Blow to PowerGen as bid mastermind quits

MARY FAGAN

Industrial Correspondent

John Rennocks, PowerGen's dynamic finance director, is unexpectedly to quit his post in a move which will shock the industry. Mr Rennocks is the mastermind behind the generator's proposed pounds 1.95bn takeover bid for Midlands Electricity, now in the throes of a Monopolies and Mergers Commission investigation. He is extremely highly rated among his peers and in the City.

His departure, which will be seen as a severe blow to the company, is not expected to take place until after the company announces its results in May. PowerGen is thought to have begun the search for a replacement to Mr Rennocks, who has seen the company through the various stages of privatisation, an ambitious expansion drive and two share buy-backs.

One source said yesterday: "He has had a Midas touch. He has done some pretty shrewd things and driven the company in the right direction. Part of the glitter of PowerGen is down to the fact that he has done a good job."

Another said: "The City people who have heard this might happen are appalled at the prospect."

The decision to leave is thought to have been taken following the recent appointment of a new managing director, Deryk King, former head of ICI's polyester business. Mr Rennocks is understood to have stated his desire for a change having guided PowerGen through the early years in the private sector. But it is unclear where he intends to go. Mr Rennocks is on a two-year rolling contract at PowerGen, with a basic salary of pounds 175,000.

There is speculation in the City that Mr Rennocks has clashed in some way with Ed Wallis, the chief executive, who is moving into the chairman's role when Sir Colin Southgate leaves after the annual general meeting in July.

The upheavals at the company emerge at an extremely sensitive time. The MMC is due to report on the Midlands bid, and that of National Power for Southern Electric, by 22 March. A government response may not emerge until the end of April, which means that PowerGen must decide its next move just as the main architecht of the original bid prepares to take his leave.

The bids lapsed when Ian Lang, President of the Board of Trade, referred them to the MMC, saying each raised competition concerns in electricity generation and supply. The decision shocked the companies because it was in sharp contrast to his clearance of five earlier bids, including that for Manweb by Scottish Power, which is also a substantial generator.

PowerGen now faces a time of enormous change in the market, with further takeovers and mergers of regional firms expected and an anticipated consolidation of the industry. There is also the prospect of a Labour government with a stated intention of imposing a windfall tax on utilities. That aside, it is unclear what approach Labour will take to regulation of the electricity sector.

The company is losing market share in UK generation to nuclear power and independent gas-fired generators and is expanding overseas. On Monday it announced the A$2.4bn acquisition with partners of a generating plant and coal mine in Australia. The company's own equity investment in Yallourn Energy is pounds 208m and gives it a 49 per cent stake.