Power takeover binge stemmed

Click to follow
The Independent Online


The government yesterday called a halt to a pounds 14bn takeover binge in the electricity industry by referring two of the biggest bids to the Monopolies and Mergers Commission.

Ian Lang, President of the Board of Trade, surprised the City by refusing to approve a pounds 2.8bn bid by National Power, a privatised electricity generator, for Southern Electric, a local distribution company. He also referred a pounds 1.95bn bid by PowerGen, another generator, for Midlands Electricity.

But there were fears in the industry that by stopping the bids Mr Lang could be opening the door to takeovers of Southern and Midlands by foreign firms that are known to be on the prowl for UK utilities.

However, this is the first time Mr Lang has acceded to widespread political, consumer and trade union demands for electricity bids to be scrutinised by the monopolies commission. The inquiries will take several months.

He has been accused by Labour of allowing the entire structure of the industry agreed at privatisation in 1990 to be torn down and rebuilt without proper scrutiny.

Mr Lang and his predecessor, Michael Heseltine, have already cleared five other bids for privatised regional electricity companies, four of which have gone through.

But Mr Lang said he was referring the latest two bids because he was concerned about vertical integration between generators and distributors.

The National Consumer Council welcomed the referrals, saying domestic consumers in a captive market needed to be protected. "We are worried about the potential for abuse of market power if the bids are allowed to go ahead and we want to be sure safeguards are put in place to protect the interests of consumers."

Unions expressed guarded relief but warned that Midlands and Southern must not be allowed to become vulnerable to takeovers by foreign companies.

Full report, page 24