The news boosted shares in PowerGen as the markets speculated that National Power's rival might consider renewing its ambitions in the regional power market. Both National Power and PowerGen were blocked from buying regional electricity companies (RECs) on monopoly grounds by Ian Lang, the former president of the board of trade, last year. PowerGen was incensed by the decision, which opened the way to the flood of overseas bids, leaving Southern Electric as the only independent REC left. Yesterday's news added 3.5p to National Power shares, which closed at 566.5p, while PowerGen shares rose 6.5p to 689p.
National Power sold 38.6 million shares in Southern, representing 8 per cent of the company, through brokers HSBC James Capel. The sale price was just under 420p, raising around pounds 160m for the generator. Southern Electric's share price edged up 1p to 426.5p.
Late last year National Power revealed a pounds 57m exceptional loss, mainly on the stake in Southern, which it bought for an average price of around 970p. Shares in RECs have fallen since National Power bought the stake, following payouts from the National Grid flotation and a wave of special dividends. National Power is expected to make a further small provision of some pounds 5m to cover additional losses on the shareholding.
National Power's decision to sell the stake also suggested the chances of a bid emerging for Southern had receded since the change of government. "We think the market conditions are right. You've got to be pretty clear there isn't any outstanding bid speculation," said a source close to the generator. One analyst said National Power had been "unlucky" that unlike PowerGen it had not managed to sell its stake through a takeover bid.
Despite the surge in PowerGen shares, analysts suggested a bid was unlikely. Simon Taylor, an electricity analyst with investment bankers BZW, said: "I would be doubtful if a new Labour government would start off by allowing vertical integration of that sort. I'd doubt they'd allow PowerGen to buy a REC at this stage. They might well feel they'd prefer to keep the structure of the industry as it is at least for the time being."
National Power said it planned to launch a raised pounds 2.5bn bid for Southern Electric in April 1996 if it gained government clearance. PowerGen had also made a bid for Midlands Electricity. The Government blocked the two bids, overturning the recommendations of the Monopolies and Mergers Commission.Reuse content