Scots chase independence and sell off energy inheritance

Scottish Power has agreed an £11.6bn offer from the Spanish energy group Iberdrola. The Directors (advised by Morgan Stanley & Co. Limited)have recommended a 777p-a-share offer from Iberdrola in the form of 400p (Euro 5.9) in cash and 0.1646 of a new Iberdrola share for every share held. The company will also pay a special dividend of 12p a share.The deal will create Europe's 3rd largest utility company (behind EDF and E.ON) with an enterprise value of £43.2bn. They rejected a 570p per share offer from German group E.ON last year.

This values the company at some 12 times its forecast earnings before interest and tax (EBIT) for 2007, in line with the European utilities sector average of 12.3 and with E.ON’s recent bid for Spain’s Endesa.

Shareholders will receive 400p in cash and 0.1646 of a new Iberdrola share for every share held (Total Shares issued will increase 22%) . The company will also pay a special dividend of 12p a share.

The CEO Phillip Bowman, ( for less than 1 year !) previously headed Allied Domecq will pocket around £2.5m if the bid goes ahead. he received a payout of £15m from the sale of the drinks group to its French rival Pernod Ricard last year. He has not bought any Scottish Power shares the shares he holds awarded under a long-term (?) incentive plan worth £1.8m at the offer price. He is also entitled to at least a year's salary in compensation — around £700,000 — when he leaves.

Mr Bowman said the deal was good for the company's shareholders and workers (Ho.Ho.)and "good for Scotland", (and none too bad for Mr Bowman) adding that Iberdrola had made a commitment to retain the headquarters for the UK business in Glasgow. (So far)

However, he said he plans to leave the business after seeing the deal through. "I don't expect to remain in the long term," he said.

He also said ,"consolidation activity has resulted in massive change within the European utilities landscape. " Too right Mr Bowman.

So the vast bulk of energy production and distribution in the UK will be in the hands of companies based elsewhere in Europe - not an ideal base for UK/Scottish energy security. Scottish Energy recently (Nov 14th) released half year results with profits before tax up 59%.Wholesale Realised price for electricity was £35.7/MWh for the period, up £10.7/MWh (a rise of 43%) from the comparable period.

Loking at the Iberdrola website it is evident that the Scottish Energy renewable energy assets are of great interest - they recently announced the start of Scotlan's largest wind farm (so far) at Eaglesham Moor south of Glasgow involving investment of £330 Mn. over the next 2 years.

Of course the splendidly named but badly run British Energy continues to run the rusting, cracking, accident prone fleet of nuclear power reactors (now running at a little over 60% of capacity), racking up massive costs and straining what little nuclear engineeering expertise the country has.

At 1140 GMT Scottish Power shares were down 0.5 percent at 743p. Iberdrola was down 2.4 percent at 32 euros

UPDATE 30th NOVEMBER

30.11.06 Spanish government boosts price support for renewables

Price support for most renewable technologies is set to rise under the terms of a draft law published yesterday by the Spanish industry ministry with the aim of achieving a 27-million tonne reduction in CO2 emissions from 2005 levels by 2010.

UPDATE 2nd DECEMBER

Angirfaan draws our attention to correspondence in the Herald concerning the way Scottish Power have been subsidised (Rlwy from Hunterston (E coast) to Longannet (W Coast)) and the lack of interest in elected lickspittle members of both Parliaments who

"Having missed the opportunity to develop any global Scottish energy company from North Sea oil, are we now going to surrender meekly our ambitions in alternative energy?"

To which the answer is yes. This children is called energy security.