Labour may crack down on utility takeovers

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The Independent Online

Industrial Correspondent

A Labour Government would consider demanding separate listings on the London Stock Exchange for all UK water and electricity firms which are foreign-owned or are subject to takeovers and mergers. The Labour Party's proposal is driven by fears that consumers would suffer if privatised utilities that are absorbed into larger groups prove difficult to regulate.

The issue will be raised this week by Richard Caborn, shadow minister for competitiveness and regulation, at meetings with the European Commission and Parliament. He will also push the idea of a European Union regulators' forum to promote common standards and a level playing field.

Mr Caborn will warn that the rest of Europe must not follow Britain's "laissez-faire" and "inadequate" approach to regulation with the opening up of their national energy and water markets. He is to consult with the Commission on the legal and technical problems of ring-fencing utilities owned by large US and European conglomerates.

City analysts believe that the prospect of enforced separate listings would act as a strong disincentive for predators scouring the UK for potential targets.

The electricity sector has seen a spate of takeovers and mergers. Eastern Electricity, one of the largest regional firms, was absorbed into Hanson and South Western Electricity was taken over by Southern Electric International of the US. There is speculation that Yorkshire Electricity will be the next to go.

Ian Byatt, the water industry regulator, has already warned that he wants separate listings for companies that fall subject to takeovers or mergers. The Government bowed to his advice in the recent takeover of Northumbrian Water by Lyonnaise des Eaux of France, demanding that the French group list all its UK water interests separately on the Stock Exchange by 2005.

However Mr Caborn is thought to be concerned about the electricity industry, where the watchdog, Professor Stephen Littlechild, has chosen not to go down that route. It could also become a contentious issue if, as some expect, British Gas decides to back out of public gas supply by selling off operations in different parts of the country.

Mr Caborn is worried that foreign-owned companies will exploit weaknesses in the UK regulatory system by consolidating accounts and cross-subsidising other parts of their group from the profitable utilities businesses which serve the public.

Apart from continuing speculation over Yorkshire Electricity, the industry is also awaiting the outcome of inquiries by the Monopolies and Mergers Commission into the proposed pounds 2.8bn takeover by National Power of Southern Electric and PowerGen's desire to buy Midlands Electricity for pounds 1.9bn.