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alexw

The-Big-6-Some-Answers-But-More-Questions

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I'm with EBICO who get their power from SSE, and with the 8% prices rises coming in i'm rightly angry. I went to look at the EBICO website to see how i'd be effected and along the way found this.....

https://www.ebico.org.uk/blog/2012/11/09/the-big-6-some-answers-but-more-questions/

Amidst all the furore over retail prices over the past few weeks, a significant set of information about the Big-6 energy supply companies has become available which seems to have been overlooked by the media and industry commentators. Last week, each of the Big-6 was required, by Ofgem, to publish ‘Consolidated Segmental Reports’ on their UK generation and energy supply operations in the year ending March 2011. This reporting has been happening for a couple of years but, for first time last week, the Reports were published in a consistent fashion – which is useful for those of us who want to compare and contrast. At the bottom of this blog is a list of links to the individual company reports so the enthusiasts amongst you can conduct your own analysis, but I thought I’d present you with a summarised view.

Table.jpg

*In calculating profit margin, I used the stated earnings before interest, tax, depreciation and amortisation (EBITDA) so as to eliminate differences in tax allowances and non-cash accounting procedures between individual companies.

This prompts some questions which you might like to speculate upon:

With an average profit margin on residential supply at only 1%, why on earth would any new company want to enter this market? By contrast, profits from Big-6 generation were really excellent. Yet new independent generating companies trying to enter the generation market are struggling to get Power Purchase Agreements (wholesale electricity sales contracts) that pay them enough to make their generation projects viable (see here ). How can this be?

There is a correlation between the price that the generation arms of the Big-6 get for the electricity they produce and the profit margin those businesses make – but it’s a negative correlation. So, the higher their sales price, the lower their profit margin. What’s going-on there?

I'm not an accountant so I'd like others thoughts on this. But it looks exceedingly like to me that these companies are making out like bandits and hiding their rentier profits in their less publicized generation arms....and now i'm not just angry but absolutely bloody furious.....

Your thoughts?

Edited by alexw

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I'm with EBICO who get their power from SSE, and with the 8% prices rises coming in i'm rightly angry. I went to look at the EBICO website to see how i'd be effected and along the way found this.....

https://www.ebico.org.uk/blog/2012/11/09/the-big-6-some-answers-but-more-questions/

Table.jpg

I'm not an accountant so I'd like others thoughts on this. But it looks exceedingly like to me that these companies are making out like bandits and hiding their rentier profits in their less publicized generation arms....and now i'm not just angry but absolutely bloody furious.....

Your thoughts?

The labour minister for energy actually pointed this out last week (sorry can't tenner dhow) albeit obliquely, that's exactly what they are doing. Sick of this crap, eh!

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It has been known for ages that energy suppliers use retail margins in propoganda which do not reflect the group profitability in supplying homes. BG had a rash of articles a while ago suggesting they made something under £100/household/annum. Just total nonsense. They are not some wafer margin type operation, although that's the impression they like to give.

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I'm with EBICO who get their power from SSE, and with the 8% prices rises coming in i'm rightly angry. I went to look at the EBICO website to see how i'd be effected and along the way found this.....

https://www.ebico.org.uk/blog/2012/11/09/the-big-6-some-answers-but-more-questions/

Table.jpg

I'm not an accountant so I'd like others thoughts on this. But it looks exceedingly like to me that these companies are making out like bandits and hiding their rentier profits in their less publicized generation arms....and now i'm not just angry but absolutely bloody furious.....

Your thoughts?

I could be totally wrong but aren't the electricity companies running at a loss deliberty buy reinvesting their proffits ( or is it joint proffits elec/ gas? ) in renewables as they then get 100% tax relief ?

There is also a lot of legislation requiring the power stations to produce a % of the power using renewables ( biomass) there are a lot of these plants being added to existing power stations

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I'm with EBICO who get their power from SSE, and with the 8% prices rises coming in i'm rightly angry. I went to look at the EBICO website to see how i'd be effected and along the way found this.....

https://www.ebico.org.uk/blog/2012/11/09/the-big-6-some-answers-but-more-questions/

Table.jpg

I'm not an accountant so I'd like others thoughts on this. But it looks exceedingly like to me that these companies are making out like bandits and hiding their rentier profits in their less publicized generation arms....and now i'm not just angry but absolutely bloody furious.....

