Railtrack heads for price tag of pounds 1.95bn

Railtrack was last night heading for a pounds 1.95bn price tag, at the top of the estimated range, as it emerged that more than pounds 6bn is chasing the institutional share allocations.

The offer to pension funds, insurance companies and other professional investment institutions is well over four times subscribed, City sources said.

The institutions are to be allocated up to 70 per cent of the shares and the offers they have made are believed to be at the top of the 350p- 390p range.

It is the institutional offers that will set the price on Friday, and private investors will pay 10p less a share.

The number of private investor applications for the retail offer is also thought to have passed 200,000 by the end of last week, several working days ahead of the close at noon today. The retail offer is believed to be oversubscribed on the basis of the number of applications already in.

But it was not clear last night whether there would be a big enough rush in the closing stages to allow the Government to increase substantially the proportion going to private investors from the minimum 30 per cent. The public success of the issue is likely to be measured by how far the retail offer is increased above 30 per cent, with a proportion of more than 40 per cent widely seen as the target.

However, City sources predicted a last-minute surge as share shops send in their final batches of applications. Almost 2 million investors registered for the offer, and on past experience the Government would be disappointed if less than 30 per cent of these - 660,000 - turned into formal applications.

There have been fears that the row over plans for price cuts announced by British Gas's regulator on Monday will deter investors in Railtrack, which is also a regulated utility.

If this row does have an impact, it is likely to show up in the pace of last-minute applications yesterday and this morning.

The argument between British Gas and its regulator was over how to value the assets of the company. But Railtrack's regulator last year abandoned the idea of setting charges on the basis of return on assets - as used by the gas regulator - and instead set them at levels that "would not make it unduly difficult for Railtrack to finance its activities," according to the prospectus.

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