UK gas and electricity group Powergen has reported a fall in profits last year.

The group also announced its planned merger with a German firm is on track to be completed by the spring.

Powergen made pre-tax profits of �464m in 2001, down from �517m the previous year.

The fall in profits can in part be attributed to the sale of some of its generating assets, with the money used to help finance its $3.2bn purchase of US firm LG&E.

Falling electricity prices in the first part of the year also hit the company's balance sheet.

Takeover bid

Powergen is the subject of a takeover bid by Germany's largest utility, E.ON.

The board of Powergen has already agreed to the conditional offer, which values the firm at 8.2bn euros (�5.15bn), and recommended that shareholders do the same.

It now says it expects the deal to go ahead in the spring, after it has been scrutinised by a host of regulators.

The European Commission, UK energy watchdog Ofgem, several US state utility regulators and the US Federal Energy Regulatory Commission must all clear the deal before it gets the green light

Looking ahead to 2002, Powergen said it would continue to respond to the effects of lower electricity prices and higher fuel costs on both sides of the Atlantic.

It said the regulated businesses in both the UK and the US are expected to continue to perform satisfactorily.

Powergen's profits were roughly in line with analysts' forecasts.