Risky business: political uncertainty and the cost of capital for regulated firms

Statements by politicians about nationalising or intervening in the functioning of regulated industries have attracted substantial media attention in recent times, leading to an increase in political and regulatory risk for regulated industries. A case study focusing on National Grid, the energy transmission company in the UK, suggests that increased political and regulatory risk can affect the valuation of regulated utilities through a combination of lower expected cash flows and a higher cost of capital

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State aid spotlight on tax: the General Court’s judgments on Fiat and Starbucks

In 2015, the European Commission ordered Starbucks and Fiat to each pay €20m–€30m in the Netherlands and Luxembourg, respectively, as their tax arrangements were found to constitute illegal state aid. On 24 September 2019, the General Court upheld the Commission’s Fiat decision, but annulled the Starbucks decision. What were the key economic issues in these cases, and what are the implications of the judgments?

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Labour markets: a blind spot for merger control?

Recent months have seen increased discussion of merger control in Europe. One central question is whether the impact on labour markets should be examined directly, or indirectly in terms of product market concentration. We shed light on the main arguments in this debate, and discuss some of the challenges that would be faced by competition authorities if they were to consider labour markets concentration in their merger assessments

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EU broadband: co-investing in a faster future

Rolling out very high-capacity networks (VHCNs) across Europe to deal with ever-increasing broadband demands is challenging. To incentivise investment, the European Commission has introduced new conditions relating to co-investment agreements, including a promise (subject to certain conditions) not to regulate SMP operators that enter into an investment agreement with at least one other operator. Peter Culham, Senior Adviser, Felipe Flórez Duncan, Partner, and Michael Weekes, Senior Consultant, ask: is it enough to unlock investment in VHCNs?

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Big data and AI: risks and opportunities for insurers

Big data and artificial intelligence are sweeping through the European insurance industry, with insurers facing competitive pressure to adopt innovative techniques. In response, regulators such as EIOPA are highlighting risks arising from big data and AI, and the critical...

Company responses to Ofwat’s slow-track draft determinations

Introduction Water companies have recently responded to Ofwat’s slow-track draft determinations (DD). The key themes from those responses can be put into three key categories: cost assessment; financial issues; outcome targets. Cost assessment While supportive in certain areas, a number of companies...
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