Outlook: The American taste for RECs

PacifiCorp is more than a little rattled as it ponders whether to relaunch its takeover bid for The Energy Group, the power and mining business which demerged from Hanson last year. No sooner had the Monopolies and Mergers Commission given the US group the green light to bid again, than stories began to circulate of rival suitors waiting to pounce at a much juicier price.

Sadly for PacifiCorp, these rumours seem to have more substance than might have been thought. The word last night was that Texas Utilities would swoop within 10 days, while an undisclosed financial buyer is hovering as well. PacifiCorp may also face competition from from National Power and PowerGen, if previous regulatory obstacles are eased.

At first sight it seems surprising that yet another US utility should be eyeing a UK regional electricity company (Eastern Group, the largest REC, is part of The Energy Group). Other American owners which overpaid for RECs, and were subsequently clobbered by the windfall tax, privately regret moving into the UK. Worse, the successful buyer of Energy Group will have to contend with a big one-off revenue cut for its distribution business in 2000, hitherto the most lucrative part of the operation, when a new price formula starts. Energy Group has completed most of the post-privatisation cost cutting, leaving little obvious one-off efficiency gains for a new owner.

On the other hand, it is not all dark clouds for investors in these industries. With the windfall tax out of the way, Labour's other big idea for the utilities - the review of regulation - looks like being much softer than might have been expected. The electricity and gas regulators are to be merged, boosting customer input in decision-making and replacing individual regulators with a board of experts, but none of this is likely to give shareholders across the Atlantic sleepless nights.

Nor will the suggestion of a common approach to price regulation across different utilities - another likely Green Paper suggestion. Some of the more worrying aspects of earlier Labour policy, such as the idea of creaming off excess profits by assessing companies on an annual basis, seem to have been quietly dropped. In many respects, then, the Green Paper ought to improve the position for investors by offering to replace the present potential for unexpectedly controversial decisions from regulators with a degree of certainty.

None of this will come as any comfort to PacifiCorp. By the time it makes up its mind about a new bid, it could be too late.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss