4
Energy Prices
• The UK sources c50% of its gas consumption from the UK Continental Shelf, with the majority of the rest
coming from Norway and Qatar. Only around 4% of gas sold in the UK originates in Russia. The direct
exposure of the UK to Russian gas is lower than many continental countries.
• Within the EU, c40% of gas consumed originates in Russia, with some European countries obtaining 75100%
of their gas from Russia. Sanctions or security of supply (affected by diversifying sources of
supply) will result in other countries competing with the UK in the global market for supplies from a
smaller range of countries; inevitably, this will cause price rises.
• The lack of storage capacity for gas in the UK/Europe means that Western Europe relies on continuous
supplies of gas, which are more vulnerable to disruption, and does not have buffer stocks that can be
fed into the market or used to hold down prices, in the way the US strategic petroleum reserve is.
• Some product manufacturers in the UK source their gas supplies directly from Russia (Gazprom). These
include Saint-Gobain (the UK's largest product producer, with a range that includes plaster,
plasterboard, insulation and glass products), and Marley (roofing products, where there are already
significant pressures on supply). Both manufacturers are part of Laing O'Rourke Strategic
Manufacturing Partners and further dialogue is ongoing with these suppliers to establish the full
exposure and reliance on Gazprom energy.
• Hedging of energy has been adopted across the Laing O'Rourke projects (excluding JV's) to mitigate
increases in prices. Based in agreement with Kinect Energy;
• The physical hedge of 0.5MW for April-22 on Friday 18th March was transacted at £230/MWh.
This now takes the Portfolio Price for April-22 to £137.08/MWh (100% is now hedged). Prior to
the hedges, the Portfolio Price for April-22 was £132.25/MWh. The additional hedge has led to
a 3.6% increase in the Portfolio Price for April-22.
• The physical hedge of 0.3MW for Summer-22 on Friday 18th March was also transacted at
£230/MWh. This now takes the Portfolio Price for Summer-22 to £133.44 /MWh (72% is now
hedged for May 22-Sept 22). Prior to the hedges, the Portfolio Price for Summer-22
was £131.70/MWh. The additional hedge has led to a 1.3% increase in the Portfolio Price for
Summer-22.
• The Winter-22 (October-22 to March 23) hedges are currently at 48%. Average price for the
period is £146.86/MWh.
Update 5th April 2022 Energy: Kinect Energy have advised LOR that they will be market
testing the energy rates in readiness for the expiry March 2023.
Kinect Energy are LOR's preferred provider of Energy to our projects.
They hedge the cost of energy on behalf of LOR and facilitate the
market testing with the energy providers.
Update 12th May 2022 Gas: Our current fixed price gas supply contract with SSE ends
September 30th 2022.
Kinect, our energy broker, are currently re-tendering this contract for us
and are advising we should look to fix in the contract price soon due to
the current market volatility. We have been provided three price fixity
option periods however we believe prices will start to decrease and will
fix for a period of 12 months:
• Option 1 - Sign a 12 month contract with Corona (the
cheapest supplier as identified by Kinect) at an annual cost of
£743k (* current agreement = £105k annual cost!)