pounds 408,000 dividend bonanza for National Grid directors

Power flotation: Prospectus shows controversial payments to four grid directors to be supplemented by extra pounds 91,000
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The Independent Online

Business Editor

Executive directors of National Grid will receive a total of three extra dividends worth pounds 408,000, it emerged yesterday in the prospectus for the flotation next month.

On top of a controversial special dividend of more than pounds 300,000 that the Government tried unsuccessfully to persuade them to give up, four directors will receive a further pounds 91,000.

These payments come from a pounds 63,000 dividend on a bonus share issue and pounds 28,000 dividend as part of a rights issue, and are in addition to normal dividends of pounds 26,000 on shares that they hold in the grid company.

The four directors, led by chairman David Jefferies, are sitting on shares worth pounds 1.34m and potential option profits worth at least another pounds 400,000. This is on the basis of the 228p closing price yesterday on the Stock Exchange's "grey market" ahead of the flotation.

The company defended the additional dividends partly on the grounds that the directors are obliged to subscribe pounds 63,000 of their own money to the rights issue if they are to maintain their holdings.

The prospectus also discloses that a fifth executive director, Roger Urwin, who has just joined as managing director for transmission from London Electricity, could earn just over pounds 250,000 with pension and maximum bonus.

Mr Urwin has not been given any National Grid Group shares or options in his new post, although as a shareholder in London Electricity he was entitled to receive more than pounds 200,000 of grid shares as a result of the flotation. His total London and NGG packages this year are well over pounds 1m, and he is to join a new performance-related bonus scheme to be set up by the grid.

Mr Urwin and another new director, Wob Gerretsen, are on two-year fixed contracts, which will become one-year rolling contracts when they expire. NGG rejected Labour criticisms that this broke the new Greenbury rules.

Furthermore, the directors will be given pounds 156,000 worth of shares in the pumped storage business that has just been spun off from National Grid as a prelude to a trade sale. The company valued the pumped storage business at pounds 450m. A spokesman said the shares for directors were to compensate for a fall in the value of their holdings in National Grid as a result of the demerger.

The shadow Chancellor, Gordon Brown, called their total package "the biggest privatisation scandal so far" and accused the Government of riding roughshod over the proposals of the Greenbury Committee on executive pay.

National Grid announced profits 7 per cent higher at pounds 330.7m on turnover 11 per cent higher at pounds 706m, but disappointed the City with higher-than- expected start-up losses of pounds 40m at Energis, the new telecoms subsidiary.

Yesterday, seven electricity company shareholders in NGG, with stakes of just over 50 per cent, announced the terms on which they would pass on their shares to their own shareholders. All holdings must be sold within a year.