BRITAIN has stunned investors and sent electricity share prices reeling with a surprise decision to block two controversial takeover bids by electricity generators National Power and PowerGen plc.
Trade and Industry Minister, Mr Ian Lang, said yesterday the bids for the respective regional electricity firms, Southern Electric and Midlands Electricity, could pose "significant detriments" to competition.
Mr Lang's statement blocks National Power's £2.5 billion sterling bid for Southern Electric and PowerGen's bid for Midlands Electricity, initially pitched at £1.95 billion before lapsing on referral to the Monopolies and Merger Commission (MMC) last November.
Mr Lang's ruling, which overruled an earlier decision by the MMC that the bids should be allowed to proceed, came as a shock because the mergers had been widely expected to be cleared.
The government had already cleared six bids for Britain's 12 regional electric companies which were floated in 1990.
The move is significant as it marks the first time Britain has called a halt to the wave of takeovers which has transformed the industry since privatisation.
The news sparked a wide sell off in the electricity sector. Southern Electric dived 79 pence on the news to close at 824 pence; Midlands Electricity shed 40 pence to 371; and other electricity stocks tumbled in their wake.
It may also affect a possible takeover bid for National Power by US power giant Southern Co.
Southern Co stunned investors last week by saying it was interested in a "combination" with the British generator.
Mr Lang said vertical integration uniting both generating capacity with supply operations in the power industry was not inherently objectionable, noting he could consider further takeovers on their independent merits.
The Department of Trade and Industry confirmed that there were three key concerns behind its decision to block the bids.
A DTI spokesman said the concerns related to ". . . equity interests in independent power producers, power purchase contracts providing access to commercially valuable information and the possibility of extensive hedging between integrated generators and supply businesses".
Both National Power and Southern Electric said they were disappointed by the decision and that their proposed agreed merger had now lapsed.
Analysts had seen National Power's rush to renew its bid for Southern Electric as an attempt to ward off a possible hostile bid from Southern Co.
It was not yet clear whether the ruling would deter any bid by Atlanta based Southern Co, the largest quoted US power group.
