PowerGen to buy back another 10% of shares

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The Independent Online
PowerGen, the electricity generator, is to buy back a further 10 per cent of its shares, bringing the amount of capital handed back to shareholders in the past 18 months to more than pounds 1bn.

This makes PowerGen the first company to embark on a major share repurchasing exercise since the Government outlawed the tax credits available on such buybacks and special dividends.

The buyback would cost PowerGen around pounds 370m at current market prices and would mean that it has repurchased almost 30 per cent of its shares since the Government sold its remaining holding in the company in spring last year.

Ed Wallis, PowerGen's chairman, denied the buyback proved it had plenty of money to pay Labour's threatened windfall tax or that it made it a virtual certainty that the company would be included in the scope of the levy.

"I don't think this does show we can afford the tax. It is a one-off situation and really quite separate," he said.

Mr Wallis also said that if the tax were to be imposed only on utilities that were monopolies, price controlled and had been laxly regulated, as Labour has suggested, then PowerGen did not fit any of those categories.

British Telecom, meanwhile, said it did not believe it would have to pay the tax because the company was now exposed to full competition for phone services. BT is also due to pay a pounds 2.2bn special dividend to shareholders next year.

Sir Peter Bonfield, the chief executive, said: "We don't believe we fall into the definition of what the Labour Party is saying. We don't fall into the definition of a utility."

PowerGen spent pounds 367m buying 10 per cent of its shares in May and June after the Government blocked its pounds 1.95bn bid for Midlands Electricity.

The buyback came as PowerGen unveiled a 4 per cent increase in pre-tax profits to pounds 138m for the first half and a market share of 22 per cent.

Separately, South West Water yesterday unveiled a better-than-expected 35 per cent increase in half-yearly pre-tax profits to pounds 72.9m.

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