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Scottish & Southern moves into cleaner coal to take on rivals

Scottish & Southern Energy, Britain's third-biggest energy supplier, is expanding into cleaner coal and also launching a new gas boiler installation and maintenance service today to take on its bigger rival Centrica, the owner of British Gas. The company also reiterated yesterday that it would freeze prices at current levels until at least the start of next year, after raising them last month.

SSE announced a new partnership with Mitsui Babcock, Siemens UK and UK Coal to build Britain's first cleaner coal plant, a 500-megawatt facility, at its Ferrybridge power station in Yorkshire. It has also acquired two new wind farm developments capable of generating nearly 100 megawatts of power, in recognition of the Government's goals of delivering sustainable energy supplies and reducing carbon emissions. The group already owns four onshore wind farms in Scotland and is awaiting approval on another five. Ian Marchant, the chief executive, said: "In the Prime Minister's words, we can expect another 'big push' on renewables."

The news came as the power supplier, created from the 1998 merger of Scottish Hydro-Electric and Southern Electric, reported a 19 per cent rise in underlying profits before tax to £858m in the year to March, boosted by acquisitions. It has won 600,000 customers from rivals which put up their prices repeatedly, taking the total number of customers to more than 6.7 million.

SSE has been raising its rates at a slower pace than rivals even though wholesale gas prices have rocketed. Its gas bills went up by 16.5 per cent and electricity by 9.4 per cent on 1 May but it has vowed not to increase prices again until next year. By contrast, ScottishPower and Centrica have warned customers of further price rises as energy costs spiral.

The new cleaner coal plant would have a thermal efficiency of more than 45 per cent, compared with 36 per cent at conventional coal-fired power stations. It would save 500,000 tonnes of carbon dioxide a year compared with a conventional plant, and its capability of capturing and storing carbon would save another 1.7 million tonnes of carbon dioxide. Engineering studies for the plant are expected to be complete within the next year and the facility could be in operation from 2011/12.

Mr Marchant said the company was looking at the option of acquiring Thames Water from RWE, possibly as part of a consortium, but sought to downplay the idea. "It's a possibility but to say we're looking closely would be an overstatement," he said. He also indicated the company's interest in running nuclear power stations in the future.