PowerGen urges sell-off: Board wants Government to discuss disposal of remaining 40%

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The Independent Online
POWERGEN is stepping up pressure on the Government to dispose of its remaining 40 per cent stake in the company, which yesterday announced pre-tax profits up 18 per cent to pounds 425m.

Ed Wallis, chief executive, said the board was now ready to discuss with the Government the timing and method of more PowerGen share sales.

The Government, which also owns 40 per cent of PowerGen's rival, National Power, had previously indicated that it would hold its stake in the electricity generator until at least last April.

Mr Wallis said the company now had its strategy in place for the core electricity business. With new five-year contracts to supply the regional electricity companies, he said that the uncertainty highlighted by the directors when the company was privatised had gone.

His bullishness contrasts sharply with National Power, whose chief executive, John Baker, said recently: 'The company now faces a more uncertain future. Looking forward we have less contract cover.'

Although National Power has also renewed contracts with the regional companies, it has been less aggressive than PowerGen in pursuing contracts for direct sales to large industrial customers.

Cost-cutting was behind PowerGen's strong profits performance, which helped the shares to rise 121 2 p to 368p. The company cut its workforce by almost 1,200 to 4,900, which compares with 9,500 people employed at the beginning of 1991/92.

John Rennocks, PowerGen's financial director, said the bulk of the cuts had now been made. More job losses are expected, however, due to plant closures and the need to trim management and white collar staff. Mr Rennocks said: 'The momentum is continuing. We expect cost savings to continue.'

Turnover in the year to 4 April rose by 3 per cent to pounds 3.19bn. The company has already paid a second interim dividend in lieu of a final dividend, taking the total for the year to 10.5p - an increase of 13.5 per cent.

Mr Rennocks said the policy was to reduce dividend cover to between 2.5 and 2.7 times over the next few years from about 3.5 times at present. The resulting increase for shareholders will be about 20 per cent a year over two to three years.

PowerGen said recent contracts signed with British Coal would result in a fall of 17 per cent over five years in its charges to the regional companies. The implication for consumers should be a 5 per cent decrease in real terms in electricity bills, it said.

(Photograph omitted)

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