Norweb said 800 of the jobs would go within 18 months. It was confident it could avoid compulsory redundancies. All the job losses will be in the electricity distribution and supply business, which employs about 5,000. Norweb has a further 3,000 staff in operations including power generation and gas supply.
Ken Harvey, chairman, said the price controls announced two weeks ago by Offer, the industry regulator, would cut income by pounds 300m over the five years from April 1995, when they come into effect.
The formula, decided by Stephen Littlechild, director-general of Offer, means that Norweb must cut electricity distribution prices by 14 per cent next April and after that cap prices at inflation minus two percentage points.
Mr Harvey rejected suggestions that the regime is more lenient than had been expected. The share prices of the 12 regional electricity companies in England and Wales rose sharply after Professor Littlechild's announcement.
'Losing pounds 300m is hardly getting off lightly,' Mr Harvey said. Norweb would be forced to cut back its capital expenditure programme, running at pounds 100m a year. The company also plans to close offices in Kendal, Cumbria and Oldham, Lancashire. The company said that in spite of the price cap it would achieve real annual dividend growth of between 6 and 8 per cent to the year 2000. Dividend cover will be increased this year from its present level of 3.3 times and thereafter scaled back.
The company has permission to buy back up to 10 per cent of its shares and said it was examining the most tax-efficient ways to do so.
No decision on a buy-back has been taken. Much depends on the potential sale of the National Grid Company, which is owned by the 12 regional electricity firms.Reuse content