PowerGen slides 6% on warning that lower electricity prices will hit profits

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The Independent Online

Powergen shares fell by 6 per cent yesterday after the electricity generating and supply group warned that second-half profits would be "significantly" below those achieved in the first six months.

Powergen shares fell by 6 per cent yesterday after the electricity generating and supply group warned that second-half profits would be "significantly" below those achieved in the first six months.

The group blamed the deteriorating outlook on falling electricity prices and its inability to hedge its contracts with suppliers at the same advantageous rates obtained earlier in the year.

The warning, coupled with a decision to hold the interim dividend at 10.8p, drove PowerGen shares 32p lower to close at 517p. Profits for the six months to 2 July fell 17 per cent from £289m to £241m. In the first four months of the year, baseload prices fell 14 per cent and prices are expected to fall further with the introduction of new electricity trading arrangements in November.

Despite the setback, Ed Wallis, PowerGen's executive chairman, remained upbeat, describing the group's first-half performance as "solid". Mr Wallis, who is 60 and has led PowerGen since privatisation 10years ago, said he was aiming to buy another UK regional electricity company or US utility next year before splitting his roles as chairman and chief executive and retiring.

The PowerGen board approved a management succession plan in July whereby the group will appoint a non-executive chairman and Mr Wallis's role as chief executive will be taken on by one of three internal candidates.

One of them is Nick Baldwin, executive director in charge of UK operations. Another is Roger Hale, the chief executive of LG&E, who will join the board when PowerGen's £2.2bn takeover of the US utility company is completed later this year.

Mr Wallis said PowerGen was on track to raise £1bn through asset disposals. It has put three UK power stations and its entire overseas assets on the block but does not expect to sell all of them.

PowerGen now has just under 3 million supply customers and aims to reach 5 million by the end of 2002 with the help of new utility services. It is already selling stakeholder pensions, fixed-line telephones and internet access in addition to gas and electricity, and is considering moving into water and mobile phones.

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