Outlook: Ed Wallis pulls it off

THE ONLY nose out of joint after yesterday's East Midlands Electricity deal appears to be that of PowerGen's former managing director, Deryk King. He will not be slipping into Ed Wallis's chief executive shoes after all. Never mind: three months' gardening leave and a pounds 400,000 pay-off should soften the blow.

Otherwise Ed seems to reckon he has the deal pretty much sewn up. PowerGen has learnt its lesson from two years ago, when both ministers and the Monopolies Commission balked at the idea of letting one half of Britain's generating duopoly take over a regional supply business in the shape of the next-door Rec, Midlands Electricity.

This time all the angles are covered. The regulator, Professor Stephen Littlechild, looks to have been brought onside by Ed's promise that he will sell off 2,000 megawatts of coal-fired capacity. Even Mrs Blockit, President of the Board of Trade, may have difficulty living up to her reputation since making power station disposals such a cornerstone of the Government's new energy policy. In fact, Ed looks positively like Mrs Beckett's star pupil compared with the truculent schoolboys round at National Power, who are so intent on digging their heels in.

So confident is PowerGen of getting away without a referral that the only thing on which it has made the East Midlands deal conditional is its own shareholders' approval. Taking the regulators for granted can be a high-risk strategy (as Ladbroke discovered when it bought the Coral bookmakers chain off Bass unconditionally). But Ed is also carrying a stick about with him. No East Midlands means no more coal purchases means no more miners' jobs and a big hole in the coal rescue programme.

East Midlands is, of course, only the appetiser. The main course remains the transatlantic merger with Houston Industries, which would double PowerGen in size and put it on another plane altogether. Tucking a Rec under his belt may prove to be a picnic in comparison.

Even supposing PowerGen and Houston can construct a company with dual listings in London and New York which satisfies both sets of shareholders, they still have to sort out who will run the business. As many before could testify, mergers of equals are not the easiest to pull off.