Outlook: Hyder

THE PIPS are beginning to sqeak at Hyder, the many-headed beast that supplies water, electricity and gas to the Welsh valleys. The water regulator Ian Byatt has decided that it can afford to cut bills by 20 per cent in 2000 and still have enough money to clean up the beaches of Pembrokeshire.

The next thing will be the energy regulator demanding his pound of flesh when electricity distribution charges come up for review. Given the penchant that the regulators have for leap-frogging one another, it is doubtful the outcome will be any less painful.

Graham Hawker, the chief executive, puts a brave face on it and says Hyder's multi-utility strategy remains intact. But from the outside it is beginning to look suspiciously like a zero-sum game. The merger of Welsh Water and Swalec will generate pounds 90m of cost savings by 2001 - which, by coincidence, will be just enough to pay for the cut in water bills Mr Byatt is demanding.

Meanwhile dividend prospects are sinking fast, with the company openly admitting the possibility of cuts. Even if Hyder diversifies like mad into gas, there is not much profit to be had when it costs pounds 35 to acquire each customer. Hyder could wriggle free by doing the splits. True, it would not unlock any shareholder value. But a problem shared is generally a problem halved.