REG - Quadgas Finance PLC Quadgas Midco Ltd Quadgas Pledgeco Ltd - Ofgem’s Draft Determination: Consultation Response

PrologisAnnouncement

14/09/2020 11:30

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 £5,000,000,000 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 £701m additional efficiency challenge, on top of the £505m 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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