Scottish Power
08/25/2005
 Following the sale of PacifiCorp earlier in the year, we fully expected Scottish Power to generate better shareholder returns from the remaining Infrastructure, UK and PPM businesses. Recent first quarter results provide an early indication that enhanced returns will indeed be forthcoming.
Turnover from continuous operations increased 13 percent to £1,084 million. Even more impressive was a 41 percent rise in adjusted pre-tax profit to £147 million. Driving the result was a robust performance in the UK due to last year's regulatory reviews, growth in new customers and added power generation.
The UK Generation and Supply division's strategy of increasing power generation capacity along with a growing customer base has proven highly successful. For the quarter, adjusted operating profits surged ahead £47 million to £56 million. Besides the larger customer base and a full period of profit from the Damhead Creek and Brighton power stations, SPW benefited greatly from a forward procurement strategy.
Adjusted operating profit at PPM, the US clean energy business, was flat at £6 million. However, this division typically has seasonal earnings that pick-up towards the end of the year. Management is forecasting earnings to be ahead of last year's £59 million.
Scottish Power's UK infrastructure division benefited from last year's two reviews by the Office for Gas and Electricity Markets (OFGEM). As a result, adjusted operating income rose a healthy 22 percent to £123 million with regulated income increasing by £27 million. Management indicated that each quarter of this year should benefit from these higher revenues.
PacifiCorp's earnings, which were excluded from the result, declined 55 percent to £26 million. We firmly believe that Scottish Power's long-term earnings potential has been enhanced by agreeing the sale of this subsidiary.
We believe Scottish Power's strategy of investing for growth (i.e. power generation) to meet the needs of an expanding customer base makes sound business sense. In addition, we remain upbeat about the potential offered by renewable energy as climate change garners more attention on both sides of the Atlantic.
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