NORTHERN Ireland Electricity has recorded a sharp drop in pretax profit from £107.4 million sterling to £59.8 million in the year to March 31st 1997. Rationalisation costs of £50.6 million were blamed for the profit setback. Excluding these costs, the group's underlying profit growth was just a modest 3 per cent.
The exceptional charges are designed to cover the costs of implementing the new tough price controls. "Our provisions are adequate," finance director, Mr Nigel Wilson, said.
NIE last month accepted a recommendation from the Monopolies and Mergers Commission (MMC) that prices should be cut by 25 percent this year, compared to a decrease of 31 per cent proposed by its regulator Ofreg.
"We are taking immediate steps to meet the challenges set out in the new price controls", the company said in a statement with results.
NIE turned to the MMC last year in a high profile row with Ofreg at the severity of the regulator's price proposals and the electricity group had expected the findings to be accepted by itself and Ofreg.
But when the MMC conclusions were announced on April 25th, Ofreg took the unusual step of saying there were parts of the report's findings which it was "not . . . currently minded" to accept.
Mr Wilson said NIE had written to Ofreg asking for clarification of its stance but was still awaiting a reply and said it was "disappointing" that there had been no meeting between the two since the MMC findings were published.
He said the "cloud of financial uncertainty" from Ofreg's position as well as a possible "windfall" tax on utilities planned by the new Labour government meant NIE was unwilling to give any details on dividend growth or possible share buybacks.
"We shouldn't say more on dividends or share buybacks or capital restructuring...", he said. At the annual general meeting in July, the group will be seeking to renew the authority to buy back up to 14.9 per cent of its issued share capital. Dividends have been raised from 19.0p to 20.9p. NIE said it was confident of delivering "real dividend growth".
Mr Wilson noted that NIE had not made provisions against a possible windfall tax from Labour because "there's too much, uncertainty". The Blair government has made a once off windfall tax on utilities - to be used to help young and long term unemployed people into work - a key part of its programme.
The British government has given little indication of the size or scope of the tax, other than that it should cover the £3 billion scheme for the employed and will be aimed at the "excess" profits of privatised utilities.
Mr Wilson said NIE's provisions included covering costs of the MMC review, relocation of staff, office closures and handling voluntary severance pay.
He declined to comment on potential job losses, saying talks with unions had just begun but stressing it was a voluntary process.
NIE said it was "determined" to meet the challenge of the MMC review, adding that although it was a harsher result than the company's submission, it does provide NIE with real opportunities to build on our successes... in a manner not open to us under the Ofreg proposals".
The latest results showed a rise in sales from £524.7 million to £560.9 million. Earnings per share dropped from 58.8p to 21.6p as a result of the rationalisation costs.
