Plan to Privatize British Power Short-Circuits
PLANS to sell off Britain's electricity industry - the last and largest venture in the Thatcher government's privatization policy - have run into serious trouble. A scheme to entertain a bid for a large chunk of the industry by an industrialist who is also a major contributor to the ruling Conservative Party's funds is stirring Labour opposition charges of secret dealing. The uproar promises a bad ending to Prime Minister Margaret Thatcher's so far largely successful strategy of selling Britain's state-owned assets direct to the public.
In its 11-year term the government has privatized British Airways; large parts of the oil industry; the telecommunications, gas and water industries; the Rover car group, and various airports.
Selling off state-run electricity was to have been privatization's jewel in the crown, yielding the government some $18.5 billion.
Instead, government and opposition are locked in debate as Lord Hanson, head of Britain's fifth-largest company, attempts, with apparent government encouragement, to short-circuit part of the sell off by buying a company which produces 40 percent of the nation's conventionally-generated electricity.
Original privatization plans called for splitting the monolithic, state-run Central Electricity Generating Board (CEGB) into two utilities - National Power, which would take under its wing nuclear as well as conventional stations, and a smaller company, PowerGen, which would own the rest of the CEGB's oil- and coal-fired plant. Twelve electricity distribution companies in England and Wales would also be sold.
The plans began running into trouble last November when the government unexpectedly announced that nuclear power stations would be excluded from the privatization. City of London financial interests had said they were not interested in a flotation that included nuclear power stations, which are costly to run and, will cost a huge amount of money to decommission.
That move prompted the angry resignation of Lord Marshall, who had been appointed chairman of National Power because of his nuclear expertise.
The government said all nuclear stations would become part of a separate state-owned company, Nuclear Electric, and that a revised sale of National Power and PowerGen would proceed as planned. That left the City to go back over its analysis of the attraction of selling the companies.
In late July bad news reached John Wakeham, Mrs. Thatcher's energy secretary. City of London financiers said they seriously doubted if there was a public market for both companies.
Almost immediately, Lord Hanson, who heads the Hanson Trust and is known on both sides of the Atlantic as a fierce takeover specialist and asset-stripper, made his move. He suggested to Mr. Wakeham that, instead of offering shares in PowerGen to the British public, he might sell the company direct to Hanson Trust.
Hours later an anonymous telephone call to the Labour party's energy spokesman, Frank Dobson, alerted the opposition to the prospective deal. The following day a public row erupted in the House of Commons, with the Labour leader, Neil Kinnock, shouting: ``The prime minister can twist and turn all she likes. The truth is that in breach of the promises she has already made, she is selling off at a fraction of its value a highly profitable company to a bosom chum and major contributor to the Tory party.''
Hanson last year is believed to have donated $148,000 to Conservative party funds. Mr. Kinnock believes he will offer to buy PowerGen for $2.25 billion - well below the value of a successful public share offer.
The political temperature rose further when Labour charged that Hanson was demanding that the government pay his company a million pound fee for framing a bid for PowerGen.
Kinnock pointed out that the government was already under heavy criticism from the European Commission for having allegedly offered a commercial ``sweetener'' to British Aerospace when it purchased the Rover car group two years ago.
An official in the Department of Energy last week defended the government's apparent readiness to back off a public sale of PowerGen, pointing out that Lord Hanson would not be the only bidder and that a competitive ``auction'' was in prospect.
Roy Lynk, leader of the Union of Democratic Mineworkers, last week said his union plans to form a consortium to bid for PowerGen. City of London sources say an attempted management buy-out by PowerGen executives is another possibility. The Hanson bid for PowerGen is expected in mid-August. This is likely to trigger a series of counterbids. As the first in the field, Hanson will be able to make second bids of its own.
Gordon Brown, the Labour opposition's industry spokesman, described the coming auction as a ``sell-out on government promises'' that ``to me doesn't look like power to the people.''
Ian Fells, professor of energy resources at the University of Newcastle, said one result of selling PowerGen to a private bidder might be to undermine confidence in National Power, which the government still plans to offer to the public.
Wakeham, however, said public confidence would be increased by the move.