US fears hammer National Grid

ABOUT £500m was wiped off the value of British power giant National Grid Transco today as investors fretted that it could become the target of litigation over the massive power blackout in New York and the north-eastern United States. NGT is the owner of Niagara Mohawk, the US electricity transmission and distribution company on whose patch the massive blackout is believed to have been sparked.

As analysts warned that NGT may face huge legal bills if it is found to have been responsible for the biggest power cut in US history, traders sold down the shares as low as 379 1/4p before they later recovered to 389p, down 8p.

More than 50m shares changed hands, nearly 10 times the normal volume, as the price fell close to a five-year low.

In New York, Mayor Michael Bloomberg promised: 'There will be a real post-mortem on why this did happen.'

The Grid's US boss Bill Edwards refused to admit responsibility. At a hurriedly-arranged Press conference, he said: 'We, like other utilities and officials across the country, do not know the cause of the outage. Many potential causes have been speculated on - including the potential of a fault on Niagara Mohawk's system - but such speculation is uninformed and premature.'

Commerzbank said that while the cause of the system failure was unknown the repercussions for National Grid could be severe.

It said: 'If the fault does lie with NGT the system failure... could lead to increased costs, legal claims and a loss of reputation.'

Fraser McLaren, utilities analyst at ING, indicated NGT could be in trouble if it were to be found 'grossly negligent'. He said: 'Until the cause is established, investors are likely to be nervous and the shares may come under pressure.'

Niagara Mohawk, which supplies much of the US north east, was bought by National Grid for £2bn in 2000, as a key part of its expansion strategy in North America after its investments in South America went awry.

In Manhattan, where power was being restored only slowly, the New York Stock Exchange opened as usual at 2.30pm London time.

It, in common with many Wall Street banks, relied on the emergency back-up generators that kicked into action almost immediately after the power went off at about 4pm New York time yesterday.