US woes pull the plug on ScottishPower

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The Independent Online

ScottishPower warned yesterday that profits from its US division PacifiCorp would fall short of target this year, then remain flat for the next two years.

ScottishPower warned yesterday that profits from its US division PacifiCorp would fall short of target this year, then remain flat for the next two years.

The announcement overshadowed news of a better-than-expected financial performance in the first half of the year and sent ScottishPower shares 6 per cent lower.

The company blamed PacifiCorp's poor performance on cooler weather on the US west coast which reduced the use of air conditioning systems, and a series of unexpected power station closures.

PacifiCorp, which accounts for almost 40 per cent of ScottishPower's turnover, had been budgeted to achieve a profit of $1bn this year but ScottishPower said the figure was likely to be nearer $940m-$950m because of the problems it had encountered in the first six months.

Profits would then plateau at that level until 2007 when PacifiCorp began to reap the benefits of a £3bn investment programme in new generating and network capacity.

Ian Russell, ScottishPower's chief executive, said he had spoken to 12 of the company's largest shareholders who had agreed with him that the market had over-reacted. He stressed that despite the setback at PacifiCorp in the first half ScottishPower was confident of the outlook for the year as a whole and was sticking with its guidance to analysts of full-year earnings of about 38p a share.

The group's confidence is borne out by the improved performance in its UK divisions and US power marketing business, which enabled ScottishPower to increase pre-tax profits by 17 per cent to £382m in the first half of the year. The UK power division, which covers generation and energy supply, added 460,000 gas and electricity customers in the six-month period and increased profits by £40m to £47m. Meanwhile, the UK wires business of regional electricity networks increased operating profits from £179m to £193m.

Mr Russell said a combination of increased customers and price rises had enabled ScottishPower to increase profits from its UK gas and electricity business by around £50m over the period. He said further price rises this winter could not be ruled out, depending on what happened to wholesale gas and coal prices.

ScottishPower is currently adding customers at a net rate of 50,000 a month - even better than the growth reported last week by its rival Scottish & Southern Energy - even though it has increased prices by more.

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