Your step-by-step guide to plug into the power issue

The latest electricity sell-off is on a relatively modest scale but looks a good medium-term investment. Nic Cicutti tells you the best way to go about it

ALMOST 2.5 million people have formally declared an interest in taking a stake in the Government's flotation of its remaining shareholding in National Power and PowerGen. The total is likely to rise sharply before the deadline for registering with an approved share shop expires - at close of business on Tuesday.

The power flotation is not on the scale of 1980s-style utilities sell- offs like British Telecom and British Gas. However, the Government still hopes to raise up to £4bn from the sale of its remaining 40 per cent stake in both companies.

Small investors must ask themselves two related questions this weekend. The first is whether the issue is worth buying into. The second concerns how to go about buying the shares, assuming they are deemed to be worth it.

On the first point, there is virtual unanimity among financial experts that, although the power sell-off is not a stagging issue, it is a worthwhile medium-term investment with excellent income opportunities.

Robin Boyle, managing director at stockbrokers Dunbar Boyle & Kingsley, said: "Both companies generate strong cash flow, enabling them to pay debts, invest for the future and -of most importance to shareholders - increase dividends substantially.

"Dividend growth will be strong, even ignoring profits growth and underlying cash generation. We think its dividend growth could be as high as 15 per cent a year until 1998, nearly 75 per cent higher than it was in March last year."

For investors, then, the key argument is that of how to join in the scramble to buy shares. This is complicated by many different options available in the sell-off and the fact that there is not much time left.

Here is a simple guide to what you should do:

q The most important single step is to register with a share shop. This registration entitles investors to bid for shares in the public offer. Registering is done by contacting, by telephone or in writing, one of the 100-plus appointed stockbrokers, banks, building societies and other dealers that are taking part.

q Choosing a broker may be determined, at least in part, by the special deals - including free draws with cars, holidays and other goodies as prizes - on offer to potential investors. However, speed is of the essence and a no-frills service may well be more important. There are no buying costs.

It is also worth checking if individual share certificates are sent out by the broker, as at least one, Hargreaves Lansdown, intends to do. Otherwise, investors will have to pay extra if they eventually sell the shares.

A mini-prospectus will be sent to all those who register by Tuesday. Applications for shares can then be made through the share shop. Dealing in the shares begins on Monday, 6 March.

q Large share allocations may be scaled down, so it pays not to be avaricious. To minimise this risk, it is worth applying in the names of other family members as well as for oneself. The minimum investment required will be for 200 shares. This is £352, based on present market prices. Pre-payment is expected.

q Taking part in the public offer also means that one receives a predetermined ratio of three National Power to two PowerGen shares.

Some brokers claim PowerGen shares are preferable, because as a smaller company it is less likely to lose market share in what is likely to become a highly competitive market.

Anyone wanting a different ratio of shares has to bid for them through a separate offer mechanism, called "retail tender". Share shops can give details of this procedure.

Although applicants are more likely to receive large allocations using this way, they will miss out on the attractive discounts available through the public share offer. The minimum first instalment through the retail tender system is £3,000.

q Investors wanting to invest in their shares through a tax-free PEP can do so through many banks, stockbrokers and share shops. This route is available for first instalments between £3,000 and £6,000, the PEP maximum.

Either the current tax year's PEP allowance is usable or the one from 5 April. However, as with the retail tender, public share offer incentives are not available via this route.

q One final point for investors to remember is that they are paying only about a third of the final price right away.

It is not a good idea to invest more than one can afford. A second instalment will fall due on 6 February 1996 and the final one comes up in September 1996.

What dealers are offering

Company Incentives

Barclays Share Shop Share certificate sent free. 0800 000888

City Deal Services Free registration Virgin Freeway Miles 0708 738887 plus 100 miles (or 300 for members)

Hargreaves Lansdown Free draw for £13,000 Mazda 323; 0800 301301 No extra for issuing share certificate.

Lloyds Share Shop Share certificate sent free.

0800 211211

Norwich & P'borough 50% discount on future transaction;

0800 550088 50% fee discount `retail tender' sales; Entry to draw Norwich City VIP tickets; Free £2 BT Phonecard if dealing through `Broker Care' nominee/deposit account

National & Provincial No joining fee before end of April.

0800 506070

Sharelink Free 12 page investment report.

0121 200 9000 Phone dealing commission on sales halved to £10; commission cut from 1.5% to 1% first £2,500.; free PEP transfer. (general or single company)

Skipton BS Future dealing charge cut to £5. 0800 310031

The Share Centre Entry in draw for holiday in India. 0800 800008 Sales commission starts at £6.75.

Yorkshire BS No sales commission before end April 0800 573573 £5 membership fee waived.