Recs grit teeth for Grid sale tax bill

PETER RODGERS

Business Editor

Regional electricity companies were bracing themselves yesterday for tens of millions of extra capital gains tax if the price of National Grid shares jumps significantly on Monday, when official trading begins.

The way was paved for the flotation when extraordinary general meetings of seven of the 12 Recs approved distribution of the companies' grid stakes to their shareholders. This means REC shareholders will own just over half the Grid when trading starts.

However, there were suggestions in the market that the opening price could be 220p or more compared with the 209p at which Grid shares closed last night on the grey market, which trades the right to buy the real paper next week.

Last night's grey market valuation of the Grid was pounds 3.5bn, in line with the estimate made at the time of a complex tax and customer rebate deal with the Government.

Estimates of the capital gains tax bill for the Recs were based on a pounds 3.5bn valuation but at 220p the Grid would be worth nearly pounds 3.7bn, bringing a significant extra tax benefit for the Government. Capital gains tax is likely to be based on the value of the Grid on the first day of trading.

Directors will be able to count their stakes on Monday. Executive directors are to receive extra dividends worth pounds 408,000 on top of shares worth pounds 1.23m and potential option profits of another pounds 400,000, based on the grey market price.