He also disclosed that PowerGen may dispose of its 50 per cent interest in the North Sea gas joint venture Kinetica, which ran up losses of pounds 37m last year on take-or-pay contracts with North Sea suppliers.
Mr Wallis, who takes over as chairman shortly from Sir Colin Southgate, said it remained PowerGen's preferred option to expand its UK electricity operations before the opening up of the domestic market in 1998.
However, if it was prevented from doing this by regulatory obstacles then PowerGen had other strategies which included overseas expansion or acquisition within the UK. Some analysts have speculated it might be interested in a water company.
PowerGen also re-iterated that it did not plan to go ahead with the sale of two power stations to the Hanson-owned Eastern Energy until it had received "regulatory clarity" from the industry regulator Professor Stephen Littlechild.
PowerGen put the plant disposal on hold after its bid for Midlands Electricity was blocked by the President of the Board of Trade, Ian Lang, on the advice of Professor Littlechild.
Mr Wallis said: "It is important we get some clear indica- tion what regulatory impediments they saw which blocked the deal because otherwise we are left believing the decision was reached for political reasons."
He said it would be a "very simple thing to resolve" and only required Professor Littlechild and the Government to explain the ground rules for competition in electricity generation and supply.
He was speaking as PowerGen unveiled a 26 per cent increase in pre-tax profits to pounds 687m and a 40 per cent increase in the dividend and confirmed that it intends to buy back 10 per cent of its shares at a cost of about pounds 400m.
PowerGen warned, however, that difficult trading conditions experienced by Kinetica, which is jointly owned with oil group Conoco, meant it was considering whether to dispose of its half-share or renegotiate its gas supply contracts in light of the problems caused by the collapse in spot prices.
Half the pounds 37m loss that PowerGen booked last year was due to actual trading losses and half was a provision for future losses that could be identified.
Kinetica was formed in 1990 and has grown to become one of the top three independent gas suppliers with more than 9,000 industrial customers and about 10 per cent of the commercial gas market. It made profits in 1993 and 1994 but the sharp fall in spot prices - which are now around 10p a therm - had resulted in heavy losses in 1995.
The headline pre-tax profit of pounds 687m included exceptional credits of pounds 121m resulting from the release of provisions for long-term liabilities that are no longer required. At the operating level, profits increased by a more modest 4 per cent, from pounds 545m to pounds 566m. The increase in the total payout for the year to 21p reduces dividend cover from 3.3 to 2.7 times earnings.
PowerGen said it would attempt to make the share buy- back accessible to as many shareholders as possible.
Comment, this pageReuse content