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
Barn owls are among species that could be affected
charity appeal
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas