The proposed government cut to the Feed-in Tariff will have little impact on Carillion’s financial performance, its chief executive and finance director said today.
Carillion last week put its 4,500 staff at Carillion Energy Services – formerly Eaga – on statutory notice of redundancy, saying the government’s proposed cut to feed-in-tariff rates would reduce the solar market “significantly”.
Chief executive Richard Howson told CN: “We did expect a reduction in the FiT tariff. What we did not expect is a reduction of this scale and I don’t think the industry expected a reduction of this scale.”
But Mr Howson said the division represents a “fairly small” part of total revenue, at just 1 per cent of group value – forecast to increase to 2 per cent in 2012 before the government proposal, but now likely to reduce.
Mr Howson said they are disappointed, but added there are opportunities further down the line on the back of the green deal.
It is understood up to 1,500 jobs could go as the company restructures in the wake of the cut to the FiT rates, where energy firms pay customers a rate for producing their own energy, such as through solar PV.
In a pre-close trading update today, Carillion said it is on course to report strong profits and revenue of about £5bn in line with 2010 when it posts its results in February.
It also said it would set aside £10m made for the restructuring of its solar PV division. The total one-off cost for the Eaga acquisition in April has doubled from £20m to £40m, with £10m of that down to the FiT cut, according to finance director Richard Adam.
The expected annual return on the acquisition has increased from £15m to £25m. Mr Adam said they knew there was some risk attached when going through with the acquisition, but reiterated that the proposed cuts are higher than the industry expected, and stressed the principle reason for the acquisition was to support existing customers with an energy solutions business.
“That is still at the forefront of our minds and is the thing we want to achieve and will achieve,” he said.
Mr Howson said there is never a good time to put out a notice of potential redundancy, adding that “unfortunately” it had to be applied to the whole of CES under labour laws,
He said he was unable to confirm how many jobs could go, but said there would be more clarity when the FiT consultation ends on 23 December.