Web of intrigue surrounds sale of Grid shares

COMMENT

Both Hanson and James Capel were protesting their innocence loudly last night, but from this side of the fence it is hard to treat yesterday's pounds 400m disposal of a 12.5 per cent stake in the National Grid with anything other than the utmost suspicion.

The questions start with why Hanson should be disposing of these shares at all at this price. Hanson is on record as believing that they are worth a lot more while the company's planned demerger apparently solved the problem of the Government's insistence that it must dispose of the shares within a year of the National Grid's flotation.

The buyer is James Capel, which says it has hedged the position with the Olayan group of companies, a privately owned Athens-based concern that likes to dabble in derivative transactions of this sort. It just so happens that one Niven Duncan, a consultant to Olayan, used to be a non-executive director of Eastern Electricity, Hanson's electricity arm. Coincidence?

Why yes, says Hanson's Chris Collins, who insists that his company has no remaining beneficial or economic interest in the shares whatsoever.

That's what he says, so we must believe him, but there is still puzzlement in the City as to why James Capel should want to tie up pounds 400m of its capital in the National Grid, hedged though the position may be. Does the hedge give Olayan, with its strong Saudi connections, any kind of an interest in the National Grid? Who does James Capel plan to sell them to? And is this a transaction that qualifies for normal market-making privileges? The situation demands further explanation, even if the answers ultimately prove entirely satisfactory.

Littlechild goes out on his own

Here's a conundrum. 1995 was the year when the electricity industry was consumed in a frenzy of takeover activity that saw shareholders rewarded royally and consumers by and large left out in the cold. You might have thought that any watchdog worth his salt would have something to say about this state of affairs and indeed Professor Stephen Littlehild, the director general of electricity supply, does.

His verdict is that 1995 was "another good year for electricity customers". Complaints fell (unless you happened to be supplied by East Midlands Electricity, which was so busy downsizing itelf that it temporarily forgot it had any customers at all). Prices also fell (unless you happen to live in the North-west and get your juice from Norweb, which conveniently discovered that it had "under-recovered" its costs the year before and so whacked up prices by 5 per cent.).

Now Professor Littlechild is a contrary sort of regulator so perhaps we should not be too surprised at his stout defence of the electricity industry's record even as the evidence suggesting something less flattering is mounting before our eyes. Moans about quality of supply - power cuts to you and me - have not decreased in aggregate at all. Against Midlands and Yorkshire they have increased considerably since privatisation and they have more than doubled against Eastern.

Professor Littlechild's other bold assertion yesterday was that the industry was "on track" and ready to meet the deadline of April 1998, when the domestic market will be thrown open to unfettered competition. Professor Littlechild may believe this but it is virtually impossible to find anyone inside the industry or government who shares his faith.

The opening up of the electricity market is likely to be so fraught with difficulties that it will make the Government's less-than-impressive attempts to liberalise the gas market look like a masterful piece of execution. It is just conceivable that the industry will have the systems in place by 1998 that will enable customers to switch off their local Rec and shop around elsewhere for supplies.

But please don't ask if the system is actually going to be tested out on anyone resembling a real customer before it goes live in front of an audience of 23 million domestic consumers.

Given the mixed reception competition is getting among gas customers in the South-west, proper trials might seem to be a prerequisite. It is unclear whether we will get any. Regional trials are a non-starter because any Rec that is singled out as a test bed will claim competitive disadvantage. Nationwide trials look a better bet but anything resembling a decent sample will run the risk that the Recs lose customers for their coal-powered contracts in the franchise market.

When competition was introduced into the 100-kilowatt market and above - a market that consists of just 50,000 customers - the result was such a dog's dinner that the accountants Coopers and Lybrand remarked that, if repeated with the domestic market it spelled "potential disaster". Professor Littlechild's problem is that he has to believe 1998 will happen. It was, after all, his obstinate belief that 12 independent Recs as opposed to a a handful of integrated players was the best way to achieve competition that made him oppose the National Power and PowerGen takeovers.

Nobody else has to share that view. Nor are they likely to.

NatWest outgunned in the Channel

That was the coup that never was. The troops were marshalled, the ground prepared, the Sunday press briefed and ... er ... well, perhaps not yet chaps. At the last moment NatWest lost its nerve and abandoned its whispering campaign to oust Sir Alastair Morton as co-chairman of Eurotunnel. It is only possible to speculate on why, since, as is usually the case with failed coups, NatWest is now refusing to admit that any such plan was ever hatched.

Suffice it to say that the threat of legal action if it could be shown that NatWest had become actively involved in the management of Eurotunnel was a potent reason for holding back. By pushing for Sir Alastair's removal, even in a roundabout sort of way, NatWest was perilously close to making itself a shadow director of Eurotunnel, which in turn laid it open to action by angry shareholders desperate for retribution from anyone with the money to pay. In French law, and to some extent British as well, NatWest might have been made liable for what many shareholders insist was an essentially false prospectus.

Presumably NatWest hoped that by removing Sir Alastair it would gain a more compliant Eurotunnel board, one that could be bulldozed more easily into the kind of reconstruction bankers, as opposed to shareholders, want to see.

It didn't work. Sir Alastair is indeed planning to leave, but in his own good time and after negotiating a deal that ensures at least a proportion of the tunnel's future cash flow is guaranteed to its long-suffering equity investors. Bankers might like to believe they still hold all the strings, but it is nice to know that just occasionally they still get out-manoeuvred.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor