MARKET REPORT Another black day for electricity shares

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Electricities remained under the Littlechild whip as the great meltdown continued.

The stock market once again fretted about the implications of Professor Stephen Littlechild's U-turn on electricity pricing and the shares of the regional companies suffered further sharp reverses.

Their latest humiliation occurred on a day shares staged a modest recovery as hopes grew that the currency turmoil would not force a UK interest rate increase.

But it was the embarrassment caused by Professor Littlechild which again dominated the proceedings. There are fears some investment houses are in deep difficulties following the collapse of electricity prices. One leading private client stockbroker was said to have insisted that clients it judged over-exposed to the sector should sell, an attitude blamed for some of the steepest falls.

There is no doubt institutional investors are dismayed by the Whitehall indifference to London's standing in the international investment community. The Barings disaster could be regarded as an unintentional one-off; the electricity fiasco is seen as Whitehall incompetence that will have a deeper and more damaging impact on the City's reputation.

Stories continued to circulate that overseas investors, sensing a double- cross, were refusing to pay for their generator shares. There was even talk of UK institutions holding back payment. Any such reluctance could force the Government to resell the unpaid-for shares, which would depress the price still further. And the view persisted among the wounded City powers that some could be stung into taking legal action against the Government.

The net result of the second day of the professor's revision was that a further £750m was wiped off electricity values, which means his change of mind has cost the investment community, so far, £4.25bn.

Northern Electric, which the professor puts forward as an excuse for considering stricter price controls on the industry, fell 104p to 793p after a 140p crash. The 1,100p cash Trafalgar House offer closes on Friday. Northern has, thanks to the professor, been forced to capitulate; whether Trafalgar will plead changed circumstances and try to postpone or drop its bid remains, as the Northern price displays, to be seen.

Elsewhere, losses stretched to more than 50p. Yorkshire, once buoyed by hopes of a take-over bid, fell 43p to 621p, a two day fall of 223p. Others lacking the merest suggestion of a spark included Midlands, off 60p at 582p and Manweb, down 55p at 634p.

The partly paid National Power shares slipped 1p to 175.5p and PowerGen lost 2p to 187.5p. The fully paid shares staged a modest recovery, NP up 4p at 442p and PG 2.5p to 471p.

Waters had another unsettled session, unimpressed with Ofwat's attempt to distance itself from the antics at its electricity counterpart. Thames dipped 9p to 470p and Northumbrian, where a French bid hovers, lost 22p to 820p.

The rest of the stock market recovered a little from its currency condition and the FT-SE 100 index rose 15.1 points to 2,992.1. But the second-line FT-SE 250 index, with many of the electricity and water companies as constituents, fell 27 points to 3,200.9, a two-day fall of 93.8.

Blue chips were helped by soothing comments from Alan Greenspan, US Federal Reserve Board chairman. He managed to offer some calm to the currency markets, easing some of the pressure. Government stocks were up about three-quarters of a point, largely on unexpected falls in industrial production as the latest "Ken and Eddie" meeting took place. Hopes of a German interest rate cut also helped.

RJB, the controversial coal mining group, held at 322p as it was elevated to the FT-SE 250 index. One of the casualties is Saatchi & Saatchi, the advertising agency which has had a torrid time since a confrontation with a large US investor.

Storehouse firmed to 214.5p. Profits for the year ending this month are expected to nudge £90m with some looking for £105m next year. But there is an undercurrent of unease. The rumoured departure of the director of a main subsidiary company has prompted anxiety and there is talk that some of the more optimistic estimates may have to be pulled back.

Smith New Court, one of the market's favourite bid candidates, had another run, gaining 11p to 480p; SG Warburg rose 17p to 696p on reports its 75 per cent-owned Mercury Asset Management subsidiary had warned it should seek a powerful partner.

Costain, the troubled builder, was demolished 6p to 12.5p as it announced a bid to remain independent. Albright & Wilson, the chemical group, made a mildly disappointing dbut; the shares, placed at 150p, ended at 162p.

Seton Healthcare, a medical products and sports equipment group, is thought to be on target to produce £11m in the year ending next month. About £15m has been pencilled in for the following year. The acquisitive group, which has created a portfolio of over-the-counter treatments, is believed to have another significant takeover in its sights. The shares are 351p, near their peak.

Gartmore American Securities, the obscure investment trust that found itself in a deep hole when poorly worded articles of association allowed a maverick investor to indulge in a form of greenmail, has opted for unitisation. It is claimed that such a move represents an "attractive alternative" to a straightforward winding up. The shares fell 2.5p to 25.5.p yesterday.

The FT-SE 100 index rose 15.1 points to 2,992.1 but the supporting FT-SE 250 index fell 27 to 3,300.9. Turnover was 690 million shares with 28,735 bargains. Government stocks were firm.

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