Power industry in turmoil as bid gets go-ahead

The Government threw the electricity industry into turmoil yesterday by approving Trafalgar House's £1.2bn hostile bid for Northern Electric. Bid fever gripped the sector, with City analysts predicting a spate of takeovers and mergers once the Government's golden share in the 12 regional electricity companies expires at the end of March.

Michael Heseltine, President of the Board of Trade, decided not to ask for an inquiry by the Monopolies and Mergers Commission in spite of advice from Professor Stephen Littlechild, the director-general of electricity supply, that the bid should be referred.

Mr Heseltine said he acted on the advice of the Office of Fair Trading and was seeking assurances from Trafalgar House that would alleviate Professor Littlechild's concerns over future regulation of the industry.

Mr Heseltine's move drew sharp attacks from Labour and from the National Consumer Council. Jack Cunningham, shadow secretary for trade and industry, said the decision not to refer the bid was "extraordinary and deeply unsatisfactory".

"Mr Heseltine's failure to intervene has left the door wide open to further bids for regional electricity companies without regard for the public interest," he said. Although the consensus was that no referral could be made on competition grounds, there was a widely held view that there might be an investigation in the interests of the public.

The NCC attacked the decision as "deeply disappointing" and lacking in common sense. Robin Simpson, head of policy at the NCC, said that the bid should be referred because it was the first takeover in the sector and because Trafalgar House was not a public utility service.

"This takeover sets a precedent and demands strenuous screening. Given that the electricity companies are already cash-rich it is hard to see what is in it for consumers. There must be cast-iron guarantees to ensure that domestic consumers do not end up subsidising the Trafalgar House side of the business," he said.

Trafalgar House has given undertakings to Mr Heseltine that, should the bid succeed, the core electricity business will have the management and financial resources it needs.

The group has also promised that Professor Littlechild will be given all the information he needs to carry out his regulatory role and that Northern will be given "appropriate financial separation and financial independence".

Because the undertakings are not legally enforceable, there will be related changes to Northern's licence that are enforceable. Professor Littlechild met Trafalgar House yesterday to discuss the matter but has not said what the change will be.

City analysts predicted an upside of up to 25 per cent for shares in the industry. The consensus is that the next most likely takeover targets include smaller regional companies including SWEB, which operates in the South-west, South Wales Electricity, Manweb and Seeboard. The other obvious candidate is Yorkshire Electricity, in which Swiss Bank Corporation has an 8.5 per cent stake.

SBC, which is advising Trafalgar on the bid for Northern Electric, has consistently told Yorkshire that it holds its stake as a market-maker. SBC also holds about 5 per cent of Northern, again as a market-maker.

Yorkshire declined to comment on the situation. Its shares rose to 884p from an opening price of 811p. Shares in Northern closed up 116p at £10.91p, compared with the Trafalgar cash offer of £10.48.

There has been speculation that Hanson is poised to bid for Yorkshire or another regional electricity firm. Other potential predators are rumoured to include Electricite de France, the French utility, and large global energy firms.

Trafalgar's bid for Northern is expected to pass another hurdle today when Northern's shareholders vote on whether to remove the ceiling that stops a single shareholder from holding 15 per cent or more of the company.

Comment, page 33

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
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

Trade Desk Specialist (Linux, Windows, FIX, Finance, Networks)

£60000 per annum: Harrington Starr: Trade Desk Specialist (Linux, Windows, FIX...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Project Manager - ETRM/CTRM

£70000 - £90000 per annum + Job Satisfaction: Harrington Starr: Project Manage...

C#.NET Developer

£300 - £350 per day: Harrington Starr: C#.NET Developer C#, WPF,BLL,MVVM, SOA...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform