LONDON, May 15, 2001 (PRIMEZONE) - Innogy Holdings plc's results for the year ended March 31, 2001.
Highlights (Pro Forma Basis)
-- Turnover up 47% percent to 3,859m pounds
-- P.A.T. (pre-exceptionals) in our first year of 220m pounds
-- Operating profit (PBIT pre-exceptionals and excluding eastern
lease income) of 202m pounds
-- 48m pounds increase in retail operating profit as a result of a
full year of earnings from MEB
-- Earnings per share of 19.6p (pre-exceptionals)
-- Final dividend of 5p per share (full-year DPS 7.5P)
-- Regenesys - CEO announced
Ross Sayers, Executive Chairman of Innogy commented, "This has been a good start for Innogy. We have repositioned the business to become a customer-led integrated energy group and the accounts reflect the early benefits of this strategy. Our low cost flexible plant has performed well as we have aggressively expanded our customer base. Our excellent mix of generation and supply gives us a strong platform for future earnings. We have made public our intentions with respect to Regenesys, our proprietary electricity storage business."
Operating Review
Key Points
The Preliminary Results demonstrate the progress made since demerger from National Power to transform the company to deliver growth.
-- npower, our retail business, has shown strong organic growth
during the year. This is reflected in the substantial increase in
the contribution to profit from the retail business with a PBIT of
49m pounds as a result of a full year of earnings from MEB. The
acquisition of Yorkshire Electricity, which was completed in
April, propelled the company to the number one supplier of
electricity and number two supplier of gas in the UK by volume
(Source: Data Monitor, October 2000).
-- Trading and Asset Management PBIT from continuing operations was
up 4m pounds to 211m pounds. Output for the year was 31TWh, which
was achieved by good performance over the winter period.
-- Business has made an excellent start over the period with a PBIT
of 6m pounds and an EBITDA of 10m pounds and a doubling of the
customer base in the second half of the year to around 50
companies. We have today announced two additional contracts in our
key market areas of the United States and Europe.
-- Overall Cogen and Renewables performance was flat with increased
earnings from Cogen offset by lower earnings from the Windpower
business which suffered from abnormally low wind speeds.
-- Good progress has been made on the development of the energy
storage business, Regenesys. Work on construction of the little
Barford plant and the design of the TVA plant in the United States
are progressing well. The company has made public its intention
with regards to its Regenesys business. Andrew Duff has been
appointed Chief Executive Officer.
Retail - npower
npower, our retail business, has shown strong organic growth during the year, with over 550,000 customers gained in the last 12 months. The Independent Energy acquisition added a further 320,000 customers. The recent acquisition of Yorkshire Electricity, which was approved by shareholders on April 2, 2001, propelled our retail business to become the number one supplier in electricity and the number two supplier of gas by volume (Source: Data Monitor, October 2000).
PBIT increased by 48m pounds to 49m pounds. This reflects the contribution from the former Midlands supply business for a full year as well as the general growth in the business.
Our retail business is a key platform of our strategy going forward. Our retail strategy has three key components - scale, systems and brand. With regard to scale the acquisition of Yorkshire Electricity combined with our own impressive organic growth means that we have around 5.5m customer accounts.
To complement scale, we believe that it is vital to have modern systems and our previously announced 40m pounds investment is on program to complete in the first quarter of 2002. This is designed to provide an integrated customer support system which will enable just one record per customer to be held regardless of how many products that customer buys from npower.
We continue to develop npower as our single integrated brand; ultimately, all our products will be sold under the npower brand. Our marketing spend this year was 23m pounds. The first phase of our brand development is to increase recognition. Nationally the npower brand recognition has risen to 44%(1) and has achieved a 90%(1) recognition in the Midlands area ((1) source:Millward Brown). This is on the course we anticipated and npower is now the third biggest brand in the sector. We will continue to spend on the brand development to both increase recognition and build brand value.
At the time of the demerger the company set a target to launch 4 to 5 products to a customer base of 4 to 5 million. We have surpassed this target and now have 6 products in the market place: electricity, gas, Safeguard (which is our boiler maintenance offering), the financial services of bill protection and household insurance and telecoms. We are targeting 150,000 new telecoms customers during this year and are confident of achieving that target.
