National Power PLC Share Buy-Back Programme, Plant Divestment and MMC Enquiry.
1. Share buy-back
National Power PLC obtained authority from its shareholders at its recent Annual General Meeting on 25 July 1995 to repurchase up to 10% of its issued share capital, subject to appropriate market conditions. The Company now announces that it wishes to continue its share repurchase programme by buying up to 57,000,000 Ordinary Shares, representing approximately 4.4% of its issued share capital. The transaction, when added to the 7.6% bought earlier this year from HM Government, results in a total reduction of 12% in the shares of the Company during 1995. The effect of this latest transaction is expected to be an enhancement in earnings per share of between 2% and 3% in a full year and an increase in gearing of about 9%. The Directors believe it is right to continue their strategy of enhancing earnings per share to the benefit of all shareholders through a further buy-back of shares at a time when the MMC enquiry has delayed any major call on the Company's funds. Moreover the transaction will go some way towards enhancing the efficiency of the balance sheet by increasing gearing. This transaction does not affect the Company's commitment to the acquisition of Southern Electric plc nor its international aspirations. For legal reasons the Company is unable to purchase the interim certificates in the Company which were sold by Her Majesty's Government in March 1995 and which are currently trading in partly-paid form. As a result, the Company is only seeking to purchase Ordinary Shares which are trading in fully paid form. As part of the share repurchase programme the Company has appointed Cazenove & Co. as its agent to effect on-market purchases. A shareholder who sells his shares to the Company through Cazenove in its capacity as the Company's agent will be treated as receiving a qualifying distribution for the purposes of UK taxation. This treatment does not apply when a shareholder sells his shares to a market maker as principal or to a third party. The amount treated as a qualifying distribution will be the proceeds from the sale of each share less its capital value of 0.52. This qualifying distribution will be treated as income for the purposes of UK taxation. A UK resident shareholder will be entitled to a tax credit equal to one quarter of the amount treated as a qualifying distribution. Each selling shareholder who sells through Cazenove as the Company's agent will receive a voucher from the Company showing the amount treated as a qualifying distribution and the associated tax credit. In certain circumstances, any benefit arising to a shareholder from treatment of part of the sale price as income and the associated tax credit may be counteracted by the Inland Revenue under Section 703 of the Income and Corporation Taxes Act ("ICTA"). The Company has not applied for clearance from the Inland Revenue under the provisions of Section 707, ICTA 1988 that no such counteraction will be taken. The Directors of the Company have been advised that it is unlikely that a general clearance would be obtained, as present Inland Revenue practice is to make any such clearance dependent upon each shareholder's own circumstances. It should also be noted that treatment of the amount received as a distribution may be less advantageous to certain shareholders, particularly individuals, than the treatment which would be accorded to a sale of shares to a marketmaker as principal or to a third party. National Power emphasises that shareholders obtain their own tax advice as to the specific consequences for them of selling their shares.
2. Plant divestment
In addition, the Company confirms that on 30 November 1995 it had received offers from four bidders for the lease or purchase of 4,000 megawatts (MW) of coal-fired generating plant. The bids have been submitted by Hanson (Eastern Group), and three American companies, Applied Energy Services (AES), Enron and Mission Energy. The three power stations to be sold are the 2,000 MW plant at West Burton in Nottinghamshire, and the two 1,000 MW stations at Ironbridge, Shropshire and Rugeley, Staffordshire. The Company is now evaluating each of the bids and envisages that a shortlist of selected parties will be finalised by early January with a view to completing the transaction by the end of March, 1996. The Company is confident the disposal of the three plants will fulfil its commitment to the divestment undertaking given to the Director General of Electricity Supply. National Power also welcomes the DGES's announcement on 12 December, in which he indicated that on the basis National Power and PowerGen dispose of plant, since competition in the generation market had increased with new independent capacity, he would not seek any extension of the voluntary undertaking on prices after March 1996.
3. MMC enquiry
At the same time, National Power is arguing strongly to the MMC that its planned acquisition of Southern Electric plc should be cleared. The MMC has been asked to report by 22 March 1996. Submissions have already been made and meetings planned in accordance with that timetable.
4. Notes for Editors
4.1 On Share buy-backs: On 3 March 1995, National Power PLC purchased 98,483,539 of its 50p Ordinary Shares representing approximately 7.7% of the issued class from HM Government. These shares were subsequently cancelled by the Company.
4.2 On the plant sales. In February, 1994, National Power gave an undertaking to the DGES to use all reasonable endeavours to negotiate the disposal of about 4,000 MW of capacity by the end of December, 1995. During this period, the Company has kept the DGES informed of its actions regarding the undertaking.
On 27 July, 1995, the DGES clarified a number of issues raised with him by prospective purchasers and the Company. This stimulated renewed interest and has resulted in a number of sufficiently attractive offers to lead the Company to conclude that a suitable purchaser could be found.
4.3 On the proposed acquisition of Southern Electric: National Power's recommended offer for Southern Electric lapsed on 23 November when Mr. Lang, President of the Board of Trade, announced that he was referring to the MMC both National Power's bid for Southern Electric and PowerGen's bid for Midlands.
National Power currently holds 8.3% of the share capital of Southern Electric.
Andrew Swanson Company Secretary
CONTACT: Investor and analyst queries to:
Group Finance Director
Lynda Jenkins, Head of Investor Relations
Press queries to:
Andy Roe, Head of Press Relations
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|Date:||Dec 19, 1995|
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