Company Snapshot: Mutual Energy Ltd
Mutual Energy Ltd (renamed in 2009, formerly Northern Ireland Energy Holdings) is the owner of three key parts of the Northern Ireland energy infrastructure — the Moyle electricity inter-connector from Islandmagee to Scotland, the natural gas pipeline from Scotland to Ballylumford, and the natural gas transmission pipelines to the Belfast area from Ballylumford, purchased from Phoenix Natural Gas.
Mutual Energy is a profitable private company controlled by a selected small group of members who attract no payment for their membership. Profits are invested at the discretion of the directors. The non-executive directors earn an annual fee, usually of £41,000.
Because of the nature of the contracts and licences to operate these assets, giving assurance on the flow of revenue and, in part, with guarantees of funding to meet any losses by passing on possible extra costs to electricity customers, the subsidiary companies were able to borrow funds at modest interest rates. Mutual Energy argues that the lower finance charges represent a significant benefit to consumers.
The financing of the Moyle interconnector earned a surplus for Mutual Energy in each of the last seven years. The company says that in 2009-10, Moyle has made a significant contribution to lower electricity prices ‘by avoiding any cash call on consumers’ and setting aside £12.9m from accumulated reserves. Reduced operating costs in gas transmission generated savings estimated to be nearly £2m.
The largest expenditure item each year is the cost of interest and capital repayments. In the year to March 2010, these costs were £18.6m.
The company is in the unusual position of showing a negative value of its equity at the end of each financial year — in 2010 £4.8m, and in 2009, £5.2m. This is explained in the annual report as a consequence of |particular accounting conventions that create an apparent loss on derivative financing.
The annual report renews a contentious plea by Mutual Energy for an improved payments deal, since the financing of the Moyle interconnector will become more difficult in the future as the trading margins on electricity flows fall when there is competition from other interconnection from Ireland to Wales. Mutual Energy is asking the Regulators (north and south) to agree that the availability of Moyle should merit the payment of a “non-flow related capacity payment” to users.
Mutual Energy has drawn attention to the apparent delay by the regulators and governments, north and south, in agreeing cross-border rules in the common arrangements for gas projects. Because of the impact on the development of the gas industry, and the obligations of EU Regulations, Mutual Energy says that “action on this is now pressing”.