Northern wiles bamboozle the learned professor

Now you see it, now you don't. Paul Daniels has nothing on Northern Electric when it comes to producing surprises from pockets we thought were empty. To find pounds 550m of goodies for its shareholders a fortnight after the regulator, Professor Stephen Littlechild, was supposed to have clamped down on electricity prices is wonderful sleight of hand. Proposals for an almost identical package were cited by the regulator as part of the reason for his price review.

Professor Littlechild had been perturbed that Northern was willing to increase its debt burden substantially - gearing would have gone up to 225 per cent - to pay for a package that would persuade shareholders to reject Trafalgar House's bid. This time, Northern is gearing up to a still-demanding 175 per cent. The only real change in the pounds 5.01 per share offer for shareholders is that part of a pounds 1.50 special dividend is to be deferred until February 1997.

Northern's comeback is possible because Professor Littlechild stuck doggedly to his view that past profits should not be clawed back, leaving the 12 regional electricity companies financially strong, at least for now, even if future prospects are a little dimmer. The effects of his review are extra cuts in bills for customers - pounds 65 each over four years in the case of Northern - and a drop in the projected annual dividend increase from 13 per cent to 7 per cent a year. Looking at the total flow of money to shareholders over the next few years, the new package puts an even greater proportion of the available rewards up front than the old one did.

Northern now claims, in the face of the expected fresh bid from Trafalgar House, that the regulatory uncertainty has been removed and that the company is probably undervalued. Shareholders have nothing to complain about, even if the Professor has been made to look stupid yet again.