. 7
( 20)


Loewenstein, who had earlier been a small investor in these companies,
acquired sizable share holdings in Barcelona Traction, Mexico Tramways
Co. Ltd., and its af¬liated Mexican Light and Power Co. Ltd., all Canadian-
registered ¬rms. Loewenstein transferred these investments to his newly
created Belgian-based holding company Societe Internationale d™Energie
Hydro-Electrique (Sidro), registered January 31, 1923. In what was now
becoming a typical pattern, there were ˜˜cross-holdings,™™ as So¬na (and
CHADE as well) acquired shares in Sidro. From the start, So¬na and Sidro
were closely associated; they shared a common president, Despret, by this
time also chairman of the Banque de Bruxelles. Heineman was involved
Chapter 4: War, the First Nationalization 155

with both companies. Heineman had been an admirer of Pearson and,
when the latter was still alive, Heineman had contemplated the possibili-
ties of association with that American engineer™s collection of Canadian-
registered ¬rms; So¬na would achieve that through Sidro.133 In 1924,
Sidro purchased added securities of the Mexican Light and Power group
(Mexlight) and soon obtained voting control.134 By that time, however,
Loewenstein was in ¬nancial dif¬culty and ˜˜effective control™™ of both
Barcelona Traction (in which So¬na already had a large interest) and the
Mexican utilities passed to So¬na.135 Meanwhile, both So¬na and Sidro
had been buying shares in the Canadian-registered Brazilian Traction,
Light and Power Co.
By 1924, So¬na held suf¬cient stock in Sidro to control that company.
However, Loewenstein acted as though he were in charge, much to Heineman™s
chagrin.136 Between 1924 and 1928, but especially between 1926 and 1928,
Heineman and Loewenstein clashed on numerous occasions. In December
1926, Heineman wrote to Edward Peacock, ˜˜We wish to do constructive work
and to do it calmly, Sidro represents only 2 p.c. of our business and we have
no time to spend in endless discussions of fantasy projects of a boxing banker™™
(a reference to Loewenstein™s infatuation with the sport). Loewenstein died
on the night of July 4“5, 1928, a dramatic death, as he fell from his
private airplane. By then, there was no doubt that So¬na controlled Sidro and,
in turn, controlled the three key Canadian-registered companies “ Barcelona
Traction, Mexlight, and Brazilian Traction “ in which Sidro had invested.
Nonetheless, the direction of these utilities continued to be delegated to the
The Empain group also persisted in the 1920s, with important Belgian
holding companies in international business in electric utilities. During
World War I, the group had lost to the Germans its signi¬cant operations in
France and it also lost its Russian operations. After the war, like So¬na, it
was able to resume its business in France. (Actually, its French investments
over the years had been much larger than those of So¬na.) The group™s
founder and head, Baron Edouard Empain, died in 1929. By then, a new
generation of management had emerged within the group, which continued
to be well connected within the Belgian political community. For instance,
Georges Theunis (1873“1944) of the Empain group served as Belgian prime
minister from 1921 to 1926. During the 1920s, Empain™s business grew,
both domestically and internationally. Parisienne Electrique and Railways
et Electricite in Belgium remained the two main holdings of the group.
These were involved in a variety of investments abroad, with new ones in
the Congo and Turkey. The group continued to be particularly important in
Egypt, where its Cairo Electric Railways and Heliopolis Oasis Company
held controlling interest in a large number of related companies, including
the Societe Egyptienne d™Electricite, formed in 1929, which built and
´´ ´
operated the important Shubra power station in the northern quarter
Global Electri¬cation

of Cairo.138 Other Belgian groups also expanded internationally in a
spectacular fashion in the 1920s, including Societe Generale Belge
´´ ´´
´ lectriques (SGB), the precursor of Electrobel.139
d™Entreprises E

the old and the new
Before World War I, British and French free standing companies had pro-
liferated. Some fell by the wayside during the war years and immediately
afterward, while others continued. During the 1920s, such French com-
panies in electric utilities were present in Brazil, China, and North
Africa.140 In Britain in the 1920s, this form came to be used less frequently
for electric light and power facilities, although some such companies per-
sisted in Latin America, Asia, and Africa, and some new ones were formed,
principally within the empire.141 For tax and other reasons (particularly
laws within host nations), incorporation in the host country was more often
required. Of course, a company registered beyond the reach of the home
country could be controlled from the United Kingdom, but overseas reg-
istration (contemporary economists believed, probably correctly) had the
effect of weakening the associations.142
The ¬gures in Table 4.1 demonstrate the move in Britain to overseas
registration by 1929. The very knowledgeable Sir Robert Kindersley, who
assembled this information, noted that ˜˜the total British loan and share
capital in the Electric Lighting and Power group [of companies registered
and operating abroad] is £43 million, contrasted with only £16 million in
the case of British [U.K.-registered] companies operating abroad.™™ He
commented that this comparison on British investment in the ˜˜younger

Table 4.1. The Nominal Amount of British Capital Invested Abroad in the
Electric Light and Power Sector, Dividends and Interest Paid, Percentage
Return on Share and Loan Capital, 1929 (in £000s)

