City & Business : Bonanza time again in the great utility lottery

It will be a bitter pill the doughty people of the Dales will have to swallow this week. A glass of water, before depleted local reservoirs next run out, might ease the passage as their favourite local company lifts its dividend by 10 per cent or more.

An even bigger special payout, disguised as a share buyback, may also be on the cards as Yorkshire Water shrugs off the pounds 40m cost of last year's drought. To hide its embarrassment, and escape the fury, Yorkshire might be advised to hold its annual results meeting in another county - following ex-managing director Trevor Newton's infamous precedent by bathing investors in riches out of sight.

For Londoners, Thames Water will also join the splurge, following Anglian and others last week. That was a week, by the way, in which regulator Ofwat warned water firms to cut leaks dramatically by 1998, or else.

Since privatisation in 1989, most have an appalling record in meeting even their own targets, Ofwat found. Thames, Severn Trent and surprise, surprise Yorkshire - where the glass only fills two-thirds full these days - had actually increased the amount spilling out of pipes, drowning unsuspecting moles underground.

Improvement takes investment, and good management, but no matter; it's bonanza time as the great utility lottery cranks up again.

Scottish Power's pounds 1.56bn bid for Southern Water set the sparks flying, prompting Southern Electric to put up its fists. It was stirring to watch: Ethelred the Unready was not going to let Braveheart run off with the Oscars this time round. And the rest of the pack now dish out the Danegeld, lest City institutions deliver their heads to the invader, too.

Multi-utility strategies have a superficially attractive logic. Companies cut costly duplication of billing and administration by selling the same consumers water, electricity, gas or telecoms. Such bids have the added benefit that utilities stick to what they know best: delivering basic services into homes and businesses.

No repeat of the unfocused empire-building that saw Severn Trent blow pounds 212m on waste firm Biffa and other utilities write off millions on ill- starred diversification into property and contracting, in the UK and overseas.

Better news for investors and - when regulators catch up - for consumers on prices, too.

With 1998 beckoning, when unfettered competition will enter the electricity sector, water companies also have undoubted attractions, with millions of captive customers to use as a marketing base.

The ongoing takeover frenzy, though, smacks less of strategy than of the last gluttons in town - wallets bulging with cash - picking off whomever they can chew.

Scottish Power's attraction to Southern Water seems as much to do with the fact that it's not Thames or Severn Trent (too big), Yorkshire (a pariah) or the rest (guests of the Monopolies and Mergers Commission or already taken over), than putting a thistle up the local electricity company, come 1998.

Regulation has also turned strategy to lottery. Water/water bids automatically go to the MMC, yet electricity/water or vice-versa escape that net.

Theoretically, Ofwat itself can push hard enough for any water bid to be referred: it launched its latest "consultation" on Southern Water last week, but the market took that in its stride. It knows Southern will fall, with whatever sops to the consumer either bidder feels it can least get away with.

The method in Trade and Industry Secretary Ian Lang's madness is also a mystery on which students of chaos theory must now be writing theses. His decisions - to block the generators' bids for regional electricity companies, after allowing Scottish Power to nab Manweb - are no ringmaster's model.

Rather, it's as if the referee wades in with a swing at whichever fighter he doesn't take a fancy to at the time.

Of Scottish Power and Southern Electric, the latter's bid - with the two regions at least overlapping - looks the more logical. But only Ian Lang's big black eye for National Power (to whom it had given its hand), turned Southern Electric from prey to poacher.

It had been talking to Southern Water about co-operation for years, but so much for strategy - without Scottish Power's impudence, it probably would not have bothered bidding at all.

(Perversely, the Labour Party's still vague windfall tax may be adding to the scramble. The argument? If you gear up with debt for deals, you might yet claim you are less able to pay).

So what is there left to rescue from the post-privatisation melee? Water company investment, for starters.

Unlike electricity or gas, there is no national water network to which competitors have unfettered access. So come 1998, water firms will still be local monopolies, sitting ducks throwing off valuable cash.

