The group is paying £180m ($298m) to buy the supply business of Midlands Electricity, a regional electricity company, giving it direct access to 2.2m customers.

Customer care

Powering ahead

At the same time National Power is selling a huge power plant in the north east England, drastically reducing its share of the electricity generating market.

The plant, in Selby, Yorkshire, could fetch around £2bn.

National Power's move follows a similar initiative from its arch rival PowerGen, which bought East Midlands Electricity for £1.9bn in July.

Electricity producers are now keen to supply customers directly.

But some analysts have questioned whether the sale of the Drax power station, with 40% of the company's power generating capacity, is wise.

"Drax is the jewel in their crown. I would be surprised if the government would require them to go that far," said Nigel Hawkins of William de Broe.

Falling prices

The deregulation of the electricity market, where customers will be given a choice of suppliers, has prompted a shake up in the industry and is likely to lead to a fall in prices.

Midlands Electricity, orginally a British company, is currently owned by US power companies.

The announcement came as National Power unveiled a fall in half-year pre-tax profits from £260m to £217m.

Turnover declined from £1.46bn to £1.35bn.

National Power's shares slipped on Wednesday amid concerns that it will not be able to sustain its current dividend pay-out.

Chief executive Keith Henry said: "Our announcement today of two major developments designed to transform National Power's UK business into a leading, integrated energy business represents a major step forward in our overall strategy.

"We intend to remain one of the world's leading international power companies, with a stronger, more broadly based UK energy business."

Another hurdle

National Power hopes the sale of its power plant will be enough to satisfy the UK's electricity watchdog Offer, who is charged with sanctioning the Midlands Electricity acquisition.

National Power has recently invested in the US and Spain, but earnings have fallen, leading to a decline in group profits.

Its shares were among the heaviest fallers on the London market today, ending down 32p to 528p.