Outlook: Tell Sid that BG is working after all

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MOST SIDS will not have to worry too much about BG's new Transco bond. Only those with holdings of more than pounds 10,000 will be invited to invest in this particular animal. The other 1.2 million can sit back and wait for their (hopefully) tax-free cheque to drop through the letterbox sometime around Christmas.

Unfortunately, the effect will be that suddenly they will own 10 per cent fewer shares than they did before. The theory is that this stock will be more highly rated once Transco, the heavily-regulated utility end of the business, has been decoupled from BG's go-go international arm with its exploration interests in Kazakhstan and other exotic places.

BG reckons there is a gap in the market for this type of index-linked corporate bond, now that the Government is more used to running surpluses than deficits and the flow of Treasury gilts has dried up. What is not in dispute is the fabulous investment that BG shares have proved since the business was demerged from Centrica two years ago and the chairman, Dick Giordano, advised all Sids to, er, bale out.

Since then the shares have ignored the worst that Claire Spottiswoode could throw at them - histrionically dubbed by BG as the "biggest smash and grab raid in history" - outperforming the market by 70 per cent. BG has even found enough spare money in the business to return pounds 1.3bn to shareholders, even as its market capitalisation doubles.

Meanwhile, the national gas network has not blown up and the 10,000 job losses that British Gas warned about have turned out to be nearer 2,000. Now there is another regulatory review on the horizon, chaired by Ms Spottiswoode's successor, a clever banker called Callum McCarthy.

BG is anxious to demonstrate for itself how much more operational efficiency can be squeezed out of Transco before the regulator gets ideas of his own. It is also keen to curry favour with Mr McCarthy by ring-fencing Transco from its unregulated business, so it can show that the one is not subsidising the other.

The logical extension of the legal and financial separation that BG plans for its pipeline and exploration arms would be a full demerger to unlock even more shareholder value. BG's top brass insists that such a move is not on the cards and by implication would not be in shareholders' interests. However, having advised small shareholders to sell out at the bottom, it is not clear that the BG board is best qualified to decide such matters.