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
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003