Scottish Power's earnings dropped 7% in 2010

By Douglas Fraser
BBC Scotland Business and Economy Editor

Image caption,
Scottish Power retained 5.2 million households as customers

Scottish Power suffered a 7% fall in earnings last year as it faced a squeeze between declining demand for energy and rising wholesale costs.

The Iberdrola subsidiary made 1.35bn euros (£1.1bn) in earnings before taking into account tax, interest and depreciation costs.

Iberdrola is Spain's biggest utility company and world leader in wind power.

Of Scottish Power's three divisions, only networks - the transmission wires and sub-stations - performed well.

A new pricing agreement with regulator Ofgem gave more security of income until 2015, as a means of encouraging more investment in the sector.

The energy retail division had a flat performance over the year, as measured by its share of the market.

It retained 5.2 million households as customers.

Margins squeezed

The division that had most problems was the less regulated market for generating and trading energy.

The company is understood to have faced falling demand as a result of the economic downturn, as well as energy efficiency measures taking effect.

It also found that rising wholesale costs of energy through last year squeezed its margins, until it announced in November that customer prices were to rise.

Announcing Iberdrola's results in Spain, the Bilbao-based company reported a 10% rise in profit, boosted by a strong performance in its home market, as well as North and South America.

Core earnings came in at 7.5bn euros (£6.4bn).

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