Innogy Holdings

Procurement policy
Innogy uses several different procurement routes depending on the project. Large power stations, such as the Staythorpe plant which is currently on hold, are planned to be let under a turnkey contract.

For smaller power projects, the company appoints consultants that let the contract, most likely on a competitive tender basis. For work such as the servicing of boilers, Innogy has power engineering alliances.

Office projects are generally design-and-build contracts, and large refurbishment schemes are competitively tendered.

Current and future projects
Innogy's capital investment held steady at close to £200m in 2001/02. However, within that total investment, generating assets fell from £102m to £84m. Offsetting this was a rise in investment in IT equipment and other assets.

Of the £84m invested in generating capacity, £7m was for cogeneration plant, £19m for wind power, and £58m for power stations. The only market in which there was a rise in investment was power stations. This relates to the group's 1600 MW power plant at Staythorpe, Newark. Against a background of severe overcapacity in electricity generating, no further power station projects are planned for the near future.

The sector with the best prospects is renewables. Investment in alternative power is rising in line with the government's goal of securing 10% of energy production from renewable resources by 2010. For example, the company is reviewing plans for an offshore wind farm in North Wales.

Elsewhere, Innogy Hydro recently commenced work on a new hydro generator in Wales. In the cogeneration business, falling prices have led the group to move away from the new development of plant.

Essential information
In May last year, Innogy Holdings was purchased by RWE Group. Since then matters in the UK generating industry have deteriorated, with falling prices and vast overcapacity placing generating companies under immense financial pressure.

Innogy is less exposed to the pressures than some, as the majority of its sales (£3.4bn) come from its retail division, npower. However, this has not prevented the company from becoming involved in the electricity industry's current problems. In October 2002 Innogy started court proceedings against TXU Europe, which at the time owed Innogy about £15m.