Speculators play the Grid
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Your support makes all the difference.FROM Wednesday, investors will be able to speculate openly, ahead of next month's National Grid flotation, as the Stock Exchange sanctions the first ever official "grey market" in a privatised utility.
The move, likely to be criticised as an example of the market's casino mentality, coincides with the launch of the Grid's much-awaited flotation prospectus and interim results.
The issue has already been dubbed the "National Greed" because of pay and perks excesses by "fat cats" on the board, and the document will reveal shares and options currently held by directors.
The Grid expects an opening price of around pounds 2.05, valuing the electricity transmission network at pounds 3.5bn. But brokers say scarcity and institutional demand may well push the stock higher, despite regulatory worries, before official dealings start on 11 December.
Then the Grid will be catapulted straight into the FT-SE 100 index of top shares. However, only six of its 12 regional electricity company (REC) owners are set to distribute their Grid holdings to shareholders immediately, leaving just 47 per cent in public hands.
"The stock isn't going to rush away to a huge premium because at the end of the day it's a dull utility, but there's likely to be a rise," said Bill Dale, analyst at brokers SBC Warburg.
"Regulatory risk is one of the big negatives, but index funds have a problem: if they don't take a full weighting they lose out if the Grid overperforms."
Warburg jumped the gun last week, starting a "grey, grey market" using SBC's derivatives rocket-scientists, to Stock Exchange frowns. On Friday, it was already quoting Grid units at a mid-price of 217.5p, prepared to buy at 213p and sell at 218p.
REC shares, swamped by bid-mania this year, perked up on Friday with news of a 100p per share special dividend, worth pounds 200m in all, from London Electricity. London is one of four of the 12 privatised RECs still totally independent, though another of these, Swalec, is expected to succumb to a pounds 950m plus bid from Welsh Water. However, talks there broke up inconclusively on Friday, with Welsh Water insisting it would wait until the grey market had established a value for Swalec's 5.4 per cent Grid holding.
The market is also expecting the pending pounds 2.8bn bid by generator National Power for Southern Electric and rival PowerGen's pounds 1.9bn tilt at Midlands Electricity to be waved through.
The Office of Fair Trading delivered its recommendations to Ian Lang, President of the Board of Trade, on Thursday. It agreed to Scottish Power's pounds 1.1bn bid for ManWeb last month, to which the DTI is expected to give the green light in the next few weeks.
The Grid is already giving customers rebates of pounds 50 as part of the flotation. The City fears more to come after revelations of pre-election pressure by the Government on utilities for a further pounds 200 rebate.
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