Michael Harrison's Outlook: Could Russia's Gazprom go for National Grid? It's not quite as far-fetched as it may seem

A Pyrrhic pensions victory; Full-frills, low-cost airline takes off

Are the Russians back in town, but this time with another takeover target in their sights? Since the start of the year, the amount of "chatter" on the political grapevine concerning Gazprom and its UK ambitions appears to have risen several notches. The state-owned Russian gas giant's interest in Centrica, the parent company of British Gas, is long-standing and well documented. It is said, however, that Gazprom may be considering switching its attentions to National Grid, the owner of Britain's gas and electricity transmission networks.

A tilt at National Grid would be in a different league altogether from a takeover of Centrica. It would probably cost the Russians £35bn, including the £10bn of debt on National Grid's books, but Gazprom is one of the few companies that could swallow such a large mouthful without getting indigestion.

It would also be a logical fit. Gazprom has made no secret of its desire to buy European energy distribution assets, partly as a hedge against its volatile gas production business and partly to secure better access to markets outside Russia. In that respect, the UK is one of the few countries genuinely open to a foreign investor. It would also position the Russians to supply the European market from the west as well as the east. National Grid is the majority shareholder in the huge Isle of Grain liquefied natural gas import terminal. In a couple of years' time, the UK will have more gas storage and import capacity than it has demand for gas, making it an attractive base for exports to the Continent.

The track record of the National Grid management suggests they would be open to a bid at the right price. The chairman, Sir John Parker, has sold every large company he has run - most recently flogging P&O to the government of Dubai - while the new chief executive Steve Holliday is a graduate of the Exxon-Mobil "everything has its price" school of business.

The political terrain is less certain. Whereas a Gazprom bid for Centrica would raise major competition concerns by pairing the world's biggest gas producer with the UK's dominant gas supplier, a Gazprom/Grid tie-up would pose few obvious complications.

It would, however, raise serious questions concerning the UK national interest. The Government surrendered its golden share in National Grid some years ago so it could not automatically block a bid from Gazprom, or another suitor such as a private-equity consortium. But there are provisions in the Enterprise Act which would allow it to refer any takeover on national interest grounds. The idea of Britain's energy grids being owned by what is in effect an arm of the Kremlin would surely fit the bill.

There would also be problems in the US, where Gazprom would almost certainly not be allowed to retain ownership of the three big American energy companies National Grid has acquired over the years - NEES, Niagra Mohawk and Keyspan.

The thought of a national asset like the Grid falling into foreign hands would have seemed intolerable not so long ago. But that was before the ownership of Britain's airports and ports went overseas. Even now, the idea that the Russian state would be allowed to take over a strategic asset such as the UK's gas and electricity networks sounds fantastical. Then again, who could have believed the Litvinenko affair would come to pass?

A Pyrrhic pensions victory

The 1,000 members of the Allied Steel & Wire pension scheme were understandably jubilant after yesterday's ruling by the European Court of Justice - a judgment that could force the UK government to compensate them for their lost savings. After all, it is an important staging post in the long campaign the unions have fought on their behalf since the firm went bust, leaving behind a very large hole in its pension fund.

But for the rest of the country's pensionable workforce, it is likely to prove a Pyrrhic victory. The judgment still has to be interpreted by the UK courts where it is certain to be contested by the Government, fearful of the floodgates it could open. Some 125,000 other pension-fund members could be eligible for similar compensation, resulting in a bill which would dwarf the £400m ministers have so far set aside in the Financial Assistance Scheme.

The European judgment also has important ramifications for the employer-financed Pension Protection Fund, which sets a limit on compensation of 90 per cent up to a maximum of £26,000 for members of final salary schemes whose employer goes bust. This cap could now also be declared illegal.

If that is the case then it is certain to knock a further nail into the coffin of the final salary scheme and jeopardise the future of the PPF itself. Many large employers are already taking steps to sort out their own pension deficits, or close their final salary schemes entirely, to minimise the levy they must pay into the PPF. The judgment can only accelerate that trend, leaving the burden of funding it to those companies with the riskiest profile and the least ability to pay. In those circumstances, the fund could collapse on itself.

It could also accelerate the switch into private savings as more and more of those not fortunate enough to work in the public sector come to terms with the death of the pension promise. For the vast majority it is no longer part of the employment contract.

If the sparkling figures produced yesterday by Legal & General are any guide, then the UK savings market is booming. Sales last year were up 42 per cent to £1.84bn. The cyclical effect of rising equity markets and consumer confidence undoubtedly played a large part. But perhaps there is structural change afoot as well. If you want to live in comfortable retirement, don't rely on your employer.

Full-frills, low-cost airline takes off

Were you truly wafted here from paradise? Nah, Luton Airport. Silverjet's maiden transatlantic flight touched down yesterday at New York's Newark airport and so was born another all-business class airline. Silverjet is competing in an increasingly crowded market.

Two rival airlines, Eos and Maxjet, have already launched services - also on the London-New York route. Where Silverjet hopes to carve out a niche is by being both full-frills and low-cost at the same time. Its average round fare is £999 - compared with the £4,000 that British Airways and Virgin Atlantic charge and the £3,000 that a return ticket with Eos will set you back. For that, the passenger gets a 30-minute check-in at a private terminal once they have arrived at Luton. On board, there is a 6' 3" flat bed, a ladies-only loo and the promise of a solid night's sleep if you prefer to skip the gourmet meal and in-flight entertainment.

Silverjet reckons it will appeal to businessmen running small and medium-sized companies and the premium end of the leisure market. Its founder, Lawrence Hunt, says he needs only 20,000 of the 4.2 million passengers who fly the route each year - 0.5 per cent of the market - to make money out of his one plane, although he hopes to have three services a day in operation by the end of the year.

Nevertheless, the odds must still be stacked against him. The other two new entrants have both found the going tough. Eos has been forced to go back to its investors to raise more finance while Maxjet has had to suspend a second service it launched to Washington because of competition on the route. Meanwhile, BA itself is transmogrifying into more and more of a business- class airline as the curtain is positioned further down the aisle.

But at least Mr Hunt's timing is impeccable. Next week, there will be several thousand BA passengers looking for another means of getting to New York.

m.harrison@independent.co.uk