East Midlands to pay out further pounds 238m

East Midlands Electricity is to pay pounds 238m in a record special dividend, which will bring the total it has paid this way to shareholders to more than pounds 420m.

The special dividend of 120p a share, which will be worth 150p to tax- exempt institutions such as pension funds, was announced alongside pre- tax profits of pounds 96.7m for the first half of the year, a rise of 12.4 per cent.

The special dividend, to be paid in March, is the highest so far among the regional electricity companies and more than the City expected.

But investors were disappointed and the shares fell 36p because of what analysts saw as an ungenerous ordinary dividend policy compared with other Recs, of 9.2p a share, up 0.6p.

East Midlands pioneered the idea of returning money to shareholders in 1994, with a special dividend of pounds 185m, which was announced well before bid fever broke out in the sector and Recs began to lose their independence.

Norman Askew, chief executive of East Midlands, said there were no plans to give extra benefits to customers beyond the pounds 54.60 rebate already announced as a result of the flotation of National Grid. East Midlands transferred the value of its Grid stake directly to shareholders.

The company had a "pretty stringent" 29 per cent reduction of revenue to achieve by 2000 as a result of this year's electricity pricing review by Professor Stephen Littlechild, the regulator. "We don't intend to do any more," said Mr Askew.

Domestic customers were paying 12 per cent less in real terms than a year ago and a spokesman said there had been pounds 700m of price cuts to customers since privatisation.

The special dividend will raise the company's gearing to about 80 per cent.