Little has gone right since chief financial officer Ian Russell took charge in April and the share price has suffered as a result, falling some 15%
As chief financial officer of ScottishPower, Ian Russell helped orchestrate the UK company's $10.7bn purchase of Pacificorp in 1999 that blazed a trail for European utilities expanding into the US.
His work on that acquisition and a plan to reduce costs by $113m this year ' helped by more than 1,000 job losses ' made him natural successor to Ian Robinson, who retired from the UK's largest electric utility in April.
Little has gone right for 48-year-old Russell since. A wrong bet on US power prices wiped out more than twice this year's projected savings and ScottishPower is now expected to post a first-half loss when it reports earnings. The company's shares have fallen 15% since he took charge.
'They've had a couple of nasty setbacks,' said Tony Edwards, who manages the £33m Special Utilities Investment Trust and holds ScottishPower shares. 'Russell really needs to show they've got the US under control.'
The purchase of Oregon-based Pacificorp made ScottishPower the first British company to own a US utility. Like rivals Powergen and National Grid Group since, it aimed to lift profit abroad amid price cuts and rising competition at home.
It hasn't gone according to plan. One year ago, a Utah plant failed and ScottishPower was forced to buy electricity on the spot market to meet obligations just as western US prices surged amid the California power crisis. The outage cost the company $160m.
Russell, who joined ScottishPower from Tomkins, then tried to limit the damage by securing long-term contracts with power suppliers, a move that backfired when prices subsequently collapsed, costing it $300m in the second quarter. The CEO said in September that ScottishPower has 'drawn a line' under the US losses. Investors aren't convinced. His hopes of recovering most of the loss by negotiating a rate increase were dealt a blow the same month when Utah regulators forced PacifiCorp to return $22m to customers.
Russell, who was promoted to deputy chief executive in 1998, plans to pour more money into risk management to prevent further US losses. He remains ahead of schedule on cost cuts from the acquisition, ScottishPower said in July.
The company now hopes to slash $300m off annual operating costs and $250m in capital expenditure by 2005.
Boosting profit at PacifiCorp isn't his only concern. Negotiations to sell its UK water business, Southern Water, are dragging and the value of its Thus telecommunications unit has slumped by more than half in a year. The unit said earlier this month it expects a profit by 2004 amid widening second-quarter losses.
Nine months after saying it would sell or refinance Southern Water, a utility with 2.4 million customers in southern England, to boost earnings, ScottishPower still hasn't found a buyer. Russell plans to use the funds raised from a Southern Water sale to expand in generation in England, where ScottishPower lags rivals such as Innogy Holdings and Powergen.
Moody's lowered its rating on ScottishPower's UK unit to A2 from A1 in June and changed its outlook to negative from stable. Standard & Poor's placed its A rating for both ScottishPower's UK business and for Pacificorp on review for a possible downgrade in February.
Debt rose £225m to £5.5bn in the second quarter, amid increased spending on construction programs.
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