Generators plan hefty dividends

National Power and PowerGen set out to woo shareholders yesterday by unveiling hefty dividends for the current financial year. Marking the pathfinder prospectus for the £4bn goverment sale of shares in the companies, National Power said that the payout would rise by 24 per cent per share to 15.45p while PowerGen will increase its dividend by almost 19 per cent to 15p. The increase was announced as the Government confirmed that private investors must pay a minimum of about £1,000 to participate in the sale, buying a package of at least 200 shares in the companies. The minimum investment is higher than in other recent government offers, suggesting it is targeted at more sophisticated private investors.

The details emerged amidst warnings of regulatory uncertainty and the threat of the companies being referred to the Monopolies and Mergers Commission.

Professor Stephen Littlechild, director general of electricity supply, said a week ago that he might launch an investigation into wholesale electricity prices, which could result in an MMC reference. Professor Littlechild has also demanded that the companies sell power plants to increase competition or risk being referred to the MMC.

PowerGen warns in the prospectus that "there will be significant difficulty" in achieving power station sales that meet its own objectives and those of Professor Littlechild. National Power also highlighted the problems in selling plants. Both companies have argued in the past that they are being asked to sell market share and must get the right price for shareholders.

John Baker, chief executive of National Power, said that in spite of the problems the company would do all it reasonably could to meet the regulator's requirements on power plant sales. Both companies said they did not expect to end up with the MMC, but Mr Baker added:"In the event of an MMC reference, National Power will present a robust case."

The companies also acknowledge that wholesale electricity prices may this year breach the cap set by the regulator but say that this is due to factors outside their control.

Ed Wallis, chief executive of PowerGen, said: "I do not think anybody has got the grounds to send me to the MMC now or on the basis of anything that might unfold in the course of this year."

The pathfinder showed that the first instalment for the UK public will be 170p for each National Power share and 185p for each share in PowerGen. Institutions, which will pay more than individuals, will be told their first instalment on 16 February.

The second instalment for private and institutional investors will also be 170p in National Power and 185p in PowerGen. The third and final instalment will be set by institutions bidding for shares and will be announced on 6 March, immediately before dealings in the partly-paid shares begins.

Private investors who register and buy through an approved share shop will receive extra incentive discounts of 25p per share on the first 800 allocated. The discount will be split to give 10p off the second payment on 6 February 1996 and 15p off the final instalment in September 1996. The discount and alternative incentive of bonus shares are intended to encourage people to hold on to their shares.

The UK public must buy shares in a package of three National Power to two PowerGen, although the partly-paid shares will trade separately. Holders of the partly-paid shares will be eligible for the final dividend this year of 11.1p per National Power share and of 10p per share in PowerGen. Private investors can also buy shares through a retail tender as part of the international offer.

The tender, designed to allow people to buy more shares than they might be allocated in the public offer, carries no incentives, and requires a minimum £8,000 investment.

The Government announced 2.4 million people have pre-registered for shares in the public offer. At least 40 per cent of the total shares in the offer will be reserved for the public.

Outlook, page 25