Outlook: Put this plan back in its Box

Let an accountant out of his Box and half-baked capital reconstructions of the type unveiled yesterday by the National Grid are the inevitable result. Stephen Box has been finance director at the Grid for four short months, his predecessor having been asked to leave after a fit of conscience (he embarrassed the rest of the board by giving his share option profits to charity). But already he is making his mark. Mr Box, whose previous job was senior partner at the Grid's auditors, Coopers & Lybrand, has conjured up a bizarre scheme to give money to shareholders with one hand and then take it back with the other.

The scheme works like this. The Grid hands out pounds 770m to shareholders by way of a special dividend. So far, so uncontroversial. Like lots of other stodgy old utilities, the management has run out of ideas and reckons shareholders can find better uses for the money themselves. Since the dividend payment is accompanied by a share consolidation, the exempt funds miss out on their tax credit, but you can't have everything. Now comes the tricky bit. Shareholders are then asked to reinvest pounds 300m to pounds 500m of the proceeds in a convertible bond issue just in case an electrifying overseas opportunity comes along.

The idea is to provide "financial flexibility" but since the Grid doubts whether any major acquisitions are in prospect for the next two years this seems a largely redundant flexing of muscle. Even if an opportunity were to present itself, the omens are not good. The Grid got burnt in Pakistan and missed out in Australia, which only leaves it with a slice of the action in Argentina while the regulator takes a hatchet to its margins back home.

Shareholders will have to wait until January before they see the terms of the bond issue. In the meantime they might wonder why the company is presenting the market with an opportunity to deal against it until the issue is safely away.

The only shareholder to benefit very obviously is HSBC Investment Banking, which holds 11 per cent of the Grid and is pocketing pounds 10m for helping Mr Box devise this little wheeze. The last time HSBC's relationship with the Grid came under the spotlight was when its broking arm, James Capel, acquired the Grid stake on behalf of the Olyan group in Saudi Arabia. The point of that little deal was never satisfactorily explained. Unless shareholders get some good answers from the Grid as to why they should support this latest humdinger, the Box plan should be put firmly back where it belongs.