Offer may insist on Northern refloat

Shares in the regional electricity companies fell sharply yesterday on speculation that Offer, the electricity regulator, would attach stringent conditions to a any bid for the companies. Offer is thought to have suggested that Trafalgar House's £1.2bn bid for Northern Electric should proceed only if it promises to refloat 25 per cent of the company on the Stock Exchange. Professor Stephen Littlechild, director general of Offer, is concerned that his ability to get information on the companies would be reduced if they were to be taken over. A separate stock market listing would be one way to resolve the issue.

Professor Littlechild has already said that changes to Northern's operating licence may be needed in the event of a takeover, to ensure that he can continue to regulate the core electricity business efficiently. Among his worries would be any reduction in his ability to compare the companies' operational and financial performance, which he regards as a vital part of his job.

Offer has declined to comment on its advice to the Office of Fair Trading, which must in turn advise Michael Heseltine, President of the Board of Trade, on whether to make a reference to the Monopolies and Mergers Commission.

Neither Trafalgar House nor Northern were able to shed any light on Offer's views. One industry source said that the idea of a 25 per cent flotation had been considered but is not necessarily a live issue now.