Energy deal gets Littlechild OK

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The Independent Online
Professor Stephen Littlechild, the electricity industry regulator, has decided against raising any serious regulatory objections to the proposed pounds 3.7bn takeover of Energy Group, owner of the Eastern Electricity, by PacifiCorp of the US.

The formal offer document for Energy Group, published today, will also keep investors guessing about the shape of the combined company's top executive team. John Devaney, chief executive of Eastern Group, has been guaranteed a senior post with PacifiCorp, possibly as chief operating officer in the US, but has not yet been allocated a firm job title.

But Mr Devaney, who is 50 and is one of the more highly regarded electricity chiefs, may instead look for a new challenge outside the utility sector, possibly in a role where he can turn around a troubled manufacturing business. He has a background in manufacturing, including a spell with Perkins, the diesel engine maker.

Executives from the two companies held talks with Professor Littlechild at his Birmingham offices on Friday where they argued that the deal did not raise any new competition issues. Eastern would be the eighth regional electricity company (REC) to fall into American hands and the first REC to be taken over twice. The Ipswich-based subsidiary is also the UK's fourth largest generator.

Professor Littlechild is thought to have expressed some concern at the complex financing arrangements, which will leave the combined group with debts of some $14bn (pounds 8.75bn). PacifiCorp has pledged to sell its US telecommunications business, reducing the debt by about $1.5bn and has denied it will have to finance part of the deal by issuing junk bonds. The regulator is expected to accept Energy Group's argument that the REC business will be "ring- fenced" and would not see its own debt rating affected by the huge borrowings of the holding company.

In previous US takeovers of RECs he has asked for further limited licence changes to ensure the regulated business remained transparent.

Professor Littlechild's advice will put further pressure on the Department of Trade and Industry to let the deal go through without a referral to the Monopolies and Mergers Commission.