Offshore wind auction shunned in blow to Sunak - latest updates

The owner of Wagamama has risen sharply after its chairman announced he is stepping down.

Shares in the Restaurant Group have climbed 3pc after Ken Hanna said he would not seek re-election to the board next year for personal reasons.

The company has endured a tough period, with activist investors seeking a break up of the group and Mr Hanna becoming embroiled in a row with Hong Kong-based hedge fund Oasis Capital over executive pay.

Last year was a tough time for the stock which fell over 75pc from the July 2021 highs to the nadir in December last year.

Victoria Scholar, head of investment at Interactive Investor said:

This week Restaurant Group said it expects higher annual profits after reporting an increase in first-half earnings. Following the optimistic update, Hanna clearly decided now is a good time to depart, rather that engaging in a dispute with activist investors that could detract from the company’s gathering momentum.

Like many businesses in the hospitality sector, Restaurant Group has been grappling with macro headwinds like the cost-of-living crisis and inflation cost pressures. However, it has been carrying out cost saving measures including closing a number of venues that have helped to improve its financials and as a result, its outlook is improving.

The Government’s ambition for the UK to produce 50 gigawatts of offshore wind by 2030 has been dealt a “major blow” by the failed auction, Investec has warned.

Analyst Martin Young declared that the auction “has flopped” after no companies decided to bid on any of seven major projects around the UK.

He added that ministers now need to agree a deal with power supplier Drax, which faces an uncertain future as its existing subsidy for burning wood pellets in its power plant ends in 2027.

Drax has claimed it faces a gap in its funding, with its £2bn carbon capture project not expected until 2030.

Mr Young said: 

This is a major blow to seeing 50GW of offshore wind by 2030, but underscores the importance of agreement of a post 2027 bridging mechanism with Drax, as energy security concerns will rise.

Keeping Drax on the system post March 2027 looks ever more important, and we suggest that Government moves at pace in agreeing a post 2027 bridging mechanism.

UK’s main stock indexes have risen as easing US bond yields and crude prices offered investors some relief at the end of a rough week for global markets.

The exporter-heavy FTSE 100 index ha gained 0.1pc in early trading, while the domestically focussed FTSE 250 index was up 0.4pc.

Global stock markets have come under pressure this week as a surge in oil prices raised concerns about persistent price pressures and US economic data fed into worries that interest rates will remain higher for longer.

Oil prices have today dipped about 0.1pc below $90 and US bond yields retreated.

Investors also took comfort from a Bank of England survey on Thursday showing businesses were planning for their lowest price rises since February 2022, which could propel a slowdown in inflation.

Inflation-sensitive stocks such as retailers rose 1pc, leading sectoral gains.

Shares of Berkeley Group Holdings declined less than 0.1pc after the house-builder joined sector peers in highlighting a gloomy trading environment in the face of rising interest rates and wider macro economic concerns.

After the failed offshore energy auction, Greenpeace UK’s policy director Doug Parr said: 

This monumental failure is the biggest disaster for clean energy in almost a decade.

Thanks to cost pressures and inept Government policy, this auction round has completely flopped - denying bill payers access to cheap, clean energy and putting the UK’s legally binding target of decarbonising power by 2035 in greater jeopardy. 

It leaves the UK more dependent on expensive, imported fossil gas.

The latest government auction of new contracts will deliver the lowest amount renewable energy in six years.

Our energy editor Jonathan Leake explains:

The round will bring a total of 3.7 gigawatts of renewable generation on stream - roughly equivalent to 3-4 standard gas-fired power stations. 

This is the lowest level since 2017 and just over a third of the 10.8GW in last year’s auction. 

The bulk is solar at around 2GW, with another 1.7GW from onshore wind. Tidal energy and geothermal projects will add just 65 megawatts.

RenewableUK, the trade body for the wind industry, called for reforms to the system of Contracts for Difference, the mechanism through which the government guarantees prices for the power generated by renewables.

RenewableUK chief executive Dan McGrail said: “The failure to secure any new offshore wind is a major blow for consumers that could, and should, have been averted. 

“Building wind farms means we stabilise the cost of energy for the long-term and reduce our dependency on fossil fuels, prices of which can be manipulated by dictators and despots. It’s not too late to get back on track, but without urgent changes, we risk pricing ourselves out of the global race for clean energy investment.”

Keith Anderson, the chief executive of ScottishPower, said the failed offshore wind auction is a “multi-billion pound lost opportunity to deliver low-cost energy for consumers and a wake-up call for Government”.

He said: 

The CfD (contracts for difference) process is recognised globally as a lynchpin of the UK’s offshore success, but it also needs to flex to keep pace with the world around it.

We all want the same thing, to get more secure, low-cost green offshore wind built in our waters.

We need to get back on track and consider how we unlock the billions of investment in what is still one of the cheapest ways to generate power and meet the UK’s long-term offshore wind ambitions for the future.

European natural gas prices have jumped as workers at two key Chevron facilities in Australia began partial strikes after talks failed. 

Benchmark Dutch futures rose as much as 11pc toward €36 a megawatt-hour after the announcement of the industrial action covering the Gorgon and Wheatstone liquefied natural gas facilities, which supplied roughly 7pc of global liquified natural gas (LNG) last year. 

Workers plan to engage in about 20 types of action, including stoppages and bans on certain tasks, according to the Offshore Alliance, a grouping of major unions.

News of the widely anticipated strikes has spooked global gas markets in recent weeks, sending prices spiking, with union officials previously threatening to “jam up” the company’s operations.

