'Fat cat' squabble over Grid sell-off

Seeboard chief 'deeply concerned' about privatisation plans as Government secures pounds 50 rebate for consumers
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The Independent Online

The Government was last night embroiled in yet another embarrassing row over top pay in the privatised utilities, despite securing a pounds 50 rebate on the bills of every electricity consumer as a result of the sale of the National Grid.

Directors of the grid have successfully defied intense ministerial pressure to waive special dividends to be triggered by the December flotation, including one of at least pounds 190,000 on the shareholding of the chairman, David Jefferies. Three other directors will get payments of pounds 125,000 between them.

The directors also came under attack from one of their major shareholders for accepting the payments. Sir Keith Stuart, chairman of the south eastern electricity company Seeboard, said he was deeply concerned at the National Grid directors' decision and urged Mr Jefferies and his colleagues to change their minds.

He said "We have made our views known to the National Grid Holding Board over many months, and some weeks ago directly to the Government, expressing my board's deep concern on this matter. We continue to urge the directors of National Grid to reconsider their position."

He said the special dividends were to help the electricity companies that own the grid to pay their capital gains tax and the pounds 50 consumer rebate; they were not meant for individuals.

Tim Eggar, the energy minister, wants the directors to back down for the same reason.

However, he said that every household would now receive the equivalent of two months' free electricity in the New Year and this meant a total reduction - with other planned cuts - of around pounds 90 for the typical consumer next year."This is an enormous bonus for 21 million customers. It could not have happened without privatisation," he said.

But there was no attempt to disguise intense ministerial frustration at their failure to persuade the directors to waive their legal entitlement to windfall "special dividends", which Labour said will bring Mr Jefferies total pay and perks package to pounds 2m. Mr Eggar, who was privately said to have been "incandescent", admitted: "I would have welcomed it had the directors felt able to waive their legal entitlement."

Gordon Brown, the shadow Chancellor, seized on the payments as fresh justification for Labour's plans for a windfall tax on the utilities of up to pounds 3bn and declared: "Consumers will be dismayed they get pounds 50 while Mr David Jefferies gets five additional bonuses to give him nearly pounds 2m. Yet again under the Tories the boardroom of our privatised utilities comes before the consumer and the taxpayer."

Mr Eggar insisted the rebate was in line with the recommendations of consumers' organisations and added that consumers would benefit by more than pounds 1bn. He had not been prepared to let the directors' dividends stand in the way of a sale which directly benefited consumers.

"This is only possible because privatisation allowed the grid to show what it could achieve when set free from the constraints of the public sector ... Now the full value will be put on the market and customers - and the public more generally as taxpayers - will share in that growth.

Labour's calculations of Mr Jefferies's overall remuneration are based on his salary last year of pounds 328,000, exercised share options - sold and unsold - of pounds 945,000, dividends on exercised share options of pounds 35,944, share options still to exercise and sell of pounds 487,669 and the special dividend of pounds 189,000, though experts yesterday suggested it could be more than pounds 200,000.

Mr Eggar said that the recommendations of Sir Richard Greenbury on restricting bonuses and share options to executives - which post-date the terms set for the directors of the grid - would be taken fully into account during privatisation of the nuclear industry.

And he took issue with Mr Brown's claim that the total value of the sale was pounds 5bn - nearly five times as much as the value to consumers and taxpayers. He hinted that it was closer to pounds 3-pounds 3.5bn.

Mr Jefferies and his colleagues remained defiant. A spokesman for National Grid said: "These are not like share options - these are actual shares for which they have paid hard cash and as shareholders they are entitled to receive the dividend."

He added that the board's view was reinforced by the fact that 500 individuals below board level in the company also owned shares and "are legally entitled to the dividend".

At board level, Mr Jefferies owns 88,949 shares, which with a special dividend thought to be more than pounds 2 a share would give him a minimum of pounds 180,000. The three other directors to benefit are Eric Chefneux, engineering services director, who owns 20,000 shares; Colin Gibson, Power Network director, who owns 9,312; and John Uttley, finance director, who owns 29,353.

The row overshadowed Mr Eggar's announcement of the rebate, which is substantially higher than the pounds 35 mooted only weeks ago. It is worth pounds 1.05bn to consumers, but will cost the companies only pounds 700m, because it includes VAT savings and the companies will pay less tax because their profits will be lower.

Payout battle, page 23