Utility shares bounce back

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Utility company share prices soared on the stock market yesterday, despite the heavier-than-predicted levy payments for water and gas businesses, as dealers welcomed the confirmation that the tax would be a "one-off".

Only Hyder saw its shares marked down after Gordon Brown, Chancellor of the Exchequer, landed the Welsh multi-utility with a bill of pounds 282m, equivalent to a quarter of its market value. Directors of Hyder spent the day locked in a financial review.

"We want to come to a conclusion as soon as possible to stop speculation and rumour," said a spokeswoman. Analysts said it could raise the company's gearing levels to 170 per cent. Hyder shares fell 14.5p to 809p.

The biggest gainers included the power generators, with National Power shares surging 35.5p to 569.5p, an increase of more than 6 per cent. PowerGen's share price ended 41.5p higher at 771p. Even BG, the renamed British Gas pipeline business which will have to pay pounds 513m to the Treasury, saw its share price rise 9p to 238p.

Angela Whelan, utilities analyst from Credit Lyonnais Laing, said: "The key thing is not the scale of the tax, but the removal of uncertainty. It's now gone in a clean way and the Treasury won't be coming back."

Thames Water described its pounds 230m charge as "containable". David Luffrum, finance director, said: "The windfall tax is not materially harmful. The Government has made clear it's a one-off." Thames shares rose 26p to 766p.

But the precise tax bill for two companies, British Energy and the airports operator BAA, remained shrouded in confusion. BAA estimated its levy at between pounds 70m and pounds 100m, though some City calculations put it much lower.

Russell Walls, the finance director, said BAA would have to wait for the publication of the Finance Bill on Monday to finalise its bill. The confusion stemmed from the different flotation share prices in 1987 for small investors and City institutions.

Though BAA was pleased it had a relatively small bill, Mr Walls criticised the Treasury formula: "It doesn't strike me as terribly logical. I suppose they had to find some way of raising the money they needed but the 23 per cent figure seems a somewhat arbitrary number."