Economic Issues, Yol. 3, Pqrt I, March 1998

The Trafalgar llouse Takeover Bid for Northern Electric - a Case Study in the Impact of Regulatory Intervention

Simon Pallettr

privatised utilities also have the potential to Abtfiact have a significant impact on the outcome of Trafalgar Horce's takeover bid for Northern takeovers and can have a significant impact Electric, the first for a privatised utility, was on shareholders' retums. notable in retrospect for the regulatory intervention which it evoked, although it had 2. Methodolnglr not been expectedthat regulatory intervention The impact of the events investigated is would play a major role in its outcome. This assessed by calculating abnormal returns, paper presents a case study of this takeover using the market model (Sharpe 1963) to bid. hs principal foctx is on the impact of estimate normal retums: regulatory intewention by the MMC and the Ofice of Elecnicity Reguldtion and it uses ri.t = aj+bf^,r + e,., , E(el) = 0, Var (e,) = 6"'? event study methodologl to assess the impact of this on shareholders' refirns. where rr, = retum for firm I in period r, r,., = return on the market in period t, eit = error l. Infiodaction term and ao bu c.2 are the parameters of the This case study on the Trafalgar House market model. takeover bid for Northem Electric adopts a The values of a, and b, were calculated by basically chronological approach, focusing OLS regression of the logarithm of daily principally on the impact of regulatory retums on the security against the logarithm intervention part on the of OFFER (Office of of retums on the Financial fimes - Stock Electricity Regulation) and the Monopolies Exchange 100 (FTSE 100) share index - the and Mergers Commission (MMC) on the measure of the market retum. The FTSE 100 progress and eventual outcome of the bid and index did at that point contain a number of on shareholders' returns. The case uses event regulated comparies, which ought perhaps to study methodology to analyse the impact of have been removed from the index (see Dnes amounc€ments made during the course of the ard Seaton 1995), but no adjustment was bid. made for this on the grounds of materiality. It has long been recognised that the Appleyard and Mclaren ( I 996) found that the possibility of MMC refenal can have a FTSE 100 without regulated companies had at significant impact on takeover bids, although this lime a 97 per cent correlation with the in reality relatively few mergers are actually FTSE 100 including them. The estimation referred (Fairbum 1993 p.253). This case period was the 60 days prior to the month of shows that other forms of regulation in the the first event (up to 31107194 for the regional

-37- S Pallett electricity companies (RECs) and the FTSE regional monopolies, although provision was 350 Electricity lndex and up to 30/l U94 for made for the introduction of competition later Tralalgar House). It was felt that retums on. OFFER, under its Director-General, during the period under review were so Professor Stephen Littlechild, was set up to affected by the large number of events often regulate the industry. following in quick succession that it would Although the regulatory mechanisms vary not be sensible to recalculate ar and b, values from one privatised utility to another, there for each event, as no uncontaminated are a number of common strands in UK utility estimation period could be found. The regulation: abnormal return is the difference between the actual daily retum and the normal retum a) the regulator is a single regulator generated by the market model. independent of government and of other Generally four-day event windows (t-l to regulalors, although still accountable to t+2) were used (Dnes and Seaton (1995) government. found these were the best) but in the case of the announcement of the Trafalgar House bid b) the system of regrlation is based upon a longer event window (F5 to l+5) was used, RPI - x% price increases rather than on any because rumours were rife before the formal particular rate of retum. The price caps announcement and on day /+3 the bid terms should be set periodically and without were announced, adding further information. retrospective clawback, providing an The irnpact of the selected events is tested incentive for the companies !o improve on the retums of the protagonists, Northem their efficiency, in particular by cutting Electric and Trafalgar House, but also on two costs (Helm 1994; Vass 1995). However, other RECs, Yorkshire Electricity and the differences between the two approaches Malweb (Merseyside and North Wales can be exaggerated, as price cap regulation Electriciry Board), and on the FTSE-350 still requires some notion of what is a fair Elechicity Index. Yorkshire and Manweb retum in order to set the price caps. were selected as RECs of similar size to Bishop, Kay and Mayer (1995) argue that Northem, so that the impact of these events price cap regulation is essentially similar, on other RECs could be assessed. The but with longer time lags. Laffont and FTSE-350 Electricity Index covers all Tirole (1993) regard price cap regulation as electricity disnibution and generation the best approach for encouraging cost companies in the top 350 UK companies and reduction, as the firm is the residual has been used to test the impact of the events claimant, but not the besl way of preventing on the electricity industry as a whole, not just rent extraction. Fwthermore to set the distribufi on companies. effective price caps the regulator requires good knowledge of cost and demand 3. Background conditions. ln this case there is clear When the elechicity indushy in England and evidence of information asymmetry limiting Wales was privatised in 1990 the Government the regulator's effectiveness and forcing separated the distribution companies from the him to revise price caps to correct a generators in order to prevent vertical perceived error. According to Laffont and integration. The RECs, the distribution Tirole (op.cit.p. 619) commitrnent to the companies, were effectively established as regulatory conffact ensourages investrn€nt,

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but is difficult for regulators, since short pass on to shareholders and made the RECs commitments allow wrong policies to be much more attractive takeover tarsets. corrected. 4, The Events Analyzed c) the system of regulation can become Table I sets out the key events in this case highly politicised because of the issues study in chronological order, indicating those involved and regulation takes place in a for which abnormal returns have been political environment, despite the calculated. independence of the regulators (Vass 1995). Laffont and Tirole (1993) comment that 4.1 Event 1 - OFFER's announcement of UK price capping reviews have not in price caps - August 1994 ptactice been exog€nous, because This first distribution price review since govemments find it difficult not to privatisation (OFFER 1994a) was more intervene when pressured to reduce prices. lenient than expected and was followed in the In principle, levels of profit or rates of next two months by big share price rises. It retum should not precipitate an unscheduled combined one-off cuts specific to each REC adjustment to the price caps, but some with general annual caps thereafter. Northem degrees of rent extraction are politically Electric was to reduce its distribution prices unacceptable. This case shows how by 17 per cenl in April 1995 and increases OFFER revised previously set price caps thereafterwere limited to 2 per cent below the because of the emergence of information rate of inflation, as shown in Table 6. This which showed the RECs to be more was one of the more severe caps, as most profitable than OFFER had believed. other RECS only faced decreases of 14 or I I per cent in 1995. However, the pricing On privatisation the Government retained a formula was believed to be fixed for five golden share, which effectively gave ministers years and left plenty of scope for strong a veto over changes in the memorandum and cashflows and increasing rewards for articles of the RECs. The latter limited any shareholders. shareholding to 15 per cent and thus Table 2 shows the impact of Event I on effectively protected RECS against takeover. shareholders' retums. The initial market The golden shares were due to expire on 3 I reaction to the price caps was for positive March 1995 and it was widely expected that abnormal retums, presumably because they a flurry of merger and takeover activity would were not as bad as expected. In the cases of ensue. RECs' low-risk and predictable Yorkshire, MANWEB and the FTSE-350 cashflows made them attractive target$. Electricity Index the abnormal retum on the Another important factor was the RECs' event day was statistically significant. collective ownership of the National Grid, However, it would seem that the market may which they hoped to be able to float as a have taken some time to realis€ the full separate company in the course of 1995. In implications of the price caps, as prices rose the 1990 privatisation prospectus it had been considerably in the following month. Figure valued at !780m, but it was thought that its I provides a graph of Northem Electric share value on flotation might be f,4-5bn. This Drice movements at this time. could give the RECs a huge cash bonarza to

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Table 1: Clronolog/ of events

Date Abnormal returns calculated

I I August 1994 OFFER announces price caps to apply to Event I RECs fiom I April 1995 14 December 1994 Swiss Bank Corporation announces that Event 2 Trafalgar House is considering a takeover bid for Northern Electric

19 December 1994 Formal bid announcement 20 December 1994 OFFER issues a consultation paper on the bid

9 January 1995 Trafalgar House larmches its formal offer document

14 February 1995 Michael H€$eltine, President of Board of Event 3 Trade. announces tiat the bid will not be referred to the MMC

17 February 1995 Northem Electric issues final defence document

23 February 1995 Trafalgar House increases its offer 7 March 1995 OFFER announces that the price caps set Event 4 in August 1994 are !o be reviewed again

6 July 1995 OFFER renounces revised price caps for Event 5 RECs

l0 July 1995 Southem Company of the US makes a dawn raid on South Western (SWEB) followed by a formal bid

24 July 1995 Scottish Power mounts a hostil€ bid for Manweb

3l July 1995 Hanson announces an agreed bid for EastEm Electricity

4 August 1995 Trafalgar House announces that it will not renew its bid for Northem Electric

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Table 2: Abnormal retums around the announcement of price caps, August 1994 (%)

Companies Northem Yorkshire Manweb FTSE 350 Date Electric Electricity Electricity Index

r-l -t.57 - 1.58 -0.94 -t.32 t 2.W *5 l4 r,4.3l +3.65

,+l 1.72 0.88 3.98 v,lJ t+2 +-3. l8 -2.72 .U.IJ 0.81

Cumul. ,-2 to /+2 0.30 t.55 17.29 2.20

t=llAugust1994 * significant at the 5% level (2-tailed test)

Figure l: Nonhem Electric sharc price movements 0l/08/94 - l6108/95 Source: Datastream

Broken line shows price lelarive ro FTSE-l00lndex

1m

s m m

Alg Sep fr Nkt/ h Jfll

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Table 3: Abnormal retums in resoonse to Trafalear House's bid for Nonhem Electric (%o)

Company Northern Yorkshire Manweb FTSE 350 Trafalgar Date Electric Electricity Electricity Index House

t-5 0.31 -1.73 -0.72 -1.89

t-4 0.34 -0.18 0.49 0.13 2.89

t-3 1.87 -0.83 -0.40 -0.88 1.38

1.0? -0.44 -0.57 -0.02 - l.l8

t-l 2.29 z.7l 0.86 0.32 *-4.07

t +9.64 2.84 * 5.73 *2.34

t+l 0.69 2.81 0.3I 0.32

t+2 -0.78 t.72 -o.22 -0.67 2.45

I+3 -0.91 0.63 0.55 -0.60

t+4 -?.19 -1.00 -2.08 - 1.16 -1.95

t+) -0.62 -t.42 -2.19 -0.87 0.68

Cumul. t-5 * 12.47 |.72 3.08 -2.?9 to /+5

t = 14 December 1994 * significant at 5o/o level (2-tailed test)

Notes: SBC announces Trafalgar's intention to bid l4ll2l94. Bid terms announced 19112194

4.2 Event 2 - Trafalgar House launches its These findings are not inconsistent with bid - December 1994 general findings about how the gains from Table 3 shows abnormal losses for Trafalgar takeovers axe shared between target and House shareholders around the amouncement predator (e.9. Jensen and Ruback 1983). date, which is quite plausible for a bidder It seems probable that financial benefits in company, but abnormal gains for Northem the form of lower taxes and less volatile Electric and other RECs because of the earnings were the most important motives for prospect of shares being acquired at a Trafalgar House. Northem's defence circular premium. It seems that the market felt at this valued the tax benefits at 12 per share stage that Trafalgar House shareholders were (Northem Electric | 995a) and in addition the unlikely to benefit from the bid, perhaps capital gain arising on the sale of the National because too high a price would have to be Grid could be offset against Trafalgfi's tax paid to secure control or because of costly losses. However. the main benefit to regulatory obstacles. Trafalgar was of being able to balance its

-42- Economic Issuet. Vol. 3. Part L March 1998 cyclical earnings stream with Northem's more These concerns are in line with Laffont and siable and cash-generatingbusinesses. Another Tirole's (1993) analysis of cost padding and probable motive was the need of Hong Kong accounting manipulation. It was reported in Land, 25 per cent shareholder and effective the press (Financial Zrzes 1995) thal OFFER controller of Trafalgar House, and its ultimate had wanted an MMC referral and that it had parent, Jardine Matheson, to reduce exposure suggested that 25 per cent of Northem to the politically sensitive area ofHong Kong. Electric should be refloated on the stock Trafalgar House could have obtained the exchange. This would have provided a share benefits of steady profits and tax offset flom price, but would have made the acquisition any REC, not necessarily Northem Electric. enormously more expensive for Trafalgar Publicly Trafalgar House claimed that it House, which would have had to buy already had substantial interests in the North Northem Electric at a premium and then of England, where it employed almost as refloat 25 per cent of it at a discount. Such a many people as Northem. In reality the solution hardly seems realistic, especially as reasons may be Northem Electric's size as the planned removal of the golden share so one of the smaller RECs and the scope for clearly opened up RECs to takeovers and cost cutting indicated by the regulator's mergers, decision to impose the biggest class of price In order to pre-empt action Trafalgar House cut on Northem Electric (OFFER 1994a). had built a f20 rebate for customers into its bid terms, taking up a hint by Professor 4.3 Event 3 - MMC refenal - February 1995 Littlechild ihat it would be easier to clear a It has long been govemment policy that bid which benefited customers. At the same referrals to the MMC should only be made on time it also showed that f26m could easily be competition grounds (Tebbitt Doctrine, House found from Northern Electric to retum to of Commons 1984). This bid did not raise customers. Trafalgar House also undertook to any significant competition issues, as there maintain Northem Electric as a separate was no vertical integration and no reduction company with its headquarters in Newcastle. in the number of RECs. Thus logically the Despite OFFER'S preference for an MMC Govemment should not have made a refenal, referral, on 14 February 1995, Michael although there were cerlain regulatory issues Heseltine, hesident of the Board of Trade raised by this frrst bid for a privatised utility. announced that he would let the bid go ahead. Professor Littlechild's consultation paper on It looked at that point as if the major the regulatory issues (OFFER 1994b) shows regulatory obstacle had been overcome. Table his concerns about the removal of the share 4 shows that abnormal gains were made on pdce quotation, which 'removes a source of the announcement with success in the bid information about investors' views of being anticipated. The decision also resulted comparative performance and the effects of in positive abnormal rehrms to shareholders in maxket factors, including regulatory actions' other RECs, as the decision increased the (Op, cit.p.2). He also voiced concem about likelihood of further takeovers in the sector. the potential loss of information if the licence The lack of significant abnormal retums on holder was a subsidiary. There was some fear the FTSE-350 Electricity Index is probably that information from the paxent and other because this includes generators as well as subsidiaries might not be so easily obtained. RECs, thus diluting the effect.

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Table 4: Abnormal retums on amouncement of non-referral of bid to the MMC (%)

Company Northem Yorkshire Manweb FTSE 350 Trafalgar Date Elecricity lndex House

-0.27 -0.80 -0.40 0.14 -0.39

t * I l.l8 +8.53 +6.53 2.70 *4.9?

t+1 0.28 0.40 -1.00 -1.30 1.45

t+2 -0.l6 0.10 -0.53 0.t? -0.49

Cumul. * 10.96 *6.50 4.50 |.64 t.) I

, = 14 February 1995 * significant al 5olo l€vel (2-tailed test)

4.4 Northern Electric's defence package Trafalgar House responded with a revised Northem Electric's final defence document offer (Trafalgar House 1995), which was (Northem Electric 1995b) announced a widely reported in the press as being finely package worth f,560m for its shareholders. pilched and by no means a knockout blow. The Board promised a f,l.50 special dividend, Without OFFER's last minute intervention. it a f,1 bonus preference share and distribution is far from certain what the result of the bid to shareholders ofNorthem Electric's share of would have been. the proceeds of National Grid flotation, which it valued at f,?.57 per share. This was worth 4.5 Event 4 - OFFER's last minute over f,5 per share and would result in the intetl)enlion company becoming temporaxily very highly OFFER's announcement on 7 March 1995 geared,2z5 per cent on an historic cost basis, (OFFER 1995a), three days before the offer declining to 100 per cent by the year 2,000, closed, that it would look again at the price although Northem Elechic (1995b) claimed caps for the period 1995 - 2000, effectively that cover for interest and preference scuppered Trafalgar House's bid by creating dividends would remain healthy. Northern so much uncertainty about RECs' firture Electric also promised fat dividend increases. profitability. Professor Litllechild's timing This bold defence certainly put Trafalgar was also extraordinaxy because his House on the spot ard forced it to increase its amouncements coincided with first trading for offer. However, the Northem Board remained the last tranche in the privatisation of the liable to criticism for only acting under gercraiors' Cowercen and National Power) extemal pressure. They could also with the shares. The announcemenl wiped millions off benefit of hindsight be criticised for taking the the prices of these shares and lead to regulatory regime too literally, assuming that questions being asked about why the offer had with price caps set until the year ?,000 their been allowed to go ahead with a highly price- action in retuming so much value to sensitive announcement in the of{ing. shareholders would not trigger any regulatory The Northem Electric Board felt in the reaction. circumstances obliged to recommend Trafalgar House's offer, but Trafalgar House

-44- Economic Issues, Vol. 3, Part l, March 1998 let it lapse at the last moment after it atffacted uncritically on information presented to it by over 80 per cent acceptances. Trafalgar House the RECs. It also was an action which further then made a lower bid of f.9.50, but the politicised the regulatory process and which Northern Electric Board refused to allow it to went against the spirit of the regulatory be put to shareholders. regime. Instead it was becoming obvious that Table 5 shows the significant negative only a certain level of profitability could be abnormal retums caused by the regulator's allowed. This illustrates Laffont and Tirole's announcement, which made the bid less (1993) proposition that commitment to a price desirable and less likely to succeed, as well as capping agreement is problematic for theatening to reduce all RECs' future profits. regulators, as it prevents the correction of At this point it was not certain that the price mistakes before the next price review. caps would be revised and whether any It appears that the information Northern changes would be implemented in the form of Electric supplied to OFFER in relation to the a general adjustment across all RECS or in the price caps was in some ways out of line with form of reductions in the price caps of that released during the takeover. Perhaps specific RECs. The maxket reachon was to this was only to be expected. Forecasts anticipate an across the board reduction with provided for a price capping regulator are all the three RECs here examined suffering Iikely to be more conservative than those used negative abnormal retums of roughly the same to fight off a hostile takeover and maintain size. the loyalty ofshareholders. Helm (1995 p.20) Even if one believes that the takeover bid states that the regulatee's objective is to was not the main reason for OFFER's maximise profits and to ensure that it faces decision to review the price caps again, the weakest regulatory constraints. Business (although OFFER claims that it was (OFFER plans are therefore likely to overstate costs 1995b) it gave hofessor Littlechild an and underslate demand. excuse to intervene. He justified his action on In the OFFER press release of 24 March the grounds that new information had 1995 (OFFER 1995b p.3) the Director- emerged since the price caps were set the General says in reference to Northern previous August. This was: Electric's second defence document:

a) the share price reaction to the August This contained information about planned 1994 price cap aflnouncement; operating costs and capital spending special payments to shareholders and a b) the terms of Trafalgar House's bid for forecast of substantially rising dividends, Northem Electric; all of which were formulated subsequent to lhe discussions which informed my c) information in the bid and defence August proposals. This could have documents (OFFER 1995b). implications for the ability of other cornpanies to implement reductions in He also mentioned widespread public concem operating costs and capital spending, about the faimess of the price caps. This was make payrnents and dividends to an admission that the earlier price caps had shareholders and to increase gearing. been wrong and that OFFER had relied too

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Table 5: Abnormal returns on announcement of intention to revise orice caps. 7 March 1995

Companies Northem Yorkshire Manweb FTSE 350 Trafalgar Date Electric Electricity Electricity Index House

0.07 -0.60 0.30 0.15 0.94

t *- 16.03 *-23.85 *-16.7 | *-l1.46 '*-6.40

t+l *-12.79 ,r-7.15 *-8.66 r'-3.51 0.46

t+2 2.97 * 6.54 t.66 1.52 0.32

*-?4.55 * ,r,- Cumul. t-l to t2 -25.1| *-22.43 13. l5 -4.78

t significant at 5o/o level (2 tailed test)

Table 6: Present and proposed price controls for electricity distribution charges (relative to inflation) REC Initial price Proposed reduction X facton 1997- Aggegate reduction in ln 1996197 2000 reduction 1994/95 't995t96 6 |999n000 Eastem I I 10 27 East Midlands I I l3 29 London 14 ll 3 30 Manweb l7 ll 3 JJ Midlands t4 ll 3 30 Northern t7 t3 3 34 NORWEB l4 3 30 SEEBOARD I4 IJ 3 Southem ll l0 J 27 SWALEC l7 1l J South Wesiem 14 ll J 30

Yorkshire l4 t3 3 Average t4 11.5 3 31 Source: OFFER (1995c)

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4.6 Event 5 - OFFER sets new price caps - Kvaerner in April 1996. July 1995 The proposals involved further price 5. Conclwions reductions as of April 1996 ranging from l0 A number of tentative conclusions can be per cent to 13 per cent. Northem Electric drawn from this case study, which would in received a 13 per cent cut. This was to be some cases need to be confirmed by further followed in the three subsequent years by RPI research on a more systematic basis. - 3 per cent, rather than RPI - 2 per cent as originally proposed. Table 6 shows that a) It could be argued that the takeover Northem Electric received the biggest price process is helpful to the regulator because reductions in both reviews and was the only it reduces the information asymmetry REC so to do. The review combined across between regulator and regulated utility the board reductions in annual price caps with (Robinson 1995). New information is some differentiafion between RECs for the likely to emerge during a bid, which was initial reduction in April 1996. not available before. This is certainly what The share price reaction to the OFFER claimed, although some might feel announcement was wild, with shares rising on that it had not been sufficienfly sceptical of rumours of a lenient settlement, then falling the data supplied to it io help it fix the back as some features of the review became original price caps. known. However, the net change by the end of day I was upwards, suggesting that the b) On the other hand mergers may create review was not overly severe and left scope problems for the regulator by making the for dividend increases. Table 7 shows positive results ofthe regulated company less visible abnormal retums which are not statistically and because of the loss of the share price. significang so the conclusion must be that the OFFER certainly put forward this view amouncement had no significant effect on (OFFER 1994b p.2) and the case certainly retums. It would seem that the reductions in supports the view that shareholder returns the price caps had already been discounted provide useful signals to the regulator. into the price. Trafalgar House itself had meanwhile c) It appears diflicult for regulators to set reported half year losses exacerbdted by the prices for fixed time periods and refrain f,l.Zm costs of its takeover attempt and from intervention throughout the period of 'Jet announced a swingeing cost cutting the price cap. Although in theory RPI - x programme. On 4 August 1995 it announced per cent price caps should avoid problems that it would not be bidding for Northem about setting an acceptable rate of retum, Electic, claiming that recent bids for other the political reality is that retums over a RECs had pushed prices up too high. certain level are unacceptable in privatised However, a stream of bad news about utilities. Regulators seern likely to TrafalgarHouse's performance had cast doubt intervene on an ad hoc basis to adjust on its management's control of the business prices. As Helm (1995 p.37) notes, five and lead to a dramatic fall in its share orice. years is a lons time to wait to eorect Since then Trafalgar House's problems have efrors. continued, culminating in its takeover by

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d) The evidence from this case lends Fairbum J (1993) 'The Evolution of Merger support to the notion that regulatory risk is Policy in Britain', in Bishop M and Kay the main type of risk faced by shareholders J, (eds.), European Mergers and Merger in privatised utilities, which are PoW, Oxford: Oxford University Press fundamentally of low business risk. More systematic research is needed to iest and Financial Times (1995) Lex Column, 1 measure this and to asses$ the exlent to February which regulatory intervention in one Helm D (1994) 'British Utility Regulation: industry affects others. Theory, Practice and Reform' , @ford Review of Economic Policy,l0 (3), 17-39

Endnores House of Commons (1984) Mergen Policy: House of Commons written answer by the Departnent of Accounting and Finance, 1. Secretary of State for Trade and Industry, University ofNewcastle upon Tyne. I am 5 July grateful to my colleagues hofessor Tony Appleyard and Josie Mclaren for Jensen M C and Ruback R S (1983)'The comments on the paper and for advice on market for corporate control, the scientific methodologl. Helpful comments were evidence', Journal of Financial received from participants to the British Economics, I I, April, 5-50 Accounting Association Northem Accounting Group Conference at the Laffont J-J and Tirole J (1993) A Theory of University of Northumbria in September Incentives in Procwemenl and Regulation, 1995 on an earlier draft of this paper. Cambridge Massachusetts: MIT Press My thanks also go to two anonymous Northern Electric (1995a)'Warning. referees for their helpful comments on the Trafalgar House's offer is wholly paper. inadequate and unacceptable', 23 January

Northem Electric (1995b) References 'Northem Electric delivering outstanding shareholder value', Appleyard T and Mclaren J (1996) 'The 17 February Nature of Regulatory Risk', Newcastle OFFER (1994a) Distribution Price Control: University Discussion Paper in Proposals, Attgrst Accounting and Finance no. 96-13 OFFER (1994b) Trafalgm Bishop M, Kay J and Mayer C (1995) House Bid for Northem Electric: A Consultation Palnr 'Infroduction', in M Bishop, J Kay and C the Director-General Mayer (eds.), The Regulatory Challenge, by of Electricity Supply, 20 December Oxford: Oxford University hess (1995a) Dnes A W and Seaton J S (1995)'The OFFER 'REC Price Controls', Pfess release, 7 March Regulation of Electricity Dist bution: Results from an Event Study', OFFER (1995b) 'Statement on REC Price Loughborough University Economic Controls', 24 March Research Paper No. 95119

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OFFER (1995c) The Distribution Price Control: Revised Proposals, July 1995, 6 July Robinson C (1995) 'Why electicity takeovers are welcome' , Financial Times, 3 August

Sharpe W F (1963) 'A simplified model for portfolio analysis' , Management Science, 9 , Iaruaxy , 277 -293

Trafalgar House plc (1995) 'Increased and Final Offer for Northem Electxic',24 February

Vass P (1995) 'Electricity hice Caps', Public Money and Managemenl, Apt.- Jun.,8-9

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