Chris Train, chief executive, Cadent
Following the creation of Cadent from National Grid's former gas distribution businesses, Chris Train reflects on the business's strategy, the row over network profits and the future of gas.
For Chris Train, the boss of Cadent, the past couple of years have been busy to say the least.
In November 2015, the then chief executive of National Grid, Steve Holliday, made the surprise announcement that the energy behemoth was looking to sell off its valuable gas distribution division. A year and a half of tense sales talks and negotiations ensued, with the businesses finally sold to a consortium of investors, the Quad Gas Group, in a deal valuing it at £13.8 billion in March 2017. Having previously served as the director for gas distribution at National Grid, Train has been propelled into the spotlight as the new firm’s chief executive, giving him his first experience of life at the very top.
Speaking to Utility Week in a small meeting room at one of Cadent’s main offices in Coventry, Train is cheery and relaxed. Sitting with his back to the window, he leans back in his chair and slightly to one side, shifting forward when a topic piques his interest. In one of his first interviews in his new role, Train is keen to set out the future of Cadent, his thoughts on the row around network profits, and his belief that gas will remain central to the UK’s energy supply for decades to come.
It’s been a big summer for networks. Regulation has come under increased scrutiny after Citizens Advice released a report claiming that they are on course to pocket £7.5 billion in “unjustified profits” because their RIIO allowances are too high. At the same time, Ofgem published a letter outlining its intentions for the second period of the RIIO price controls, in which it vowed to “get tougher” on network costs.
Cadent is forecast to achieve the lowest underspend of any of the gas distribution networks (GDNs) during RIIO GD-1, but this still equates to almost 9 per cent of the total allowance – or £721 million – of which the company will be entitled to keep nearly two-thirds.
Unsurprisingly, Train doesn’t agree with Citizens Advice’s analysis, saying: “I’m not sure how and where the numbers come from. I don’t think that’s truly representative.”
It “doesn’t feel right” to judge RIIO GD-1 halfway through, he says. “It negates all of the value that has been delivered to customers to achieve those outcomes.”
He is happier with the Ofgem letter. There were “no surprises” and it covered “all of the issues that we’re already engaged with the regulator in discussing”.
Overall, he feels that the incentive-based RIIO framework has been “a great step forward” in regulation: “Coming back into distribution a couple of years ago, I think I was absolutely surprised by the focus on the delivery of outputs that the RIIO regime creates.”
Train argues that the price controls have done a “great job” in driving networks towards change. The ability to innovate will be essential if gas networks are to retain a role in the long-term future energy system.
The performance of the business has fallen somewhat short of where it should be during the current RIIO price control, with National Grid Gas Distribution being the only GDN that failed to meet all of its targets for customer service in Ofgem’s most recent annual report.
“This is a huge area of focus for us,” says Train. “While our customer performance has improved over the RIIO period, it has improved at nothing like the rate of the other GDNs and it’s an area where we need to make much more progress.
“We are very, very mindful of where we sit in that customer table at the moment,” says Train, and Cadent is “diligently and analytically” exploring ways to resolve the problem.
Asked whether Cadent will be able to meet the targets by the time Ofgem reports on its first full year in operation, Train responds: “I would absolutely hope that we are demonstrating those quality services for customers.”
Another big focus for Train, both before and after the separation from National Grid, has been forging the new identity for the firm. He tells Utility Week that the company is making “good progress” on the mammoth task of rebranding the 12 major and 20,000 minor sites that Cadent operates around the UK, as well as its vast fleet of around 3,000 vehicles.
“Employees have taken the change really, really well and are very excited by it, which I’m slightly surprised at,” he says. “You know, utilities are organisations where you’ve got cynics. I’ve been around this business long enough to know who they are and they are all really excited by the opportunity.”
Train has set a deadline of March next year for the completion of the rebrand, but there is plenty left to do, with the new protective clothing yet to be divvied out to workers and around 600 to 700 vehicles still awaiting their turn for a makeover. “It takes, would you believe it, 10 hours to do the rebranding on a vehicle,” he remarks.
So, what is this new identity? According to Train, it can be encapsulated in the company’s four key values, the first of which is community.
Train says the separation from National Grid has given the business an opportunity to “really set that community feel about the organisation”. In this respect, he hopes to draw a sharp distinction with its “nationally focused” former parent.
The second is commitment, which is “all about delivering on our promises”. “You know, being realistic about what we need to achieve and delivering against those promises into the communities that we’re serving.”
Three and four are more forward looking, he says. Train wants the company to be curious – one that “learns, is curious, looks to improve and drive improvements in what we do” – and also courageous – “having the courage to make those changes and deliver against those commitments”.
He highlights the work of one employee in the company’s management information department as a demonstration of the courage he wants to see. “She was providing information to a consultant about setting up a website. She felt like it wasn’t quite delivering what we needed in a website, so she took responsibility, wrestled it away from the consultant and delivered the website.”
Thanks to her efforts the website “looks and feels like the brand”.
“Now, that’s not to say we wouldn’t have achieved that with the consultant, but Philippa took direct accountability for the delivery, she saved us some money, but she also delivered us a better product,” he adds. “For me that’s been a tremendous example of what we are trying to achieve by saying we need to be more courageous.”
Train talks with particular enthusiasm about the “fantastic job” done by teams at National Grid and Cadent in carrying out the separation – setting up the office in Coventry and moving people out of Warwick, ensuring it could undertake all functions and not just the operational part of the business, as well as doing the sale process. “I look at some of the people in the process and what they have done in order to achieve that – it is just absolutely amazing.”
Train is full of praise too for the new investors in the business. “It’s a big board,” he admits, “but they organise themselves very well.” He’s been impressed by the board’s interest in understanding how the business functions on a day-to-day basis, “not just the financials”, and is assured by their commitment to its long-term future – “they want to see long-run value, not just short-term gains. As somebody that’s responsible for the operations of the business, that makes me feel very comfortable”, says Train.
There are multiple routes to the decarbonisation of heat and not all involve gas, but, as a “gas man at heart”, Train believes the networks will have a major part to play. He warns of the difficulties of electrifying heat in a place such as London, where “you’d need to rebuild UK Power Networks’ network five times over in order to deliver the peak heat requirements in the city”.
Train is clearly investing a lot of his hopes in hydrogen, and is passionate about Cadent’s innovation project at Keele University, injecting hydrogen into the campus’ gas network.
He says Cadent is also working closely with the other GDNs to flesh out the proposals outlined in Northern Gas Networks’ H21 project to roll out hydrogen networks to a series of major cities around the UK. They are looking at ways to “translate that into an overall strategy for heat”.
That said, “no one single technology is going to deliver the magic solution”, according to Train. Biomethane and bio-synthetic natural gas (bio-SNG) will both have parts to play, too.
He believes the future of gas will be more local, with different solutions for different parts of the country: “So East Anglia – very good for anaerobic digestion because the agriculture offers a great opportunity over there. Liverpool – more industrial, looking at hydrogen. Carbon capture and storage off Liverpool Bay is an opportunity to help to deliver that.”
Despite the enormity of the challenges he has faced, Train says his experiences of leading Cadent have been “fantastic” so far. “It’s been in one sense liberating but also an element of scary as well, because you obviously have direct responsibility and accountability… on a personal level, I’ve really enjoyed the journey.”
Whether completing the rebranding of the business, catching up on customer service targets, helping to set the direction for the next RIIO price control or using innovation to secure a future role for gas networks, the task ahead for Train is daunting. His next few years look likely to be no less busy than the past two.
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