National Grid set to dispose of Energis stake

The National Grid is reviving plans to sell off a stake in its telecommunications business Energis to an international telecoms operator.

The company, which runs Britain's network of high-voltage power transmission lines, had talks about bringing AT&T, the giant US telecoms group, on board as a partner some months ago.

Although those discussions broke down, the Grid is keen to reactivate partnership talks now that it has been floated off as a separately quoted company independent from the 12 regional electricity companies.

The Grid has also brought in a senior BT executive, Michael Grabiner, since then to run Energis. The business is valued at about pounds 400m and the Grid might be prepared to sell up to 49 per cent of its holding to the right partner or group of partners.

Energis now has 12,000 customers, including the travel agents Thomas Cook, the BBC, Reuters, Lloyds Bank and Richard Branson's airline Virgin Atlantic, which signed up last week.

The planned sale of a stake in Energis comes as the Grid prepares for a tough round of meetings in coming months with industry regulator Professor Stephen Littlechild over a new five-year price cap for the transmission business.

The Grid management is expected to argue strongly that the new price controls should not be any more stringent than the present formula which limits increases to RPI minus three. The review by Ofgas, the gas industry regulator, of Transco's charges, is understood to have increased the chances that Offer's review of the Grid will produce similarly steep price cuts.

On a like-for-like basis, National Grid could face cuts in its transmission prices of between 18 per cent and 32 per cent, according to SBC Warburg, the investment bank. Since 1992 the Grid has achieved a 30 per cent reduction in operating costs,from pounds 500m to pounds 350m, and argues that it has cut its prices to competitive market levels.

The new price regime is set to take effect from April 1997 and run until 2002. Over that period the Grid expects capital expenditure to reach about pounds 1.1bn and has targeted further efficiency improvements of 1.5 per cent a year. That would mean another 400-500 job cuts through the demanning of sub-stations and a programme known as Vision 2000, under which regional control centres are being closed down and their operations relocated at the new national control centre near Wokingham, Berkshire.