NORTHERN Electric, the electricity supplier, yesterday faced its second hostile bid in two years as CalEnergy, an independent US power producer, launched £766 million sterling offer.

CalEnergy also scooped up 12.88 million Northern shares, a stake of nearly 13 per cent, at its offer price of 630p a share, in one of the most successful dawn raids yet on an electricity company. Analysts said this suggested Northern might have a tougher time fighting off this bid than that by Trafalgar House, the British property and construction company, made in late 1994 and early 1995.

If successful, Northern would become the UK's fourth regional electricity company to fall into US hands - giving US groups nearly 30 per cent of the electricity market in England and Wales, measured in customer numbers. Northern's board said the offer was too low and told shareholders not to sell.

The offer values Northern's ordinary equity at £651 million. A separate offer for the company's preference shares at 103p would cost another £115 million. Northern's shares closed at 648p - 18p above the offer and well above Friday's close of 520p.

The two sides traded claim and counter claim following Northern's statement that CalEnergy had at the weekend talked of an offer at "around 700p" a share.

CalEnergy denied it had talked about such an offer.

Northern successfully fought off Trafalgar House's hostile bid by adopting a "shareholder value" strategy which included special dividends and the issue of preference shares.

Some analysts said yesterday that CalEnergy's bid a fair valuation for Northern Electric and the success of the dawn raid underlined the willingness of UK institutions to quit the utilities sector when offered cash.

The sector faced an uncertain short term future, with a capricious regulatory framework and the Labour Party's promised windfall tax on privatised utilities seen to have made excessive profits.

These concerns, however, were not shared by CalEnergy, which is advised by CS First Boston. Mr David Sokol, CalEnergy's chairman and chief executive, said it had taken a possible windfall tax into account in planning its bid.

CalEnergy has total assets of $3.5 billion. In the year to September it had turnover of $480.4 million and profits of $83.8 million.

It owns, or has under construction, 3,000MW of power stations. Its US assets are in California, New York and Texas; abroad it has investments in the Philippines and Indonesia.