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Ian Marchant interview: Power behind Scotland's biggest firm

LAST week Ian Marchant got a text message from his son pointing out he had become the head of Scotland's largest company by market capitalisation.

In the last ten years of its existence, Scottish & Southern Energy was always among the upper echelons but now it was beating out the usual contenders for top spot of Royal Bank of Scotland and HBOS. That this was more to do with the banks' disgrace than the energy company's virtue should be pointed out, but it is in fact virtue above all that drives Marchant.

Not everyone sees SSE as a universal force for good. Aside from its aggressive push into windfarms – an issue that continues to inflame public opinion – SSE also makes profits while hiking its prices to consumers. In addition to this, Marchant's 1.2 million or so annual remuneration tends to look overweight and feline next to poverty stricken pensioners rationing their heating to make ends meet.

At a House of Commons business select committee earlier in the summer, one MP branded energy company profits as "obscene", including those of Perth-based Scottish & Southern.

Marchant, who does not tend to mince his words, told the committee that unless something "drastic" happened, the price of energy would have to go up significantly as the wholesale cost of energy continued to rise. Unsurprisingly, later in the summer he announced SSE was upping its electricity and gas prices, by 19 per cent and 29 per cent respectively.

It turns out he may not have hiked prices fast enough. Last week, Marchant faced another grilling by analysts representing the group's shareholders when he unveiled the power company's half-year results. Marchant had to explain why his profits had more than halved in the six months to September.

He cited a combination of power outages, lower-than-expected wind turbine production and delays to a project fitting filters on the group's coal stations. Delays in implementing the price hikes also hit profits.

When executives bring out bad news like this, the City tends not to like it. Nevertheless, Marchant presented a strong case – and promised a full recovery in the year-end bottom line. The analysts, who respect Marchant, were mollified.

"Ian Marchant has his head screwed on," said Lakis Athanasiou, a utilities analyst for Evolution Securities. "He knows what he wants to do and how he goes about it. He runs his company really well."

Described as earnest and genuine, Marchant shuns publicity yet has emerged as an engaging public speaker who is unafraid to stir controversy.

He has rarely put a public foot wrong since taking the helm of SSE.

When he arrived at the company's Perth headquarters he was a bit of an unknown quantity. Then Marchant was the finance director of Southern Electric which merged with Perth-based Scottish Hydroelectric in 1998. The merger had been bloodless: although the newly-formed Scottish & Southern Energy would be run by the Maidenhead-based company's management who made the move up to Perth. Roger Young, the chief executive of Scottish Hydroelectic, was planning to retire, replaced by SE's Jim Forbes. Forbes was described as an abrasive Glaswegian known as "the jockweiler". Marchant was his reliable sidekick.

When the 55-year-old Forbes made it clear the SSE job was his last before hitting the golf course and following his beloved Rangers, Marchant was already in the sights as just the right young gun to run the group. When he duly took over in 2002 at 41 he was hailed as the FTSE 100's youngest boss.

Then the energy world was awash with talk of consolidation. Would SSE buy an energy company in the US like ScottishPower did? Would SSE merge with its Scottish peer, even?

In retrospect ScottishPower's 7 billion acquisition of PacifiCorp looked a step too far and was cited by many as a significant reason for why the group eventually fell into Spanish ownership. Marchant, on the other hand, steered a more conservative course.

Instead of companies, he started buying up individual power stations – a gas-fired power station in Medway, two coal-powered stations in Yorkshire and Cheshire.

Marchant has clearly not left nasty old fossil fuel burning ways behind him. Nevertheless it is to the mast of low-carbon, renewable energy that he has nailed his colours. When he bought Irish windfarm group Airtricity for 100m at the beginning of the year it was a confirmation of the direction he wanted to take SSE. With that deal SSE became the UK's biggest renewables player. It also became developer of the largest windfarm in western Europe, the 600m Clyde windfarm in South Lanarkshire, as well as the world's largest offshore windfarm, Greater Gabbard off the Thames Estuary.

Yet the project Marchant says he is proudest of is the 150m Glendoe dam he launched in 2003 near Inverness.

Unlike traditional power generation, windfarms still rely on government support in order to remain profitable. He remains close to government and north of the Border chairs Holyrood's Climate Change Business Delivery Group.

Nevertheless he did not hesitate in his address to the Business in Parliament conference at Holyrood last February to take a swipe at politicians. With typical charm-laced directness he lambasted the planning system that hindered the development of renewables projects.

Reaching the UK and Scottish governments' 20 per cent goal of renewables, he said, would be like Perth's football team, St Johnstone, winning the Champions League – an unlikelihood.

Clearly it is to his and his company's benefit to argue for relaxed planning rules when it comes to renewable energy projects. But many believe Marchant has put his heart as well as his pocketbook behind clean energy.

Up the road from SSE in Perth is the Dunkeld-based environmental campaign group WWF. Environmentalists are not usually fans of energy companies, but Dr Dan Barlow, head of policy for WWF in Scotland, goes as far to say Marchant's approach to climate change and low carbon energy is "inspirational".

"Overall we are very impressed by the genuine commitment he shows to this agenda," says Barlow.

"He obviously recognises the role an energy company has in tackling climate change.

"It is very encouraging to have such a strong voice from the business community advocating the need for change and the scale of challenge we face. But he is very positive and articulate in his belief we can rise to the challenge."

It is probably to his credit that even the Scots think of Surrey-born Marchant as a bit of a tightwad.

Various instances of banning executive biscuits and sandwiches as well as tight policies on use of paper and radical waste reduction schemes has sometimes saved the group as much as 10m in a year.

As long as Marchant runs SSE the future looks well run and even a bit greener.

BACKGROUND

IAN Marchant, 48, went to school in Croydon and graduated in economics from Durham University.

He started with Southern Electric in 1992.

In 1998, Scottish & Southern Energy was formed following the merger of Scottish Hydro Electric and Southern Electric where Marchant was finance director.

In 2002, at the age of 41, Marchant became one of the youngest FTSE 100 chief executives.

In January 2008, SSE acquired Ireland's windfarm business Airticity for 1 billion.

Since the acquisition of ScottishPower by Iberdrola, SSE has been the subject of continued takeover speculation. Along with Centrica it is the last major independent energy company in the UK.

SSE operates 100 thermal and renewable power plants and operates some major networks, both through its electricity transmission and distribution activities and via its 50 per cent ownership of Scotia Gas Networks.

One of the UK's "big five" energy suppliers, SSE has about eight million electricity and gas customers.

 
 
 

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