an unworkable and unfinanceable plan
whilst also funding other networks more than their requirements to
the clear detriment of all customers.
Cadent conclude that, in its current form, the Draft
Determination from Ofgem does not enable Cadent to finance the
services they are delivering for their customers and the activities
they are obligated to deliver under the licence and their statutory
requirements.
Cadent believe there is a considerable amount of work to do to
resolve the issues Cadent have raised to deliver a robust, fair and
proportionate set of proposals in Final Determinations. It is
critical that these issues are addressed for Cadent's customers and
indeed for all customers across the UK. Cadent are keen to offer
every assistance they can to help Ofgem achieve this and remain
committed to working constructively for the benefit of
customers.
MidCo is dependent on the payment of dividends by Cadent and
other payments from Cadent and, to a more limited extent, its other
subsidiaries to generate the funds necessary to meet its financial
obligations, including repayment of any loan made by the Company to
MidCo from the proceeds of the issuance of any notes under the
Programme. A reduction in the ability of Cadent to finance the
services they are delivering for their customers and the activities
they are obligated to deliver under the licence and their statutory
requirements may reduce Cadent's ability to declare a dividend and
therefore affect the amount of funds available to MidCo. There may
be changes between the Draft Determination and the Final
Determination, and MidCo will continue to be assess the potential
impact on the dividend stream prior to and following the Final
Determination.
Inside Information
This announcement is released by Quadgas Finance plc and
contains inside information for the purposes of Article 7 of the
Market Abuse Regulation (EU) 596/2014 ("MAR"). For the purposes of
MAR and Article 2 of Commission Implementing Regulation (EU)
2016/1055, this announcement is made by Diane Bennett (Secretary)
at Quadgas Finance plc.
Enquiries
For further information, please contact:
Helena Norgate
Quadgas Finance plc
Ashbrook Court Prologis Park
Central Boulevard
Coventry
CV7 8PE
Email: Helena.norgate@cadentgas.com
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