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

Start your day with The Independent, sign up for daily news emails
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

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Why the cost of parenting has become so expensive

Why the cost of parenting has become so expensive

Today's pre-school child costs £35,000, according to Aviva. And that's but the tip of an iceberg, says DJ Taylor
Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US