Outlook: Can Sir John switch NatPower back on?

SIR JOHN COLLINS made his mark reviving the corpse of Vestey, the former owners of the Dewhurst chain, so he should know a thing or two about butchery of both the retailing and the corporate variety.

The cadaver on the slab this time is National Power and a nasty mess it looks too.

He has already chopped off the head in the shape of the hapless ex-chief executive Keith Henry, and now he is wielding the meat cleaver in the direction of the dividend.

Meanwhile, the choicest cut, the Drax power station in Yorkshire, will have been sold off by the autumn, presumably to a foreign bidder, leaving NatPower with a quarter of the market share it had at privatisation.

But even then it is far from obvious what sort of a carcass Sir John will be left with once he has finished his three-month review. Bain & Co are helping him pick over the bones of this once grand business, but Sir John was not making it any easier yesterday to read the entrails.

At least the dividend policy going forward is clear. A 50 per cent cut in the payout may look swingeing given that the loss of Drax will reduce earnings by less than a third.

But it will restore dividend cover to a sensible level as NatPower adjusts to falling market share and margins at home, and increased reliance on erratic earnings abroad.

But as for the shape of the group, who knows. It was strategic dither that got National Power into its present pickle and it is apparent that the range of options remains agonising wide. Will NatPower sell off even more UK generating capacity?

Quite possibly. Will it buy another electricity supply business? Hopefully, provided the fancy price it paid for Midland Electricity has not priced everything else out of the market. Will it separate off its international arm? That's a medium term prospect.

UK earnings are shrinking too fast to make NatPower an income stock, while its international business is too unpredictable, as the fiasco in Pakistan has shown, to make it a growth stock.

Sir John would dearly love to transform NatPower into something which it palpably is not at present - a marketing-led business, living on its wits.

He may not be obsessed by megawatts. But the fact is that NatPower's corporate culture remains locked in an era when it produced half the nation's electricity and saw its duty in life as keeping the lights burning.

Sir John has three months to get his strategy sorted out, find a chief executive who will buy into that vision and persuade the world that NatPower has an independent future. It looks a tall order. NatPower cannot rely on New Labour rattling its golden share in the face of an unwelcome bidder.

All of which must shorten the odds on some body-snatcher stealing this corpse off Sir John's slab.

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