Power firms plan MMC fight against price curb

Appeal against Offer could help to fend off unwanted bids

BY MARY FAGAN

Industrial Correspondent

At least one of the 12 regional electricity companies - known as recs - is likely to reject the latest price controls, announced last week by the industry regulator Offer, which are intended to cut pounds 1.25bn from electricity bills over four years.

It is likely the companies will take the option of taking their case to the Monopolies and Mergers Commission instead.

Among those firms industry sources say are actively considering taking the MMC route are East Midlands Electricity, Yorkshire Electricity and South Wales Electricity.

According to these sources, the latest price proposals from Professor Stephen Littlechild, director general of Offer, will be hard for some companies to accept because he has changed his view of the asset base on which the allowed returns to the companies are calculated.

One senior executive who feels the Offer proposals are wrong said: "It really is almost a fraud to investors."

There is also a view that some companies will go to the MMC to fend off the expected flurry of takeover bids following the expiry earlier this year of the Government's golden share in the companies.

Yorkshire, thought to be a target for takeover by Scottish Power or Hanson, may see a lengthy MMC investigation as a useful defence tactic.

The company has been the focus of attention for months because of the stake held by Swiss Bank in a market-making capacity. The stake was once about 8 per cent but recently dropped to 5 per cent.

Trafalgar House is set to appoint Robert Fleming as its advisor on a renewed bid for Northern Electric following the lapse of its pounds 11 per share offer in March.

Northern is likely to be amongst the first of the 12 recs to accept the new price controls, clearing the way for a fresh attack from Trafalgar House.

Trafalgar's previous advisor, Swiss Bank Corporation, has had to stand down following its acquisition of S.G.Warburg, formerly advisor to Northern.

Trafalgar, which was prevented by Northern from launching a second bid at pounds 9.50, is thought to be preparing to come back at about pounds 9, valuing Northern at around pounds 1bn. Northern's shares, which rose to 858p on Friday, are regarded as already showing something of a bid premium.

Some industry analysts said yesterday that the Trafalgar situation may be a one-off, and industry consolidation less than expected by the market.

This is because Trafalgar has huge tax losses which it has been unable to set against profits recently, because it has been in the red.

Buying Northern would enable Trafalgar to set these losses off against Northern's steady cash stream. Not many companies are in the same boat as Trafalgar, according to these analysts.

The largest rec, Southern Electric, would like a merger, and is thought to have attempted to link with Midlands Electricity lasy year, creating a group worth pounds 3.5bn, but was rebuffed. Its favourite potential merger partners now appear to be South Western, Seeboard and London.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
News
people
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
ebooks
ebooksA special investigation by Andy McSmith
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

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn