ScottishPower amasses pounds 3bn war chest for US deal

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The Independent Online
SCOTTISHPOWER, the energy, water and telecoms multi-utility, yesterday set its sights on a big US acquisition, indicating that it had up to pounds 3bn to spend on the right deal.

The company, which pulled out of talks to acquire a Florida electricity producer two weeks ago, said it still had a shortlist of half a dozen US utilities that could provide it with a bridgehead into the deregulated American energy market.

Ian Robinson, ScottishPower's chief executive, maintained that its plans for a US acquisition were not a defensive move designed to ward off a takeover bid from one of the US utilities circling the British electricity industry.

He also insisted that ScottishPower was not under any pressure to make a big acquisition and said it would only do a deal if it created a significant return for shareholders.

ScottishPower was prepared to pay around $5bn (pounds 2.98bn) for Florida Progress, a vertically integrated electricity producer in north-east Florida with 1.3 million customers. It would have raised pounds 1bn by selling off parts of Florida and funded the remaining pounds 2bn with pounds 1.5bn of debt and a pounds 500m share issue to American investors. ScottishPower obtained a US listing last year.

Mr Robinson said the deal was abandoned after two months of due diligence and talks with Florida when it became clear the acquisition would not deliver sufficient value for shareholders.

ScottishPower believes it can extract the same level of efficiency savings from a US utility as it had achieved with its UK acquisitions, Manweb and Southern Water, where staff levels have been reduced by one-third.

In the UK, the group plans to press ahead with its multi-utility strategy, with the aim of capturing 15 per cent of the electricity market by 2000, 12 per cent of the gas market and doubling its share of the Scottish telecoms market to 10 per cent.

Since the opening up of the gas market, it has captured 320,000 domestic customers and is in the first wave of electricity liberalisation, with its Scottish and Manweb areas due to open to competition in September.

Electricity exports from Scotland, meanwhile, are set to increase by 50 per cent early next century with the completion of the north-south interconnector and a new link being constructed to Northern Ireland.

Pre-tax profits last year rose 15 per cent to pounds 640m, helped by a full- year contribution from Southern Water, where savings of pounds 120m have been achieved.