The Offshore Alliance said the global energy giant would “finally be facing their day of reckoning,” adding: “It’s game on, Chevron.”

The FTSE 100 has opened higher despite falls across Wall Street and Asia over heightened US and China tensions.

The commodity-heavy index has risen 0.4pc to 7,456.95 while the domestically-focused FTSE 250 has fallen 0.2pc to 18,414.70.

Housebuilder and developer Berkeley Group has said the value of home reservations over the last four months were more than a third lower than the previous year amid falling house prices.

Underlying private sales reservations were some 35pc below last year’s rate, reflecting macroeconomic and political volatility, the Surrey-based group said.

The company also told investors it has not acquired any land in the latest quarter as it came up against a complex planning system and high inflation and interest rates deterring investment across the sector.

But it stuck by its earnings guidance of at least £1.05bn in pre-tax profits over the current and next financial years.

The Government blamed rising inflation for the failure to attract any bids for its offshore wind farm projects.

In a statement, the Department for Energy Security and Net Zero said:

While offshore and floating offshore wind do not feature in this year’s allocation, this is in line with similar results in countries including Germany and Spain, as a result of the global rise in inflation and the impact on supply chains which presented challenges for projects participating in this round.

However, the industry remains a British success story, with the government committed to its ambition of securing 50GW of offshore wind capacity and 5GW of floating offshore wind by 2030. 

The UK is home to the world’s four largest operational wind farms and just last year the UK installed 300 new offshore wind turbines, with Contracts for Difference contributing towards 29GW of total wind capacity and helping power the equivalent of around 24 million homes.

Heathrow has secured a victory in its battle over passenger fees in a provisional ruling by the competition watchdog.

The Competition and Markets Authority (CMA) said it has found that the Civil Aviation Authority (CAA) made some errors in its decision over how much Heathrow Airport can charge airlines.

The CAA told Heathrow in March that it must cut passenger fees amid a row with airlines.

The airport wanted charges to increase to £40 per passenger following huge losses as a result of the Covid shutdown.

However, the CAA said fees would remain at an average of £31.57 this year – in line with 2022 – before falling to £25.43 for the following three years.

The CMA proposes to require the CAA to reconsider aspects of its decision, but noted: “We would expect any such changes to have only a small net impact relative to the CAA’s overall price control decision.”

Labour’s shadow energy security secretary Ed Miliband said the failure to secure any bids for offshore wind projects would push up energy bills.

He said:

The news this morning is an energy security disaster and a £1bn Tory bombshell that will push bills up for hardworking families. 

The Conservatives have now trashed the industry that was meant to be the crown jewels of the British energy system - blocking the cheap, clean, homegrown power we need. 

Ministers were warned time and again that this would happen, but they did not listen. They simply don’t understand how to deliver the green sprint, and Rishi Sunak’s government is too weak and divided to deliver the clean power Britain needs. 

This is just the latest episode in the Tories’ 13 years of failed energy policy: they broke the onshore wind market, they undermined the solar industry, and they caused chaos with botched home insulation. Every family and business are paying the price for these failures in higher energy bills, and our country remains exposed.

Only Labour can get Britain building and deliver the clean energy we need to cut bills and make the UK energy secure, with our plan for clean power by 2030.

An energy minister said offshore wind remains “central to our ambitions to decarbonise our electricity supply” despite the Government’s auction of contracts attracting zero bidders.

No companies responded to the auction for seven major offshore wind projects amid complaints that the maximum price they were able to charge was too low to cover costs.

Energy and Climate Change minister Graham Stuart said the Government aims to build 50GW of offshore wind capacity by 2030 and that its ambition to do so “remains firm”. 

He added: “The UK installed 300 new turbines last year and we will work with industry to make sure we retain our global leadership in this vital technology.”

The Government’s plan to increase Britain’s energy security has been dealt a blow after no companies decided to bid for contracts for major wind farms around the UK.

The Department for Energy Security and Net Zero has announced a series of smaller onshore wind projects did attract bids.

Many of the 3.7 gigawatts of new projects that cleared the Government’s auctions round for renewables were also solar farms.

Thanks for joining me. An auction of offshore wind farm contracts attracted no bids from companies in a blow to the Government.

No wind farm developers bid for any of seven new contracts around Britain amid complaints that the maximum price they were allowed to charge for energy was too low to cover the costs.

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What happened overnight 

Asia’s stock markets dipped, with tech shares tumbling amid deepening tensions between the US and China.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2pc and is down 1.4pc for the week. Hong Kong markets were closed for the morning due to storms lashing the city. Japan’s Nikkei fell 1.4pc.

Some $200 billion has been wiped from Apple’s market capitalisation in two days on reports of China curbing iPhone use by state employees and on Friday protectionism fears were weighing on shares of chip suppliers in Asia.

Shares in Taiwan’s TSMC, a big Apple supplier, eased 0.4pc. Shares in South Korea’s SK Hynix, whose chips some users have found in China’s Huawei Technologies’ new phone, fell 4pc. Tokyo Electron shares dropped about 4pc.

Tech stocks had already been under extra pressure from US bond yields that have been rising on bets that US interest rates are likely to linger at 20-year highs.

That in turn has unleashed the dollar, which is up for an eighth straight week against a basket of currencies, a rally that has carried the US currency index more than 5pc higher.

Dollar gains have pushed the Chinese yuan to a 16-year low and have prompted a step up in rhetoric from Japanese policymakers growing uncomfortable with the yen’s slide.