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.Reuse content