National Grid float delayed as talks flounder

The flotation of the National Grid Company, worth between £4bn and £5bn, is unlikely to go ahead until July at the earliest - months later than had been envisaged by the industry - it emerged last night.

The 12 regional electricity companies which own the grid have yet to agree with the Government on several issues including the amount of tax to be paid and the rebate which the companies should pay to customers to share the benefits.

Work on the prospectus for a sale has yet to begin despite months of intense negotiations. There remains a chance that the NGC will not be floated as the regional companies become increasingly concerned about securing value for shareholders.

The Government is expected to hold out for a rebate of at least £20 per customer - twice that suggested by the 12 firms - which would cost the industry about £500m. Some consumer groups have said that the rebate should be £50 or more if it is to be meaningful, but Government advisors regard this as unachievable.

It was originally expected that the 12 regional companies would pay up to £1.2bn in capital gains tax. However, most of the companies intend to distribute their grid holding to their existing shareholders, which could result in clawback of tax by institutions and much less revenue for the Government. This is also thought to be adding to the stand-off between the industry and the Treasury.

The one issue on which there is some agreement is that the NGC should pay a special dividend of about £750m to the regional companies before any flotation goes ahead.

One source close to the negotiations said: "The Government wants this to happen. It is unfinished business from 1990/91 [when the industry was privatised]." There is also a view that the Government and its advisors, Morgan Stanley, are becoming increasingly aware of the problems posed by the flotation - not least getting the 12 companies to agree between themselves.

Plans for the flotation of the grid company could run into further problems if Trafalgar House's £1.2bn hostile bid for Northern Electric is referred to the Monopolies and Mergers Commission. It is thought that Michael Heseltine, President of the Board of Trade, could decide on whether a reference is needed by the end of this week.

The issue of the grid and how the benefits of a flotation would be passed through to shareholders has become one of the key issues in the battle for Northern, which is the first regional electricity company to become a bid target. Northern has said that it will pass through its share of any special dividend paid by the NGC prior to flotation. This could be up to £50m for Northern's shareholders.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference