Best bet for the small investor

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The Independent Online

Buying the Government's remaining shares in PowerGen and National Power will not make you rich, but it is one of the better prospects around for anyone with cash to put by. That at least is the consensus in the City, four days before the closing date for investors to apply.

The minimum subscription is 200 shares, made up of three National Power and two PowerGen shares. The down-payment for small shareholders, due by midday Wednesday, is170p a share for National Power and 185p for PowerGen, which makes a total down-payment of £352 for 120+80=200 shares.

Small investors who registered with a share shop before 14 February are guaranteed a 25p discount to the market price of existing shares on up to 800 shares. Or they can opt for one bonus share for every 15 bought now, up to a maximum of 80 free shares. Only 10p-a-share discount is included in the down-payment. To get the remaining 15p discount, investors will have to hold the shares until the third and final instalment is paid in September next year. To get the bonus shares, they would have to hold their stake until March 1998.

The second instalment is equal to the first and is due on 6 February next year. The size of the third instalment, which determines the total cost of the shares on offer gross and net of discounts, will not be decided until 6 March, but it will be based on the market price of existing shares. At current prices the discounts represent about 5 per cent off the market price for small shareholders, and the bonus is worth 7.5 per cent for those who can wait that long.

Investors will be entitled to dividends on their partly paid shares and National Power is forecasting a final dividend of 11.1p a share net, which represents a yield of 6.53 per cent net in the first year.

PowerGen is expecting to pay 10p net, yielding 5.4 per cent but that discounts a proposed buy-in of shares. Either way the yields beats most equity yields and anything building societies are likely to offer over the next 12 months.

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