Power companies transfer ownership offshore to protect against Corbyn’s renationalisation

Two of Britain’s largest power companies have transferred the ownership of their businesses offshore to protect themselves against renationalisation proposed by Labour.

National Grid and SSE, who together own the country’s gas and electricity transmission networks, said they had started overseas holding companies in the wake of Labour’s plans to bring them under state ownership.

Last week, Jeremy Corbyn announced a radical manifesto in which he pledged to reverse a number of privatisations, including rail, water and electricity as well as BT’s Openreach division.

Since the announcement, SSE, which has a market value of almost £14billion, has shifted its UK business into a new Swiss holding company and National Grid, worth £30billion, has moved to subsidiaries in Luxembourg and Hong Kong, as reported by The Guardian. 

The decisions follow similar moves by two water companies Anglian and Yorkshire, and Severn Trent is believed to be contemplating a similar move.

The transfer would protect shareholders against any move to buy back the firms without paying full market value. 

SSE confirmed it moved its electricity distribution business, which supplies 3.7million homes in Britain, as well as its high-voltage electricity transmission network to a Swiss holding company.

It said in a statement: ‘SSE has incorporated in Switzerland a direct and wholly owned subsidiary company to acquire, oversee and hold investments or other financial assets.

‘The company has become the holding company for SSE’s electricity transmission and distribution networks through a share-for-share exchange. This is intended to support long-term investment in low-carbon infrastructure in SSE’s core businesses.’

The company said it was not benefiting from tax advantages with the move and it was consistent with their commitment to fair taxation.

National Grid connects local power companies in England and Wales with large stations by 6,000 miles of cables, and also owns the main gas transmission pipelines.

Jeremy Corbyn announced a radical manifesto in which he pledged to reverse a number of privatisations, including rail, water and electricity as well as BT’s Openreach division

It said in a statement: ‘Labour’s proposals for state ownership of National Grid would be highly detrimental to millions of ordinary people who either hold shares in the company or through their pension funds – which include several local authority pension funds.

‘To protect their holdings, and in line with our legal fiduciary duty to our shareholders, we have established holding companies in Luxembourg and Hong Kong.’

National Grid also confirmed there was no financial benefit and the move was only to protect shareholders’ interests.

The two power companies hope the moves would force Corbyn to pay more to seize the assets if they carry out renationalisation.

They fear a Labour government would issue a compulsory purchase order on shares at a price below the market value and then offer shareholders low-returning government bonds as a compensation.

Hong Kong, Luxembourg and Switzerland have investment treaties with the UK which makes sure that investors are paid the market rate during a state buy-back.

Analysts claim that Labour’s renationalisation plans would have a negative impact on shareholders, particularly as both SSE and National Grid have delivered dependable returns. 

The Labour party said: ‘The idea that private owners, who have been ripping off the public, would move offshore in an attempt to prolong the rip-off illustrates just why we need the grid back in public hands.’