National Power could be bid target after chief is ousted

KEITH HENRY was ousted as chief executive of National Power yesterday, fuelling speculation that Britain's biggest electricity generator may be vulnerable to a takeover bid or break-up.

Mr Henry, who had been at National Power for four years, is expected to receive a payoff of between pounds 400,000 and pounds 500,000. His removal follows a series of profit warnings and a long period of underperformance, drift and confusion over strategy at National Power, culminating in the collapse of merger talks with United Utilities in February.

The news of Mr Henry's departure came alongside another veiled profit warning as National Power indicated that the sale of the 4,000 megawatt Drax power station in Yorkshire would lower earnings by more than pounds 150m in the current year.

A senior source within the company denied yesterday that there had been an personality clash, boardroom bust-up or row over strategy. "He was fired. This is all about performance and Keith has not performed - it is as brutal as that."

His job will temporarily be taken over by National Power's chairman, Sir John Collins, who will step into an executive role while a search for a successor from outside is carried out.

National Power shares have underperformed the market by 19 per cent since the start of the year and the company has been widely criticised for lacking direction. The disclosure that National Power had been in abortive merger talks with United Utilities, the owner of Norweb and North West Water, confused the market, as Mr Henry had consistently said he was not interested in taking over a regional electricity company.

Last year National Power caught the market unawares by warning that profits would be pounds 130m lower because of new price curbs in the industry. It then issued a second profits warning, disclosing that problems with a huge power station contract in Pakistan had led to a near halving of earnings from the group's international activities. National Power's revenues from the Hub and Kot Addu power stations have been cut by the Pakistan government after allegations that the contracts were awarded corruptly.

The sale of Drax, which contributed pounds 200m in operating profits in the year just ended, is expected to raise pounds 2bn and is scheduled for completion this autumn. Sir John said that National Power would review dividend policy and its capital structure in light of the Drax sale. The company said profits in the year to 31 March would be broadly in line with market expectations and the board expected to pay a final dividend of 19p. Analysts are forecasting a 19 per cent fall in profits to pounds 590m for 1998-99.

Graham Brown, currently managing director of the UK business, will become chief operating officer with responsibility for day to day management of the group.