National Power goes into China

NATIONAL Power yesterday unveiled plans to move into the Chinese electricity market as part of an overseas expansion strategy that will see half its generating interests located outside Britain within the next three years.

The move is designed to compensate for the impact of increasing competition at home and declining profits caused by tougher price controls and the end of guaranteed contracts with the supply companies.

National Power is investing $250m in two coal-fired stations in China, increasing its overseas investment to almost pounds 1.5bn. The company also said that it planned to double the rate of overseas investment to pounds 600m a year over the next two years.

Keith Henry, chief executive, said that by 2001-2002, its power station interests would be split 50:50 between the UK and overseas. At present it has 16,000 megawatts of plant in the UK and interests in 10,000 megawatts of overseas generating capacity.

The company already has significant interests in Australia, Pakistan and the Czech Republic and has plans to expand further into areas such as central Europe, Turkey, Zimbabwe and the US.

However, Mr Henry said National Power was not interested in following its rivals PowerGen and Scottish Power in seeking to buy a US electric utility. "We struggle to make the numbers add up," he said.

Profits last year from overseas operations were pounds 130m and National Power expects that to grow to as much as pounds 190m over the next two years.

The overseas contribution helped offset the squeeze on its UK earnings last year which saw pre-tax prfoits fall from pounds 740m to pounds 720m in the year ended 31 March.

This year National Power expects its UK profits to be lower by pounds 130m because of the end of the sales contracts linked to long-term deals to buy coal.

The company, which will buy about 10 million tonnes of coal from UK pits this year, is in talks with ministers over a deal to protect the coal industry from disappearing altogether. This is likely to involve a moratorium of up to five years on consents for further gas-fired power stations and supply arrangements which will guarantee demand for 20m to 25m tonnes of British coal.

Mr Henry said, however, that there had been no discussions about the generators being broken up to create more competition or forced to dispose of mothballed coal-fired stations to other operators.