Outlook: London calling as Louisiana beckons

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The Independent Online
THE AMERICANS are leaving. First the Virginians who run Dominion Resources decided to make Ed Wallis's day by selling him a regional electricity company in the shape of East Midlands. Now Entergy, the owners of London Electricity, are packing their bags and heading back to New Orleans after just 18 months running the show.

If this is a trend, we are in for an awful lot more corporate action over the next 12 months because at the last count US utilities still owned seven of the 12 Recs. Texas Utilities can presumably be counted on to hang on to Eastern for a while as it is still digesting its acquisition.

But what about the boys from Dallas, Central and South West, who would not be unhappy to see the back of Seeboard, or Southern Company of Atlanta, Georgia which has been looking for an exit from SWEB almost since the day it bought the business?

Based on the price at which East Midlands and Eastern have recently changed hands, Entergy's advisors estimate that London ought to fetch at least pounds 1.8bn which should help cut its $10bn debt mountain down to more manageable proportions.

But how distant that day now seems back in December 1996 when Entergy made its agreed offer for London. Ed Lupberger, the then chairman and chief executive officer, waxed lyrical about being a long-term participant in the UK electricity market and how London would serve as his platform for the conquest of Europe's energy markets.

Mr Lupberger was invited to leave in May after shareholders decided they did not share his vision and liked what his expansionist strategy was doing to the balance sheet even less. Now the mantra is focus and a return to concentrating on core businesses.

The first time that London went under the hammer, there was not too much interest from across the Atlantic. The Americans were worried seemingly about the damage that a "brown out" at Buckingham Palace and the Palace of Westminster would do to their reputations.

This time around, there is the forthcoming distribution price review and the prospect of a harsher regulatory climate to worry about. If there really were a queue of buyers falling over one another to acquire London then Entergy would not have had to go to the trouble of getting Morgan Stanley to arrange an auction.

That said, it only needs one buyer. Nomura's Guy Hands could try his luck again, PacifiCorp is still smarting from having lost the battle for Eastern and there is surely someone who is prepared to see how the competition authorities react to a Rec on Rec merger.