National Power's bid is expected to value Southern, the largest regional electricity company, at around pounds 1,005-pounds 1,015 a share, compared to Friday's closing price of 897p.
Two groups are in contention for National Power's planned pounds 1bn power station sell-off: Eastern Group and AES, the US energy group. Eastern said yesterday it had "no comment to make on the speculation".
In another twist, Houston Industries and its partner Central and South West Corporation are planning another bid for Norweb, after their original agreed offer of pounds 1.7bn last week was trumped by North West Water's hostile bid of pounds 1.72bn.
The Texans fear that NWW may be able to increase its 11.7 per cent stake in Norweb if its share price continues to fall.
The two American companies have a combined market capitalisation of $10.4bn and have formed a joint venture, Texas Energy Partners, to invest in utilities world-wide. The Texans have said they want to expand into Britain, partly because of the "very attractive" economic environment, while NWW claims its can get big cost savings by rationalising overlaps betweens its operations and Norweb.
Some power bosses fear that the National Power bid will finally persuade the Government to launch a monopolies inquiry into the industry. The Labour Party conference this week is set to hear strident calls for a full-blown inquiry into the takeover frenzy gripping the privatised utilities.The sale of three of National Power's largest power stations, as ordered by power regulator Professor Stephen Littlechild, is designed to head off this threat.
Eastern, the Rec bought recently by Hanson, is already buying two power stations for pounds 400m from PowerGen. AES lost out to Eastern in that battle. Both companies have been asked to submit bids for National Power's stations in the next fortnight. The parties hope to complete the deal by the end of the year.
This will cut National Power's share of the generating market from 34 per cent to 25 per cent, leaving the number one spot to British Energy, the nuclear group to be sold off next year.
The current tumult in the electricity industry looks set to continue as sources close to the Government indicated that Chancellor Kenneth Clarke is unlikely to copy Labour's idea of a pounds 3bn "windfall tax" on the utility companies.
The prospect of more UK utilities falling into overseas hands is another sensitive political issue. If the Texans are successful, Norweb will become the second British electricity company to be bought by Americans, following the pounds 1.07bn acquisition of South West Electricity by Southern Electric International. There are continuing rumours in the City that PacifiCorp of the US will counter Scottish Power's Manweb bid.
Six of the Recs privatised in 1990 have been bid for so far, while Manweb has been the only one to face a hostile bid. Other American utilities are expected to enter the ring. The two Texas companies had been talking to Norweb for some time about the UK company joining them in a US power generation project, but the discussions were put on hold after the bid discussions began.