Bottom Line: Offer proves a party-pooper for high-flying generators

THE UK power generators' share prices dimmed yesterday amid fresh concern that Professor Stephen Littlechild, director general of Offer, the industry watchdog, is poised to spoil the party after a year that saw the shares of PowerGen and National Power leap 90 and 70 per cent respectively.

Offer is worried that they have too much influence in the electricity trading system and are charging too much for power. He also suspects that both should be doing more to promote competition by selling power plants, redundant or otherwise.

Last month Professor Littlechild warned that he wanted guarantees on both issues and said he would decide whether to seek an MMC inquiry by mid-January.

The timetable is tight and neither generator is completely clear about the form of guarantees required by Offer.

For their part, they argue that prices in the electricity trading pool have risen to a level where they cover avoidable costs. Neither have they fallen over themselves to sell plant to other prospective generators.

PowerGen has sold some power stations but only for export to China, despite interest from a potential buyer in the UK, while National Power feels it is losing market share to the Scottish generators and Nuclear Electric quite rapidly enough.

A deciding factor could be the government's 40 per cent stake in each generator - currently worth a combined and much needed pounds 4bn - which is likely to be sold in 1994/5. Yields of 3.7 per cent and 3.2 per cent for 1994/5 at National Power and PowerGen coupled with a fast-rising dividend stream still look attractive.