New Statesman Scotland
"This was more like a funeral than a company presentation," commented one analyst at the meeting convened by British Energy to explain its evaporating profits and dividends. The Edinburgh-based electricity generating company commands a fifth of the UK market, but it has suffered so many reversals recently that the senior management may soon be packed off to the golf course to contemplate water hazards of a very different sort.
The truth is, most of the reversals are due to no lack of foresight or even technical ingenuity. The British electricity market has become so successful since privatisation that it is this very efficiency which is the prime problem. Because there is so much of it, the price of power is tumbling, especially for bulk industrial buyers. The price of domestic electricity has fallen by 30 per cent in real terms since the local state electricity monopolies lost their restrictive practices.
Scottish Power is barely recognised as the former lumbering South of Scotland Electricity Board. From being a commercial joke - half municipal nonsense, half Stalinist bruiser - it has diversified into the telephone and gas markets. Its floated subsidiary, Thus, is itself a member of the FTSE 100, the only Glasgow-based PLC in the premier league of UK companies.
British Energy was created out of most of the state's nuclear capacity. Since liberalisation, it has been run by accountants instead of nuclear scientists. It has had some golden years and became a treasured stock for fund managers. Perhaps its recent glorious successes make it more painful now that profits are depleted.
Its chairman, Sir John Robb, and chief executive, Peter Hollins, are two very different creatures. Neither of them suffers fools or dithering. They have sacked swathes of headquarters staff in Edinburgh and are even switching their base to unfashionable (but cheap) East Kilbride. These are cosmetic gestures that amount to little against the shrinking price of power.
One option is to sell off some of their foreign power stations. Their recent expansion in the US made them look like world-class players, but auctioning sites such as Three Mile Island in Pennsylvania would leave British Energy leaner.
The stock market can be brutal. Neither Robb nor Hollins has got much wrong - except the surfeit of power. This is good news for the rest of us, but a dreadful headache at the top of the industry.
Post this article to
We want to encourage people to comment on our content and to exchange views with other readers and hope this will be done on a courteous basis. However, if you encounter posts which are offensive please let us know by emailing comments@newstatesman.co.uk and we will take swift action where necessary.
