It's tough for a management team to acknowledge that a plan went awry and a business move turned out to be a mistake. Credit ScottishPower
On Tuesday morning, Scottish Power announced its agreement to sell PacifiCorp to BerkshireHathaway's
From those net proceeds, Scottish Power expects to return about $4.5 billion to its shareholders. While management was not specific about their strategy, I'd speculate that a major share repurchase or a special dividend would both be popular options.
In addition to jettisoning the PacifiCorp albatross, Scottish Power announced decent earnings for the fiscal fourth quarter (ended in March). Turnover (that's Brit-speak for revenue) climbed 11%, and profit excluding goodwill climbed more than 8%.
Scottish Power also saw good results for the year as a whole. Operating profits before goodwill climbed about 4%, but when PacifiCorp is removed from both '04 and '05 results, the growth shoots up to over 23%. The company's UK division (power generation and supply) grew nearly 79%, while the American-based PPM business (which focuses largely on wind power and gas storage) grew nearly 60%. The company's infrastructure business (transmission and delivery) was more laggardly but still grew nearly 6%.
Although free-cash-flow performance for the full year was weak, I still believe that Scottish Power is worth a look for investors interested in foreign utility companies. The company has a reasonably clean balance sheet, a good return on equity, and a solid payout.
Better still, investors in Scottish Power not only get a good, and growing, electrical utility company, but a profitable and liquid trading play on wind power as well. (Liquidity is the key when compared to wind power pure-play Vestas (OTC BB: VWSYF).) Foreign companies aren't always easy to follow or analyze, but I'd argue that Scottish Power is worth the time and trouble for investors.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).