London Electricity pays out pounds 200m special dividend

Utilities turmoil: Handout to shareholders helps to buttress power company against the threat of predators

MARY FAGAN

and PETER RODGERS

London Electricity yesterday announced a pounds 200m special dividend, taking its total existing and planned distribution to shareholders to pounds 700m. The move could benefit the former chief executive, Roger Urwin, by up to pounds 100,000 from his remaining shares. Other directors will share about pounds 33,000 in all.

The pounds 1-a-share dividend, which was immediately attacked by the Labour Party, is bound to be seen as a pre-emptive defence against a takeover bid since London is one of only four regional electricity companies that have not yet received an offer. But a spokesman denied that the give- away was to block a predator.

John Battle, Labour's energy spokesman, said: "In the brave new world of competition the balance of governance between shareholder and consumers is increasing tilted in favour of shareholders."

Mr Battle accused London Electricity of putting "those at the top" first and of leaving customers at "the bottom of the heap". He added: "I hope this is not a sweetener to get shareholders on board in anticipation of a bid."

Besides the special dividend - which will carry an additional tax credit for pension funds - the company pledged to raise its ordinary dividend by 20 per cent in the year to March.

A spokesman for London said: "This is something the company would have done irrespective of whether there had been bid activity in the sector. We have been saying on more than one occasion that we feel obliged to return value to shareholders. This is precisely what we have been doing."

Several bidders are thought to be on the prowl still, including Houston Industries, the Texas utility.

Last month Thames Water, which had been widely tipped as the likeliest suitor for London, said that it was not interested in a merger although it would explore the possibilities for co-operation.

The pounds 700m distribution includes the value of London's previous share buy-back, worth pounds 150m, and also the promised pounds 350m distribution to shareholders of the company's stake in National Grid after it is floated next month. The shares rose 19p to 933p.

Sir Bob Reid, chairman, said that the special dividend delivered value to shareholders "while maintaining the company's ability to invest and develop its businesses".

A spokesman said the debt-to-equity ratio would rise to 60 per cent by the end of the financial year next March and he denied analysts' claims that it could be 90 per cent by then.

Apart from the pounds 50 rebate to consumers as part of the National Grid flotation - which all the electricity companies are to pay - London has no plans to hand extra cash back to customers.

The company's move came amid continuing speculation over a bid for South Wales Electricity by Welsh Water, which has confirmed that it is considering such a move. A meeting between the two yesterday was inconclusive and described by Swalec as "disappointing".

Welsh Water said it could not put a price on any bid until there was a "market value" established for the National Grid Company, in which Swalec has a stake and which is due for flotation in early December. Some City analysts believe that Welsh Water, which also said it would want any bid to be agreed, could end up with gearing of over 100 per cent if it took over Swalec. Shares in South Wales Electricity fell 1p to pounds 10.30 yesterday and those in Welsh Water rose 1p to 700p.