Independent Energy Holdings called in the receivers after cash flow problems. Its supply business assets have now been acquired for a knock-down price of £10 million by Innogy Holdings, UK business arm of National Power. Independent Energy got into difficulties over billing its customers.
Standard & Poor’s had already issued warnings on the future financial performance of electricity generation companies operating in the UK and thus credit quality ratings.
The company predicts a further deterioration over the coming year and follows an increasing number of credit downgrades for the 17 companies within the UK sector to which Standard & Poor’s gives ratings. The company identifies a number of recent market changes that are putting cash flows under significant pressure. These include increased acquisition activity, regulatory action and competition. Furthermore, over the coming year as major UK incumbents sell off significant chunks of generation capacity, competition is likely to increase still further. The introduction of the new electricity trading arrangements, due in late November, could also be a problem.
Credit quality has also been affected by a rapid fall in average electricity pool prices and a general increase in price volatility. A forthcoming pressure is likely to include the relaxation of the current “moratorium” on the development of new gas-fired plants.
PowerGen has issued a profits warning because of the fall in power prices. The company has said that profits will be significantly lower this year and the company logged a £56 million ($81.2 million) drop in first half profits for its power generation arm. The company plans to make acquisitions in the US.
