Scottish Power in shock US U-turn

SCOTTISH Power performed another of its surprise U-turns today, announcing it is quitting its massive American utility PacifiCorp in a $9.4bn (£5.2bn) deal that will see £2.45bn returned to shareholders in the UK energy group.

The withdrawal, however, comes at a substantial cost with the company admitting that booking the deal will involve a £927m charge.

The decision to sell PacifiCorp - which represents more than 50% of the group's business - comes after previous strategic about-turns by chief executive Ian Russell which saw the company go into the UK water and telecoms businesses only to pull out not long after.

Russell is quitting PacifiCorp after failing to hit his much-heralded target of $1bn of annual profits from the business and follows the conducting of a secret review over the winter into its future.

He said today ScottishPower is getting out of PacifiCorp before it becomes too much of drag.

'We said profits at PacifiCorp would be flat for the next couple of years and that had to be weighed against the $1bn a year of capital expenditure going into the business. The conclusion was that we would get better returns from concentrating on our other businesses,' he said.

The £927m writedown on the value of PacifiCorp took the shine off Scottish Power's strong underlying pre-tax profits in the year to 31 March, up 10% and over £1bn for the first time, with the dividend going up 10% to 22.5p.

Investors had their eyes on the expected return to shareholders, sending Scottish Power shares up 33p to 475p. Those payouts however are unlikely to appear for at least 12 months, the time it is expected to take to complete the sale of PacifiCorp to rival US utility MidAmerican.

Russell said he want to concentrate on developing the company's growing wind-farm businesses in the UK and US and overseeing its UK electricity supply business, which saw profits leap by 78% to £180m last year with customer numbers up 20% at 5m.