Scottish Power results reveal ten per cent profits fall

1 May, 2002 – Results published today by Scottish Power showed that pre-tax profits for the year had fallen ten per cent to à‚£567m ($826.9m). The poorer performance was blamed on difficult operating conditions in its US businesses, which were badly hit by the Californian power crisis.

Scottish Power insisted that a good recovery was underway and pointed to earnings in the second half of the year which were 45 per cent higher than the corresponding period. “This was due to much improved operational performance in our US and Infrastructure businesses,” said chief executive, Ian Russell.

Scottish Power’s main US business is PacifiCorp, a utility serving the northwest USA with 1.5 million customers and 8200 MW of generating capacity.

The group recorded exceptional charges of à‚£1.3bn in the year to March 31 on the sale of Southern Water, the demerger of Thus, the telecommunications group, and its exit from its UK retail business. Turnover was unchanged at à‚£6.3bn and a dividend of 27.34p (26.04p) will be paid on earnings per share of 26.12p (27.86p).

UK operations remain competitive. “The UK electricity market remains very challenging, but we are making good progress in developing our energy trading expertise and improving our costs to serve in the UK Division,” said Russell.

Scottish Power is one of only two regional power companies remaining out of the ten created at the time of privatization in the early 1990s. The others have been acquired or merged and most are now under foreign control. Recently, Innogy has agreed to a bid by German energy group RWE and National Grid announced it is to merge with gas pipeline operator Lattice.

This has led to speculation that Scottish Power may be vulnerable to take-over and that a merger with Scottish and Southern, the only other British-owned regional electricity supply company, may be advisable. Commenting on the speculation Russell said, “Putting two Scottish companies together would look like a sensible thing to do but I am not sure it is that simple. The complexity and uncertainty of the regulatory position make it quite difficult to see whether there would be value for shareholders.”

Through a series of disposals during the course of the year, Scottish Power is redefining itself as a company focused on international energy business. “The Board believes that this focus and commitment will enable it to take advantage of the opportunities to create shareholder value that will, over time, arise from the changing structure of our industry in the UK, the rest of Europe and the US,” said Russell.

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