THERE is little doubt
ScottishPower will be spending quite a lot of money this year on transatlantic air fares, as it believes there could be rich pickings among the 160 or so utilities in the US.
That electricity generation market there is about five years behind that in the the UK, and the company has the firepower to make a substantial acquisition - it was offering about #3000m for Florida Progress.
But a purchase may be closer to home, with some disillusion among the US buyers of
English electricity companies, although as yet there is none up for sale.
Short term, it is difficult to see much earnings growth without a deal.
The non-regulated businesses are experiencing quite severe margin pressure - one plus point was that the distribution and transmission activities did better than market expectations.
ScottishPower has set itself quite ambitious targets for penetration of the domestic markets in both power and gas.
Gas seems one area where there must be casualties among weaker competitors which lack its sophisticated, low-cost billing and sales operations. This may force profit per customer to well below the #30 being achieved before they give up.
The City is happy to listen to the story of excellent progress in telecoms, where the track record of profit on comparatively low investment is remarkably good, and it may eventually persuade the company to de-merge the activity.
But it is more concerned with the price reviews which kick in in April 2000 for Scottish
Power, Manweb distribution and transmission and for
Southern Water.
Together these businesses accounted for 75% of last year's profits.
Hence the strategy of increasing the exposure to non-regulated businesses and the need to make an acquisition in the US, where there are strong cashflow benefits from re-focusing utilities on their core activities.
Significantly, one-third of the cost of Florida Progress would have been recouped from
property sales.
ScottishPower shares have under-performed the market this year, but they do offer a growing and above-average yield at 4.4%.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article