ScotPower to axe PacifiCorp corporate jets and 1,600 jobs

ScottishPower is to axe 1,600 jobs - one-fifth of the workforce - at its newly acquired US electricity business PacifiCorp as part of a $300m (£190m) cost-saving plan.

The cutbacks will include the sale of the West Coast utility's two corporate jets and helicopter and a massive reduction in corporate overheads. The executive board of PacifiCorp is being halved in size and 320 corporate staff will lose their jobs.

Sir Ian Robinson, chief executive of ScottishPower, said the cost reductions, to be implemented by 2004, would make PacifiCorp one of the 10 most efficient US utilities. PacifiCorp is also applying for regulatory approval to increase prices by 10 per cent in four of the six states it serves - Utah, Wyoming, Oregon and Washington.

Despite the plans to cut jobs and raise prices, Alan Richardson, the head of ScottishPower's US operation, maintained that it had been made "incredibly welcome" by commissioners, regulators and customers.

ScottishPower was now looking to expand its presence in the US market through more acquisitions in both electricity and gas, Sir Ian said. "We have good growth opportunities in the West and Mid West. We want to become a significant company with a significant business."

The target of $300m in cost savings is $75m to $100m higher than ScottishPower pencilled in when it launched its £4bn bid for PacifiCorp at the end of 1998. It is also aiming to achieve a $250m reduction in PacifiCorp's capital expenditure.

The PacifiCorp acquisition, completed in November, helped ScottishPower to increase underlying pre-tax profits in the year to 31 March by £91m to £736m. Reported profits were £1.16bn, including an exceptional net gain of £454m following the sale of half the group's telecoms business, Thus.

Profits this year will be £127m lower due to electricity and water price cuts at its UK businesses, which include Manweb and Southern Water. But ScottishPower aims to offset this with a £142m cost-saving plan involving 900 job losses.

ScottishPower aims to increase its presence in power generation south of the border when the moratorium on gas-fired stations ends in October. It has applications pending to build a 1,000-megawatt gas-fired station in Enderby, Leicestershire, and a 200-megawatt plant at Humbly Grove, Hampshire.

The group is also set to widen the online purchasing market it is setting up with United Utilities and Northern Electric to include several large European utilities. Ian Russell, the deputy chief executive, said he expected the electronic exchange to result in procurement savings of 7 to 8 per cent.

Mr Russell also said ScottishPower was aiming for an eventual float of the e-commerce venture being launched this summer with Royal Bank of Scotland. The joint venture will offer utility and financial services, including banking, to the 16 million customers of ScottishPower and RBS.