Finance director David Nish took difficult steps in the last year to focus his company on becoming an international energy business.
The company appeased shareholders ahead of its results, issuing an upbeat trading statement, which said results for the year would be ‘in line with the board’s expectations’.
In 2001-2002, the Scottish chartered accountant has seen the power company demerge its telecommunications business, the capital restructuring of subsidiary Southern Water, and a reshaping of the company’s US division, which experienced difficulties at the beginning of last year.
Scottish Power’s difficulties with Southern Water have led the company to sell the company.
First Aqua, a new entrant into the water business, made a bid for Southern Water, but in a recent report, water regulator Ofwat expressed concerns about the acquisition, holding up the sale.
The company has experienced problems with Southern Water since the beginning of last year, when profits began to fall.
It attempted to restructure the water subsidiary’s debt, but decided to sell the subsidiary despite saying the refinancing, which would ringfence £19bn of borrowings, was ‘progressing well’.
In a statement in March, the company said the sale ‘redefines Scottish Power as an international business and strengthens its financial position’. Scottish Water will also see whether the progress seen in the third quarter in Scottish Power’s US division will have an impact on the company’s results. Last year, the collapse of the western US’ wholesale power prices cost the company $33m in excess net power costs.
But in its interim results, the company said it implemented policies to reduce commodity price exposure and recover the costs already charged to its profit and loss account.
Although some brokers upgraded the company following the statements, analysts at Merrill Lynch and Lehman brothers were less optimistic.
Merrill said it does not expect recovery in the company’s US operations to recover at the rate expected earlier, adding Scottish Power’s UK operations had been hurt by problems with generators and conflicts with British Energy about electricity overpayment.