June 1 , 2002
U.K. regulators wouldn't let Dominion conduct its plan to market financial services, Lazenby says. The regulators thought they were being asked to grant an unfair advantage to Dominion to market financial products to its 2 million customers, when other financial service houses would want the same access, he says.
"Concurrent with those three developments was an unexpectedly good offer by Powergen for the East Midlands business. When this profitable offer came over the transom … we decided it was time to exit with a profit," Lazenby says.
White says that the other winners in the U.K. market as prices have fallen are those who sold more power than they produced and who did not pass on the savings to customers. In other words, they bought cheap power but sold it at retail at a markup. "The people who have won have sold more power to domestic customers than they generate at their own power stations," he says.
Centrica and Innogy have been winners, he says. "Innogy had a lot of generating stations but saw this was going to happen, so they sold their generating stations and bought customer supply businesses," he says.
RWE has since bought Innogy. Centrica has continued to be a profitable U.K. power and gas supplier and has aggressively pursued business in North America.
Pat Hemlepp, AEP's director of corporate media relations, says AEP has decided to tough out the low market prices in the United Kingdom by hanging on to the ownership of Fiddlers' Ferry and Ferrybridge coal-fired plants with a total capacity of 4,000 MW. "We have a strong team in London. Even with the poor prices, we feel we are well placed over there. … We feel we can ride it out."
AEP bought the plants from Edison Mission last year. More recently, AEP withdrew its trading operations from the Continent and is now trading only around the U.K. plants as part of a companywide strategy announced Oct. 10 to trade only in wholesale markets where the company has assets.
But E. Linn Draper Jr., AEP's chairman, president, and CEO, says he is "very disappointed" with the performance of the company's U.K. generation. "The generation has been cash flow positive, but market conditions in the U.K. have been terrible and power prices continue to be depressed."
Hemlepp says AEP's U.K. operations have had only about a 2 percent impact on the company's revenues.
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