Investment column: Independent

INDEPENDENT Energy has proved a stunning success in its short life as a publicly quoted company. Shares in the energy distributor were priced at 100p when the company came to the Alternative Investment Market three years ago. Yesterday they closed 30p higher at 901p after the group reported maiden profits of pounds 4m compared to the previous year's pounds 180,000 loss.

Independent Energy was set up to take advantage of deregulation in the UK electricity market, and has done so with gusto. Although a minnow in a market dominated by the regional electricity companies, Independent has concentrated on supplying electricity to medium-sized businesses and claims a 6 to 7 per cent share of that business.

It has been helped by being able to use its nimbler marketing techniques to outmanoeuvre the lumbering Recs. It also has a built-in regulatory advantage, which means that if a Rec offers a discount to an individual customer if must offer the same terms to all other customers in that category. With their margins already under attack from Ofgem, the Recs have so far not been sufficiently worried about the threat from the likes of Independent Energy to bother, though of course that could change as the threat grows.

A move to the main market is planned for the autumn. This will be combined with a fund raising of about pounds 50m to underwrite investment in better systems as well as expansion plans in the deregulating electricity markets of continental Europe. Spain and Holland are likely to be the first targets, though not until next year.

On Peel Hunt's full-year profit forecast of pounds 18m the shares trade on a forward multiple of 22, falling to 13 the following year. Investors who were in at the start might consider taking profits after such a strong run. But prospects are still good, making the shares an attractive buy on weakness.


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