Sale of Grid faces delays in squabble over stakes

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The Independent Online
MARY FAGAN

Industrial Correspondent

Plans for the pounds 4bn flotation of the National Grid Company face a setback in coming weeks, with at least two companies expected to seek the right to hold on to their stakes.

It has also emerged that the Government and the 12 regional electricity companies which own the Grid have yet to start serious discussions about the NGC, making it increasingly likely that any sale would slip into next year.

Hanson, which has agreed a pounds 2.5bn takeover of Eastern Electricity, is expected to argue that it should be allowed to retain its 12.5 per cent grid stake after flotation, if it sees fit. This is in spite of the view of the Government and the regulator, Professor Stephen Littlechild, that all 12 companies - or their parents - should dispose of their shares.

A spokesman for Hanson, whose pounds 2.5bn offer price includes pounds 500m for Eastern's Grid holding, said: "The Grid stake will become an investment and we will be keeping our options open." Southern Electric International of the US, which has an agreed pounds 1.1bn offer for South Western Electricity, has also said that it would like if possible to retain some NGC stake.

One Whitehall source said that ministers were strongly against anyone in the electricity industry being linked to the NGC. "It is essential that the high-voltage transmission network remains completely independent. If you have anyone influencing that, you are in trouble," he said.

Earlier this week the Government cleared the bids by Hanson and SEI and that of Scottish Power for Manweb.

But in the undertakings given by the companies, only Scottish Power gave a commitment that the Grid stake would be sold on flotation.

Talks between the industry and the Government over the flotation are expected to resume within weeks. The main stumbling block is the size of the rebate customers should get on flotation.

The Government is expected to argue for pounds 25 to pounds 35 per household, with the companies fighting for as low a payout as possible.

One problem if some companies do not sell their stakes is that millions of customers could be deprived of their share of the windfall.

The Whitehall source said the industry had yet to put forward "a sensible proposition" and added: "When they are ready to negotiate we are ready to go."

The spate of takeovers in the industry, with more expected, has made the long-drawn out Grid saga even more complex and increased the view that it might have to be shelved.

One City analyst said: "History tells us that getting the companies to agree anything is a nightmare. There is a real risk now that the sale will be delayed into 1996 and there is a risk that it will not happen at all."

One issue which appears to be resolved is that the NGC will pay the 12 companies about pounds 850m in a special dividend before the flotation. But this would only partly offset the amount the Government takes in tax, which could be between pounds 700m and pounds 1bn, and the cost of the customer rebate.

There is also an ongoing row over the right of the Grid directors to their share of the special dividend. David Jefferies, chairman, stands to receive almost pounds 190,000 because of the size of his shareholding in the company, while three other directors would also be entitled to payouts.

Tim Eggar, minister for energy and industry, is said to be enraged that the directors appeared determined to claim their dividend and is threatening to block the sale unless they waive the payout.

Mr Eggar feels that the dividend, which is a mechanism to help companies offset the cost of the sale, should not be paid to individuals. It is feared that the issue could re-open the controversy over utility boardroom greed.

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