The Grid became the latest privatised utility to announce a complex restructuring of its share base in what it claimed was a more tax-efficient way of handing back cash to investors. If shareholders vote in favour of the scheme, they will receive a 44.7p-a-share special dividend early in the new year, equivalent to 15 per cent of its market value.
At the same time, the Grid will reduce the number of shares in circulation by a similar figure. The scheme follows complex share consolidation operations carried out by Southern Electric, Yorkshire Water and, most recently, BG, the former British Gas.
But some big investors were surprised by a further twist to the scheme, where the Grid will invite shareholders to reinvest some of their windfall in a convertible bond issue worth between pounds 300m and pounds 500m. The company said the funds would give it the flexibility to invest in big overseas transmission projects in the future.
One institutional shareholder said he was puzzled by the bond issue. "This all seems a bit unusual. They are under pressure to hand back money to shareholders but they think they might need it in the future. You either need the money or you don't."
David Jones, the Grid's chief executive, defended the role of HSBC Investment Banking, which devised the scheme. Another HSBC arm, James Capel, is the biggest holder of Grid shares with an 11 per cent stake. The shares are owned by James Capel on behalf of Olayan, the Saudi investment group which has made substantial profit on its stake. Mr Jones said there was no connection between the two parts of HSBC.
The special dividend is the first move at the Grid by Stephen Box, the finance director who joined in August from Coopers & Lybrand, the Grid's auditors. Mr Box said: "It gives us the flexibility when an acquisition comes along."