Ian Marchant, Southern's finance director, predicted that the abolition of ACT would end the recent vogue from the privatised utilities for complex capital restructuring schemes, designed to hand back cash to investors but avoid the tax charge associated with straightforward buy-backs.
In February Southern returned pounds 156m to shareholders through a share consolidation. Yorkshire Water and BG, the former British Gas, both followed Southern's lead this year. However Mr Marchant said he was disappointed that the tax change would not take place until 1999.
Southern also predicted a wave of consolidation in the privatised electricity industry if the Government allowed regional power companies (RECs) to split their supply and distribution businesses. Jim Forbes, chief executive, said Southern had already been approached by other power groups.
"We talk to everyone. We have to look at these things but we can't say yet what will happen. This is still two years away," he said.
Shares in Southern fell 8p to 447p yesterday after the group revealed a pounds 9m drop in half yearly profits, to pounds 103m. Earnings from its non-regulated contracting businesses slumped from pounds 7.4m to pounds 1.5m, following a sharp drop in orders at its MP Burke subsidiary, which lays television cables. Southern said Cable & Wireless Communications, its biggest customer, had cut its investment budget "overnight."
Mr Forbes also warned that Southern's supply business could lose money in 1999-2000, the second year of a new price formula which caps customer bills for the first time.