National Power to slash dividend and jobs

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The Independent Online
NATIONAL POWER, the embattled electricity generator, warned yesterday that it intends to cut its dividend by up to a half and slash costs in a move which could result in as many as 1,000 job losses.

The dramatic action follows a slump in profits last year and the expected sale of its Drax power station this autumn, which will reduce group earnings by a further pounds 200m.

Sir John Collins, National Power's chairman, has drafted in the US management consultants Bain & Co to help devise a new strategy for the group and expects to announce the results in three months.

The wide-ranging review follows the dismissal of Keith Henry as chief executive last month after a series of setbacks which culminated in heavy losses on its investment in Pakistan and abortive merger talks with United Utilities. Sir John said he did not rule out demerging National Power's international division and also said the group would be prepared to sell off even more UK power stations.

The sale of the 4,000 megawatt Drax station in Yorkshire will reduce National Power's share of the UK generation market to 12 per cent compared with 46 per cent at privatisation eight years ago.

Sir John said the sale, which is expected to raise pounds 2bn, might enable the group to return capital to shareholders. But National Power is also keen to buy either a regional electricity company or an electricity supply business in order to meet its goal of increasing domestic energy customers from 2.7 million to 4.5 million.

National Power is already axing 200 of the 1,100 jobs at its headquarters in Swindon and has set itself a target of cutting costs by up to 20 per cent. This is likely to involve substantial job cuts elsewhere among the workforce, which will be swollen to nearly 6,000 when National Power completes the acquisition of Midland Electricity's supply business.

A firm of headhunters will be appointed next week to conduct the search for a replacement for Mr Henry, with the aim of getting the new chief executive on board by the end of the year. The internal candidate is Graham Brown, the chief operating officer. Pre-tax profits fell 23 per cent last year to pounds 571m after a pounds 76m fall in UK earnings and a pounds 49m provision against revenues owing from the Hub and Kot Addu stations in Pakistan. But the dividend was raised 6 per cent to 28.6p.

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