Scottish and Southern wants high street shops to sell gas

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The Independent Online
SCOTTISH AND Southern Energy, the utility giant, is in talks with a number of high street banks and retailers about supplying electricity and gas to their customers.

The company, formed in September by the pounds 5bn merger of Scottish Hydro- Electric and Southern Electric, is looking for deals similar to its existing agreement with Argos, the store chain.

Jim Forbes, the chief executive, said that the offer of gas through Argos stores helped the company to win a large portion of its 300,000 gas customers. Mr Forbes, nicknamed the "Jockweiller" for his grit, declined to name the potential partners, saying only that the company is talking to several "big household names".

He added that the deals would help Scottish and Southern to boost its electricity customers from the current 3.3m to around 5m and its gas customers from 300,000 to around 1m.

His comments came as the company, the UK's second largest electricity supplier and the fourth biggest generator, reported a slight drop in interim pretax profit to pounds 171.5m. The results, the first since the no-premium merger, were held back by the prolonged closure of one of the group's power stations. The shares rose 9p to 690p.

Scottish and Southern stock ishighly rated among the utilities and is currently trading on a hefty premium to the rest of the sector.

One leading City analyst said the rating was justified because the company's underlying performance was robust and it was making progress in reducing costs. However, he added: "This is not cheap stock and we have a hold recommendation because it has outperformed for some time."

Some observers voiced concern about the regulatory threat hanging over the company's future. More than 60 per cent of Scottish and Southern profits come from regulated businesses. These operations are likely to feel the pinch of a price review due to be published by Offer, the industry watchdog, in 2000.

The Government moratorium on the construction of coal-fired power stations could also curb the company's growth in the generating market. Mr Forbes dismissed these fears, saying that both companies were used to managing regulatory risk.

Analysts were more sanguine on Mr Forbes' determination not to follow rivals Scottish Power and National Grid on the US acquisition trail.

One expert said Scottish and Southern, with its pounds 1.5bn war chest and some pounds 60m of merger savings, would be a serious contender to buy the UK coal-fired power plants to be sold by National Power and Powergen.

The two leading generators have been forced to sell some of their capacity as part of the government plan to open up the electricity market and boost the ailing coal industry.

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