ScottishPower to spend £3bn despite profits setback

ScottishPower owner Iberdrola yesterday unveiled plans to invest almost €4 billion (£3.3bn) in the UK over the next three years as it posted annual profits that were hit by a doubling of regulatory levies in its Spanish home market.

ScottishPower is to upgrade local and longer distance power networks. Picture: Getty Images

The UK wins the lion’s share of €9.6bn of global investment between 2014 and 2016, as revealed in The Scotsman’s sister publication Scotland on Sunday, despite ScottishPower’s underlying earnings in generation and supply falling to €320.5 million (£265m) in 2013.

That was down 11 per cent on the €360.6m booked in 2012 – the fall mainly due to the closure of the coal-fired Cockenzie power station in East Lothian last March.

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ScottishPower’s revenues were flat at some €8.7bn, although its customer numbers rose 100,000 to 5.79 million. More than 40 per cent of Iberdrola’s forward investment programme will be in the UK. Latin America gets 23 per cent (€2.3bn), the United States 17 per cent (€1.6bn) and Spain just 15 per cent (€1.44bn).

The skewing of investment overseas continues the policy of recent years, as regulatory levies in Spain soared 99 per cent to €1bn in 2013, as part of worldwide levies of €1.6bn. It contributed to Iberdrola’s group net profits declining 7 per cent to €2.57bn.

Of the UK investment, 60 per cent will go on upgrading local and longer distance power networks, with 40 per cent on developing renewable energy sources. Keith Anderson, head of Iberdrola’s UK arm, revealed that the investment included plans being resubmitted to regulator Ofgem next month for a £5bn-plus upgrade of ScottishPower’s networks in central Scotland, north west England and Wales.

Ofgem declined to fast-track the investment last autumn, citing the need for more clarity on how the company would achieve “ambitious” consumer benefits.

Anderson said ScottishPower also had planning consents for three gas-fired plants at Cockenzie, Damhead Creek in Kent and Avonmouth, near Bristol, but that currently the economic arithmetic for building them did not stack up.

However, Anderson took a swipe at the UK’s energy industry becoming increasingly politicised, which has included Labour Party leader Ed Miliband recently pledging he would freeze energy prices for 20 months if he gained power at the 2015 general election.

Anderson said ScottishPower believed the UK gas and electricity market was competitive already, saying: “We don’t like to see political intervention in the market to try and change and redirect the market. That’s the regulator’s job.” He warned that such political interventions in the industry could “end up with a semi-regulated market that is to nobody’s advantage”.

On another political issue, Anderson said ScottishPower would not get involved in the merits or otherwise of an independent Scotland, arguing it was a matter for Scottish voters.

But he added: “We are saying that, right now, when you look at energy markets across the world, we are seeing countries want to be more interconnected. That’s already in existence in the UK. We would like to see that in the UK as we would in any other countries Iberdrola operates in.”

The Spanish parent said yesterday that it hoped to reduce its net debt by €1.8bn to €25bn by 2016.