Your thoughts?

My Thoughts? Its weird that despite not understanding what the figures mean (neither do I but that's beside the point) you have still managed to work yourself into a lather about some imagined injustice and its depressing that half the country seems to thinking the same way. as you.

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My Thoughts? Its weird that despite not understanding what the figures mean (neither do I but that's beside the point) you have still managed to work yourself into a lather about some imagined injustice and its depressing that half the country seems to thinking the same way. as you.

???

Please point me to where I said I do not understand basic financial statements. I said I'm not an accountant that's a far far different thing.

I also find things depressing, such as the fact that so few question such things as the accounts above. They'd rather dine on whatever propaganda the VI's put out and take it as the god's honest truth.

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Those figures make no sense.

EDF

Revenue 3788

Op Costs 3637

Profit Margin 40% !

Glad it's not just me. I gave up trying to figure the table out

I am wondering if the revenue from selling generated power to each other is missing ?

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Glad it's not just me. I gave up trying to figure the table out

I am wondering if the revenue from selling generated power to each other is missing ?

If you look, the generation figures have little to do with revenue. You would expect them to be pretty much 1 for 1 and so the revenue figure comes from elsewhere. I suggest the revenue figure is the "selling to eachother figure" whereas the overall turnover would be Energy generated X price per unit, and is not explicitly shown.

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If you look, the generation figures have little to do with revenue. You would expect them to be pretty much 1 for 1 and so the revenue figure comes from elsewhere. I suggest the revenue figure is the "selling to eachother figure" whereas the overall turnover would be Energy generated X price per unit, and is not explicitly shown.

That's what I was thinking - but it's a guess, and so I wonder what is the point of the table ?

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I have just looked up the accounts of Scottish Power. On annual revenues of £7.8bn it makes £742m profit before tax. That is a very generous profit margin of nearly 10% in a fairly uncompetitive market. If there was genuine competition, margins would be a lot lower.

It has capital of £3.7bn, so the pre-tax return on equity is an astonishing 20% - the kind of returns that you would see for a dynamic company that adds a lot of value to its product, not for a dull utility.

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Those figures make no sense.

EDF

Revenue 3788

Op Costs 3637

Profit Margin 40% !

The profit margin is the % difference between revenue and Op Costs. At least that is how it is calculated for the others of the big 6. I believe a typo was made in the case of EDF.

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I have just looked up the accounts of Scottish Power. On annual revenues of £7.8bn it makes £742m profit before tax. That is a very generous profit margin of nearly 10% in a fairly uncompetitive market. If there was genuine competition, margins would be a lot lower.

It has capital of £3.7bn, so the pre-tax return on equity is an astonishing 20% - the kind of returns that you would see for a dynamic company that adds a lot of value to its product, not for a dull utility.

Isn't that profit before tax and interest payments? And as all the utilities are geared up to the teeth then interest payments will take a big bite out of that £742m.

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Isn't that profit before tax and interest payments? And as all the utilities are geared up to the teeth then interest payments will take a big bite out of that £742m.

The problem with using such a basis as a means to measure profitability is that we don't know how many of those loans are simply tax dodges. The water utilities have been caught doing exactly this.

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???

Please point me to where I said I do not understand basic financial statements. I said I'm not an accountant that's a far far different thing.

I also find things depressing, such as the fact that so few question such things as the accounts above. They'd rather dine on whatever propaganda the VI's put out and take it as the god's honest truth.

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???

Please point me to where I said I do not understand basic financial statements. I said I'm not an accountant that's a far far different thing.

I also find things depressing, such as the fact that so few question such things as the accounts above. They'd rather dine on whatever propaganda the VI's put out and take it as the god's honest truth.

Sorry I thought you implied you did not understand the figures,.Anyway they are not the whole story so it is hard to see how anyone could come to a conclusion about profiteering from them.

I am becoming increasingly tired of the populist whining that both parties, but especially Labor, are pandering to and cannot see how it will lead to anything other than huge political failure when reality intrudes and raised expectations are not met.

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