Bigger dividends do not pay to stop leaks, renew pipes, preserve reservoirs or clean up rivers and beaches. Regulators should use ample evidence, from the higher dividends, that water firms can invest more to force the pace. Not issue wishy- washy "or else" warnings like Ofwat's last week - that it might do something if they haven't finally cleaned up their act two years down the line.

Rice at the wedding

WELCOME back to Lucas, or LucasVarity as it will be called. If Friday's pounds 3.2bn merger goes through in September, after a near five-year absence, the stalwart of British engineering will be catapulted back into the FT- SE 100 index. It seems a marriage made in heaven, placing the group fifth among the world's automotive component makers.

There is still ample scope for slips, however - not least the prospect of a rival bidder, which still gives a fair premium to the Lucas share price.

Crucially, too, after George Simpson decamps to GEC, it has to prove the new management will work. Victor Rice of Varity - the former Massey Ferguson - steps into Simpson's shoes, but noticeably so far there is only one other executive appointment: Lucas's John Grant as finance director. Former Midland banker Sir Brian Pearse stays in the chair, but among the eight other non-executives there remains a lot to fight for.

Mr Rice is little known in the UK, but his reputation seems sound. An analyst was troubled by one quirk, however. "He changed Massey's name to Varity after Victor A Rice. If that's not egomania, what is?"

Nuclear fizz

CONGRATULATIONS to British Energy and its advertising gurus Lowe Howard Spink. They were coy last week about the privatisation's pounds 5m TV campaign before Tuesday's launch. But, as predicted, Sizewell B and nuclear waste it is not.

With the ad's gaggle of athletes, leaping hurdles round the track, investors might be forgiven for thinking they were buying shares in Lucozade, not a nuclear utility.

Life and Style
tech

Sales of the tablet are set to fall again say analysts

News
A Brazilian wandering spider
news

World's most lethal spider found under a bunch of bananas

Life and Style
fashion

British supermodel and hitmaker join forces to launch a 'huge song'

Life and Style
gaming

I Am Bread could actually a challenging and nuanced title

PROMOTED VIDEO
Sport
Mario Balotelli pictured in the win over QPR
footballInternet reacts to miss shocker for Liverpool striker
News
people
Voices
Sol Campbell near his home in Chelsea
voices
News
i100
News
Kimi the fox cub
newsBurberry under fire from animal rights group - and their star, Kimi
Sport
Fans of Palmeiras looks dejected during the match between Palmeiras and Santos
footballPalmeiras fan killed trying to 'ambush' bus full of opposition supporters
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
filmsIt's nearly a wrap on Star Wars: Episode 7, producer reveals
Life and Style
fashion
News
i100
News
<p>Jonathan Ross</p>
<p>Jonathan Ross (or Wossy, as he’s affectionately known) has been on television and radio for an extraordinarily long time, working on a seat in the pantheon of British presenters. Hosting Friday Night with Jonathan Ross for nine years, Ross has been in everything from the video game Fable to Phineas and Ferb. So it’s probably not so surprising that Ross studied at Southampton College of Art (since rebranded Southampton Solent), a university known nowadays for its media production courses.</p>
<p>However, after leaving Solent, Ross studied History at the School of Slavonic and East European Studies, now part of the UCL, a move that was somewhat out of keeping with the rest of his career. Ross was made a fellow of the school in 2006 in recognition of his services to broadcasting.</p>
TV

Rumours that the star wants to move on to pastures new

News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Project Coordinator - 12 month contract

£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

IT Operations Manager - London - £55,000

£50000 - £55000 per annum + bonus + benefits: Ashdown Group: IT Relationship M...

Day In a Page

Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

How We Met: Hugh Bonneville & Peter James

'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

Bill Granger's heavenly crab recipes

Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
Radamel Falcao: How faith and love drive the Colombian to glory

Radamel Falcao: How faith and love drive the Colombian to glory

After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

Terry Venables column

Premier League managers must not be allowed to dictate who plays and who does not play for England
The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

Michael Calvin's Inside Word

Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past