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ScottishPower in pricing plea

SCOTTISHPOWER chief Keith Anderson has demanded the Government move quickly to provide pricing certainty for power companies seeking to build new gas-fired plants.

ScottishPower has plans for gas-fired plants at its former coal plant at Cockenzie in East Lothian, Damn Head Creek in Kent and Avonmouth near Bristol. Mr Anderson, ScottishPower's chief corporate officer, also said the current regime was excessively skewed towards plants in south-east England.

The call came as ScottishPower's parent Iberdrola revealed that profit for the year fell 6.8% to €7.2 billion (£5.9bn) as it was hit by rising regulatory costs in its home market of Spain.

Mr Anderson said: "It still doesn't make economic sense to invest in new gas plant."

The Government is keen to see the energy industry move away from coal-fired electricity generation to gas which has lower carbon emissions, although green groups remain concerned about the impact of this fuel too.

A power generation auction is due later this year, which will provide the industry with more certainty, but Mr Anderson said there was still no indication about the level of pricing.

He said current spreads were too thin to justify building new gas plants and that it would be inappropriate to wait for normal market mechanisms to lead to under supply and blackouts before construction begins.

Mr Anderson further argued that the current structure of the energy market disadvantaged thermal plants further north, such as Cockenzie.

"From a pure economic point of view, you would build in the south-east," he said.

Iberdrola confirmed that the UK was in line for €3.94bn investment spending over the next two years, some 41% of the €9.6bn planned by the group.

Projects will include ScottishPower's ongoing £2.6bn transmission line upgrade, which includes the £1bn subsea link between Scotland and England - from Hunterston near Glasgow and to Connah's Quay on the Wirral - due to launch in 2016.

The company will also resubmit plans to regulator Ofgem next month for an upgrade for ScottishPower's distribution networks in central Scotland and north-west England and Wales. The original proposals involved £5.2bn of investment. Mr Anderson said Iberdrola was "not gong to get involved in the political debate" over independence.

But he added: "Our view is that right now when you look at energy markets across the world we see countries want to be more interconnected."

Mr Anderson played down the potential impact of exploitation of shale gas in the UK.

"I can understand the attraction of it. I can understand why you would want to do it. I just question when people think it is going to have a massive impact on the pricing of gas."

He said that gas prices in the UK were not notably lower than those of the rest of Europe, even as the North Sea oil industry boomed.

Iberdrola's strategy sees earnings before interest, taxes, depreciation and amortisation falling to €6.6bn in 2014 before recovering to post annual growth of about 4% in the next two years.

"We are confident we will keep on providing opportunities for growth with a model based on international diversification," Iberdrola executive chairman Ignacio Galan said.

"Imagine what our situation would be were it not for Spain," he added.

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