National Power gives pounds 1.2bn back to investors

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The Independent Online
National Power yesterday unveiled a pounds 1.2bn payout to shareholders and held out the prospect of still further incentives for investors in the shape of share buy-backs and bigger dividends.

The company, Britain's biggest electricity generator, confirmed that it is to pay a special 100p dividend to shareholders as it announced a thumping 49 per cent increase in the ordinary dividend for the year to 23p and a 10 per cent increase in pre-tax profits to pounds 806m.The shares rose 31p to 547p.

News of the bumper dividend payout was rushed out early after details began to leak and National Power was advised to act by the Stock Exchange. It had not been due to release its results until Monday.

The special dividend - which is worth 125p a share to tax-empt institutional shareholders - was accompanied by a pledge that National Power would consider more share buy-backs while reducing dividend cover still further.

The payout to shareholders follows the collapse of National Power's pounds 2.5bn bid for Southern Electric, which was blocked three weeks ago by President of the Board of Trade Ian Lang.

At the same time National Power's balance sheet has been bolstered by the pounds 1.7bn sale of three power stations to the Hanson-owned Eastern Energy.

National Power's move follows PowerGen's decision earlier this week to reward shareholders with a pounds 400m share buy-back following the demise of its plans to buy Midlands Electricity.

The payout from National Power will raise its gearing by about 60 per cent. John Baker, chairman, said that having reviewed its capital structure the company had decided it was in shareholders' interests to run with a much higher gearing than it had to date.

He also pledged that National Power would continue to deliver real dividend growth. This indicates that dividend cover will fall further. At present the dividend is covered 2.3 times by earnings but cover could slip closer to two times, analysts believe.

National Power began activating plans for a bumper handout to shareholders as a means of defending itself against a potential bid from the Southern Company of Atlanta, Georgia.