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Monday newspaper round-up: British Energy, HSBC, British Airways

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Date: Monday 12 May 2008

LONDON (ShareCast) - The government has ruled out selling British Energy to a lone bidder, despite the auction for the owner of Britain's nuclear reactors drumming up interest only from France's EDF by last Friday's deadline.

The Daily Telegraph understands that the Government, which has a 35.2% share in BE, is maintaining its position that no one body should have full ownership. Sources said the Government would prefer to grant the winning company the sale of just six sites, thereby leaving the door open for another firm, such as Centrica, the only realistic British bidder, to acquire the remaining two.

HSBC and Barclays will this week give the banking industry some much-needed cheer with evidence that both have their sub-prime problems under control. Barclays is expected to announce another £750m of provisions on credit market securities in the first quarter, on top of the £1.6bn taken last year. HSBC, which sold US sub-prime mortgages directly, will take about $3.5bn of credit impairments in its US arm on top of the $12.2bn last year, reports the Telegraph.

The FT adds that losses suffered by Britain’s largest banks as a result of the global credit turmoil will add further pressure on the public finances by cutting the amount of corporation tax paid by the financial services industry. Figures compiled by the FTshow that the £10bn of write-downs unveiled in recent weeks by Royal Bank of Scotland, HBOS and Lloyds TSB will knock more than £2.5bn off the three banks’ combined tax bills. Though some of the losses will be booked outside the UK, the majority is expected to come at the expense of British taxpayers.

British Airways has appointed the recruitment consultants Whitehead Mann to find a new chief operating officer and possible successor for its embattled chief executive Willie Walsh. The successful candidate will a fill a newly created role, which was devised after the recent Heathrow Terminal 5 fiasco, writes the Independent.

Royal Dutch Shell and Spain’s Repsol have pulled out of one of Iran’s biggest gas projects, dealing a blow to Tehran’s attempts to expand its energy exports in the face of US and international sanctions. The pair will withdraw from the $10bn-plus development of phase 13 of South Pars, the world’s largest gas field. They say they could still participate in other phases, says the FT.

An investment company centred on the Indian energy sector and linked to a fast-growing company on Aim will announce today plans to raise up to $500m (£256m) through a dual listing. KSK Emerging India Energy Fund will be listed on Aim and the Channel Islands Stock Exchange. It will be managed and advised by subsidiaries of KSK Power Ventur, which specialises in building power plant in India, particularly for large industrial companies that need reliable electricity supplies says the FT.

DSG, owner of Dixons, Currys and PC World, is expected to slash its dividend and announce a wave of store closures and job cuts this week in an attempt to re-establish its dominance in Britain's electricals market. New chief executive John Browett is anticipated to say up to 200 of its 700 stores will have to close, to be done in piecemeal fashion, with 2,000 jobs lost, say analysts, reports the Telegraph.

Kazakhmys is expected to look at ways of offloading its 15% stake in ENRC after rejecting its domestic rival's £7bn takeover proposal last week. The lock-up period governing the holding expires early next month and Kazakhmys has already indicated it does not see holding such a stake as a long-term strategy says the Telegraph.

Business customers are deserting Royal Mail and most firms do not find the postal group an efficient organisation to work with, a study by the British Chambers of Commerce (BCC) for The Times has revealed. The BCC sought the views of nearly 1,000 businesses throughout the country about their use of Royal Mail and their experience of the organisation.

Britain's economic slowdown will be longer than first feared and there needs to be strong action from the Government and the Bank of England to avert a severe downturn, the British Chambers of Commerce (BCC) says today. In a bleak assessment of dangers to Britain's prospects, the BCC sounds a warning that the Bank may have to run some risks with inflation and the Treasury may have to accept a temporary breach of its fiscal rules in order to take the measures needed to underpin growth, says the Times.

Hugh Osmond, the serial entrepreneur, is considering relocating Pearl Assurance, his financial services group, outside the UK for tax purposes, in the latest sign that frustrated businesses have lost faith in the Labour Government. Mr Osmond, who famously floated the Pizza Express restaurant chain and turned Punch Taverns into one of Britain's biggest pub landlords, told The Times yesterday that Pearl was already likely to list some of its investment funds offshore.

Labour's tax headache is intensifying with the chairman of Lloyd's of London raising concerns that the UK tax regime will force more insurers offshore, while concerns mount that leading entrepreneurs are also preparing to take flight. Lord Levene of Portsoken expressed fears that more of Lloyd's managing agents would redomicile to lower tax economies unless the rules were changed, writes the Telegraph.

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