As a discouraged Southern delegation flew home at the weekend after being summarily rebuffed by National Power, it emerged that the company required special approval from the SEC to double the amount it can invest abroad to $3.4bn (pounds 2.3bn).
The Campaign for a Prosperous Georgia (CPG), a consumer pressure group in Southern's home state, unsuccessfully opposed the change saying it would reward the company for its "poor record on pollution", according to SEC documents obtained by the Independent on Sunday.
But even with the commission's favourable ruling in pocket, the plan to merge the two electricity giants could be still be abandoned because of opposition from National Power's board.
Although industry analysts are predicting a hostile bid, possibly priced as high as 700p per share, there is evidence that Southern was hoping to avoid a fight.
Unlike its last foray into the UK market, which began with a dawn raid for Sweb shares followed by a hostile takeover bid, the approach to National Power was intended to be friendly.
The Southern delegation met briefly last week with National Power's chairman, John Baker, but only had time to tell him that Southern had no intention of stripping the company down and milking it before the door to talks was slammed shut.
"They'll be thinking about it for a while," said one source close to the deal. "They're certainly not sharpening their knives. You may never hear from them again."
The approach - prompted by a sharp jump in National Power's share price on bid rumours - came during a break in Southern's attempts to raise interim finance in the City to back the deal.
But the timing of the whole project was dependent on the SEC's ruling earlier in the month that the company could continue its aggressive expansion.
Under the 60-year-old Public Utility Holding Company Act, it was limited to investing at most 50 per cent of its consolidated retained earnings in overseas ventures. It already has a portfolio - including Sweb - worth $1.2bn, just $480m below the old cap. Under the new limit it will be able to spend another $2.2bn
However, a hostile bid for National Power would probably cost more than pounds 8bn. The balance could be raised in equity and debt markets, as long as Southern's regulated operations at home are not put at risk.
The application for a change was endorsed by utility regulators in states where the company operates, but caused outrage among citizen activists at CPG.Reuse content