Trading and Asset Management
Output this year was up 36% to 31TWh which was a considerable achievement from our plant. Our market share was up from 8% to 11%. Our achieved price for electricity was 26.84 pounds/MWh compared with a system demand weighted pool price of 24.08 pounds/MWh. This exceeds our recent statements that a combination of good trading skills aligned with commercial plant operations and flexibility can add around 1 pounds/MWh of value over and above that achieved by a passive market player. Our fuel prices averaged 11.97 pounds/MWh over the year.
To further enhance the flexibility and capability of our plant portfolio we have invested some 20m pounds this year on returning plant capacity at our Littlebrook and Tilbury power stations. Both of these are expected to help our improved plant portfolio to continue to deliver solid earnings.
The new trading arrangements, NETA were introduced on March 27, 2001 but it is too early to offer any firm views on its impact. We will report more fully at our Interim's, when we will have a reasonable period of experience of operating in this environment. However, we remain confident that the combination of our trading skills and flexible plant portfolio provide an opportunity to create value from the new market environment.
Operations and Engineering Business
Our plant performed well and we have continued our focus on delivering high performance and flexibility from our assets.
Our external business has made a good start with a PBIT of 6m pounds and an EBITDA of 10m pounds. We continue to increase our activities in this area and remain confident of the growth prospects of this business. We have doubled our customer base in the second half of the year to around 50 customers and have been successful in winning new business. We today announced another major US deal with Idaho Power to manage the fast-track construction and commissioning of an open cycle gas turbine station. The contract is worth $11.5m and offers additional value sharing for early delivery. We see a considerable opportunity in this area of business resulting from the Californian power crisis where we believe our ability to bring plant quickly and reliably into service will be highly valued. We are also undertaking work for other US clients on improvements to commercial performance of their assets.
Following the successful completion of the Kosovo project to refurbish a coal fired generating unit we have and have announced today, the award of a EURO 20m contract to undertake further work on the plant this summer.
Cogen and Renewables
The combined business performance was flat with increased earnings from Cogen offset by lower earnings from National Windpower which suffered from abnormally low windspeeds. This year has seen the introduction into commercial service of a 60MWe plant at Bridgewater Paper at Ellesmere Port and a 39MWe extension to our plant at Aylesford Newsprint. The plant at Huntsman Tioxide Grimsby is on target for completion this autumn. We believe that Cogen is well placed to benefit from the UK Government's intention to double the country's combined heat and power capacity.
We are confident that our wind business will benefit from the supply obligation for green energy. We have recently secured a site at North Hoyle under the Crown Estates bidding procedure to develop an offshore project. The supply obligations for green energy mean that our presence in wind power remains an important part of our business.
Regenesys
Work is proceeding on our energy storage business, Regenesys. Construction of the first commercial plant at Little Barford in the United Kingdom is on program and the Tennessee Valley Authority (TVA) contract in the United States is progressing to plan.
Andrew Duff has been appointed Chief Executive Officer. He brings with him a proven track record of strategic business development and delivery. Further senior management appointments will follow.
We have also announced the acquisition of Electrosynthesis Company Inc, (ECI) of Buffalo, New York for $11m as part of our plans to develop Regenesys. ECI is a commercial research and development company with a well-known reputation in the electrochemical industry. We believe this acquisition provides us with a valuable electrochemical technical capability to complement and enhance our own expertise. The acquisition also strengthens our competitive position as we have exclusive access to the intellectual capability of this company.
We continue to develop our component and manufacturing assembly capability and have identified a suitable site in Buffalo, New York where work on building a plant is expected to commence later in the year. The facility is expected to be used to assemble Regenesys modules for TVA. This location is ideal as it is close to the Electrosynthesis facility.
Revenue expenditure this year on developing Regenesys was 13m pounds. This is expected to double in the next year to meet demand for new orders, including investment in production capacity.
Yorkshire Electricity
At the time of the recent acquisition of Yorkshire Electricity we planned to achieve synergy benefits of 30m pounds per annum by putting the two supply businesses together - achieving 12m pounds in the first year of ownership. We have reviewed our plans over the past six weeks and we are confident that we will deliver the 12m pounds planned for this year and have revised our longer-term target of 30m pounds per annum up to 35m pounds per annum. In addition, the performance of the businesses is as we anticipated at the time of our acquisition and in some cases ahead of our expectations. We remain confident that we will deliver substantial shareholder value from our Yorkshire Electricity acquisition.
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