National Power Profits Fall 8%

National Power, Britains biggest generator, Wednesday disappointed the market by unveiling an 8 per cent fall in annual profits before exceptionals to 740 million. The market had been expecting profits of about 786 million.

National Power said it was experiencing increasingly competitive conditions in the UK market, with wholesale electricity prices 4 per cent lower than a year ago.

Its share of England and Wales generation fell from 32 per cent to 24 per cent - almost entirely from the sale of 4,000mw of generating assets to Eastern Group, the UK subsidiary of Energy Group.

Roger Witcomb, finance director, said National Powers earnings over the next couple of years would be unexciting until income from foreign investments bolstered earnings. He denied, however, that the company faced a revenue downturn when long-term UK coal contracts expired next spring.

 

We will probably take a hit when the coal contracts come to an end - they were negotiated five years ago. But it is not the cliff-edge some are forecasting.

National Power also said that it should not be subject to the governments proposed windfall tax. It was not a price regulated utility, it said. Moreover, the government had owned a 40 per cent stake during the period when there had been most share price appreciation, and was therefore a beneficiary of any windfall that might have occured.

Sales in the year to March 31 fell 10 per cent to 3.4 billion (3.9 billion), and earnings per share lost 2 per cent to 50.8p.

A final dividend of 19p makes a total of 25p, up 9 per cent. This was the first time double-digit dividend growth had not been recommended. National Power planned to maintain real dividend growth, even if this meant a further contraction in dividend cover. Earnings currently twice cover dividends.

The group sought to highlight its international operations. The chairman, said about 15 per cent of competitively available world power projects had been secured more, we believe, than any other independent power producer.