Missing links

For utility companies with income streams linked to inflation, using inflation derivatives to match assets with liabilities easily and relatively cheaply must be the easy option? If only it were that simple. By John Ferry

Tom Fallon, group treasurer of Warrington-based United Utilities, which owns and operates electricity and water networks in the northwest region of England, has developed a healthy skepticism of inflation derivatives and index-linked bonds over the years. Like many finance experts at UK utility companies, which typically have inflation-linked assets, the thought of raising index-linked capital very much appeals, but Fallon is holding back, for the moment at least.

He cites a

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