Outlook: Can the last investor please turn out the lights

ROLL UP, roll up for the great disappearing act. In the nine years since privatisation National Power's market share has dwindled by 75 per cent and now it is about to retreat still further with the sale of another two stations, one of them less than five years old. To fit its shrunken circumstances the dividend is about to be halved too.

The clown who helped reduce NatPower to this parlous state has gone and the ringmasters who are now in charge have decided to opt for a double act. Even the City's most ingenious investment bankers could not find anyone prepared to take on dull old NatPower, which has displayed all the investment appeal of a 30 watt bulb.

So instead it is doing the splits. One half will be an international power company with interests in exotic places such as Thailand and Malaysia. The other half will be a regulated UK utility suitable for risk-averse domestic investors who are more at home with a high yield and the warm glow of steady income. The international business will be largely free of debt and, although it has no plans to pay a dividend, will have good growth prospects provided it can steer clear of another Pakistan-style blackout.

But the UK business will be a shadow of its former self. Even the fancy new lower-case name, npower, demonstrates how the company has all but given up on the home front. With 8 per cent of the market, it will rank a distant fourth. Meanwhile, PowerGen, which started out two-thirds the size, suddenly finds itself cast in the role of big brother.

The role model NatPower's chairman Sir John Collins hopes to emulate with this break-up strategy is, of course, British Gas, which went from one large basket case to two of the best performing stocks in the market in the shape of BG and Centrica. As a mutual insurance policy against being swallowed up, BG and Centrica took out rights on each other's ownership of the British Gas name.

Sir John has decided that the NatPower brand is not worthy of a similar poison pill, while the Government's golden share looks a rusted up defence mechanism indeed. He may yet be right that demerger is the best hope for shareholder value. Unfortunately this is probably only so because it turns NatPower into two bite-sized pieces, the more easy to consume without indigestion.

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