Offer opposes US generator bid
Wednesday 01 May 1996
Professor Littlechild gave a clear hint that he would want any bid blocked on the same grounds that the Government barred the takeovers by National Power and PowerGen of regional electricity companies.
Southern also owns a REC - South Western Electricity - so any bid by it for National Power would amount to unacceptable vertical integration unless Southern disposed of its interest in Sweb.
Asked whether he would object to a merger between Southern and National Power, Professor Littlechild said: "In as far as they would be run as a single company the same detriment would apply."
Professor Littlechild refused to be drawn on whether he would open an inquiry into National Power if it went ahead with plans for a shareholder incentive package worth up to pounds 2bn to fend off a possible Southern bid.
But it seems unlikely this would prompt a fresh review of electricity prices. National Power, he said, had been highly profitable since privatisation which was why Offer had so strongly supported the Government's decision to encourage more competition in the generating market by blocking its takeover of Southern Electric, the UK REC.
Professor Littlechild also delivered a warning shot across the bows of PowerGen, saying that he expected the generator to go through with the pounds 400m sale of power stations to the Hanson-owned Eastern Group.
PowerGen warned last week that it was reconsidering the deal following Trade and Industry Secretary Ian Lang's shock decision to block its purchase of Midlands Electricity.
But Professor Littlechild said: "I don't envisage that they will want to pull out of a sale they have agreed with another company. I would expect that sale will go ahead."
Behind the comment was a thinly-veiled warning that the regulator would have no hesittation in referring PowerGen to the Monopolies and Mergers Commission if it backed out of its agreement to dispose of the two power stations with a capacity of 2,000 megawatts.
"Clearly the situation would be serious if they didn't," he added. There was not enough competition in generation two years ago and there isn't enough now."
He was speaking as Offer announced that 1995 had been another good year for electricity customers with complaints down 20 per cent and prices 4 per cent lower in real terms.
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