Strong start to power issue

INSTITUTIONAL shareholders around the world have provisionally agreed to buy all the stock available to them in the forthcoming sale of the Government's remaining stakes in National Power and PowerGen.

Brokers encountered strong institutional demand when they began approaching potential buyers on Thursday - a process known as bookbuilding. All £1.6bn of available stock, 40 per cent of the shares for sale, found provisional buyers on day one.

The hearty institutional appetite for the shares is an encouraging augury for the separate public offer for sale. Members of the public have until noon on Wednesday to lodge applications with share shops.

But the strong demand is likely to raise the strike price, the price buyers have to pay over the three instalments of the offer, which is still to be determined. According to sources close to the issue, institutions are valuing the new shares at 25p to 35p a share more than existing shares because of the instalment nature of the issue - investors get the benefit of dividends before paying second and third instalments.

About 600 institutions have indicated firm interest in both National Power and PowerGen. Kleinwort Benson and Barclays de Zoete Wedd, the joint global co-ordinators, used a further 15 syndicate managers to market the issue internationally.

About 3 million people registered an interest in applying for shares. Pricing and share allocation are scheduled to be decided next Sunday and first dealings in the shares will begin the next day.

The Government aims to sell about 40 per cent of the total issue to small shareholders. The minimum investment in the first instalment is £352, suggesting a total investment over the three instalments of around £1,000.

The privatisation is expected to raise around £4bn.