It is understood that National Power has not yet reached a decision, but there are indications that if a bid does emerge it will be within weeks rather than months.
The number of potential bid candidates is shrinking, after PowerGen's agreed pounds 1.95bn deal on Monday with Midlands, the takeover of South Western by Southern Company of the US and Eastern by Hanson. Manweb is under siege from Scottish Power and North West Water has bid for Norweb.
Potential bid candidates include most of the rest of the distribution industry, but analysts believe Southern Electric is high on the list for a deal, either with another REC or with a generator. Southern Electric's shares are trading at just 1p below a year's high at 853p, which values the company at pounds 2.33bn.
The company's decision to look at specific takeover options emerged in the wake of PowerGen's bid for Midlands Electricity. This created the prospect of a large, integrated company able to supply power to any customer in England and Wales from 1998 onwards, when the final phase of the deregulation of electricity supply begins.
From 1998, domestic consumers will be able to buy from competing suppliers and PowerGen cited this as one of its main reasons for wanting to buy the customer billing and marketing expertise contained in Midlands Electricity.
In the summer, Mr Baker made clear that National Power had no plans to buy a REC, at a time when there was widespread speculation that PowerGen was keen to do so. He cited his wish not to expose the company to greater regulatory controls. Yesterday a company spokesman said, "We have nothing to say."
National Power's new chief executive Keith Henry also announced a streamlining of his top executive team that results in the departure of Graham Hadley, a pounds 198,000-a-year director who has been in charge of international business for the last four years.
Mr Hadley, 51, is expected to receive a payment, but of less than his full two-year contract. Two other directors, Colin Webster and Granville Camsey, are retiring.
Meanwhile, Norweb said it was still in talks with other parties following the bid from North West Water. The bidder said it paid around pounds 10 a share for 9.98 per cent of Norweb. "It was to demonstrate our commitment to the offer we had made," a spokesman said. He ruled out any increase in the cash offer at this stage, but said North West had said it wanted to be "flexible" in case another bid emerged.
Manweb, the Chester-based power company, was forced by the Takeover Panel to backtrack on claims it made earlier this week that it had been given less than a day to consider a revised pounds 1.13bn offer from Scottish Power. It said discussions were initiated only on Sunday.
The significance of the row is that some institutions refuse to accept hostile bids, and Scottish Power is trying to demonstrate that it gave ample opportunity for discussion. In what was described as a "clarification" - following a complaint from Barings, Scottish Power's advisers - Manweb said discussions began on Saturday when Barings said it wished to hold a meeting with principals the following day.
Barings also said it was prepared to revise its offer in return for a recommendation, and wished to reach agreement by 6pm on Sunday. Schroders, Manweb's advisers, said it was not possible to convene a board meeting before Monday. Manweb did not respond to Barings until a meeting between the two advisers on Sunday.Reuse content