A. Electric Light and Power Companies Operating Abroad and Registered in the
United Kingdom
Share Dividends % Loan Interest % Total Share
Capital Capital & Loan
8,886 888 10.0 7,542 480 6.4 16,425
B. Electric Light and Power Companies Registered and Operating Abroad
Share Dividends % Loan Interest % Total Share
Capital Capital & Loan
11,820 600 5.1 31,002 1,724 5.6 42,822
Source: Robert M. Kindersley, ˜˜British Foreign Investments in 1929,™™ The Economic Journal,
41(Sept. 1931), 377“81, with percentages added.
Chapter 4: War, the First Nationalization 157

industries [electric light and power] bear out the view that the British
[-registered] company operating abroad is no longer so favourable a
medium for the investment of capital.™™ In addition, he found ˜˜the pro-
portion of British controlled [investments] is tending to diminish.™™143 Mira
Wilkins did the percentage calculations provided in Table 4.1, and they are
striking. British-registered companies (part A of the table) that were clearly,
by Kindersley™s de¬nition, controlled from the United Kingdom had a
superior return to British investors, both on share capital and loans, com-
pared with those companies registered abroad (Part B of the table). Why,
then, did this form not prevail? According to Kindersley, ˜˜[T]he high rate of
income tax now payable by British registered companies compared with
companies registered abroad™™ had left little scope for the further develop-
ment of this method of investment.144 How Kindersley de¬ned ˜˜controlled™™
investments is not articulated (for companies registered abroad could be
British-controlled), but his conclusions appear accurate. Registration
abroad often did serve to undermine the British in¬‚uence and result in
lower returns to the British investors.
After Britain returned to the gold standard in 1925, its leaders hoped to
restore the country™s paramount global position. Capital controls were
removed. At the same time, within the United Kingdom many economists
(including John Maynard Keynes) argued that the out¬‚ow of capital
overseas was at the expense of domestic investment and that domestic
industry should be encouraged. Globalization had its hazards. As historian
David Kynaston put it, Montagu Norman “ at the Bank of England “
˜˜attempted to walk a tightrope “ on the one hand, seeking to reassert
London™s standing as an international ¬nancial centre and not entirely give
the game to New York; on the other, fearful of what an avalanche of
foreign loans would do to Britain™s chances of staying on the gold standard,
given that a high Bank rate was . . . political dynamite.™™145 Many British
policies, from the Trade Facilities Acts to those in the tax arena, were in line
with the ˜˜Buy British™™ sentiments of the time and were framed to spur
domestic investments in manufacturing at the expense of international
investments. In 1926, as the British made plans for an electrical grid, new
investments at home were greatly encouraged.146
Within Britain, the prewar networks of merchant bankers, investment
trusts, investment companies, and insurance companies “ that is, the major
players in the City “ were well aware that the pound had to share with the
dollar its important role in the world economy. Transatlantic ¬nancial
relationships had altered with the rise of the United States to new promi-
nence and with the new economic, including monetary, weaknesses within
Britain; nonetheless, transatlantic ties were no less intimate than before the
war. The important British merchant bank Schroders had set up a subsid-
iary in New York City in 1923, while Lee, Higginson, Boston, which
became particularly signi¬cant in international ¬nance in the 1920s, had
Global Electri¬cation

long had Higginson & Co. in London.147 The Morgan houses in New York
and London continued to be closely linked. British“American relationships
were complemented by the drawing in of continental alliances “ a
resumption of the pre“World War I linkages. What was new in the late
1920s were the ever increasing complexities of the transatlantic ¬nancial
networks and the wealth in the United States relative to Europe.148
In Britain in the late 1920s, the Robert Fleming group of companies and
those of Robert Benson “ traditionally investors in American securities “
¬lled their investment trust portfolios with stock of Insull™s electric utili-
ties.149 When in January 1929 J. P. Morgan issued shares of the United
Corporation (a major U.S. electric utility holding company), Morgan
Grenfell, London and Morgan & Cie., Paris, took an allotment of shares to
market in England and on the continent. So, too, Electric Bond and Share
attracted investments from abroad in its securities.150 Thus, at the same
time as the United States was sending capital around the world, there were
inward portfolio investments into the United States, from the United
Kingdom and elsewhere.
During the late 1920s, the British Pearson group™s Whitehall Trust
participated in numerous bond issues for electric light and power. For
instance, the group was involved in the British-registered free standing
company Perak River Hydro-Electric Power Co. Ltd., operating in Malaya
(now Malaysia), which included in its ˜˜loan capital subscribed™™ in 1928“
1929 outstanding 5 percent £1,250,000 Debenture Stock, issued at 99.10
percent, November 1926, principal and interest guaranteed by His
Majesty™s Treasury. (Just under half its entire loan capital was British
government“guaranteed.) This 1926 issue was ˜˜redeemable at par over the
years 1931 to 1941 by a cumulative sinking fund operating by annual
drawings and/or by purchase at or under par.™™ Whitehall Trust was listed
as ˜˜Trustees.™™ When the power plant was completed in 1930, Perak River
Hydro-Electric Power Co. Ltd. was the largest single producer of electric
power in Malaya.151
Interlocking directorates of British-headquartered free standing compa-
nies were the norm, as in times past. Clusters of individuals and ¬rms were
ubiquitous. An example lies in the group surrounding the Sudan Light and
Power Company Ltd., registered in England, January 7, 1925, which
announced plans to install a new light- and power-generating plant at
Khartoum, as well as other infrastructure within the Sudan. Its lustrous
board of directors was chaired by the Rt. Hon. Lord Meston, K.C.S.I
(Knight Commander of the Star of India). Meston (1865“1943) had been
Finance Secretary to the Government of India and was also chairman of the
Calcutta Electric Supply Corporation Ltd., and he was on the board of
many other free standing companies in electric utilities. From its estab-
lishment in 1919, Meston had been active in the Royal Institute of Inter-
national Affairs, London. Also serving on the Sudan company board was
Chapter 4: War, the First Nationalization 159

Percy John Pybus, C.B.E. Before World War I, Pybus (1880“1935) had
worked at the Siemens plant in Stafford, England. When in 1919 the plant
was acquired by English Electric Co., Pybus moved to the newly formed
British manufacturing company, where he became managing director in
March 1921 and chairman in 1926. English Electric at that time was one of
the four principal electrical manufacturers in Britain. English Electric did not
do well under Pybus™s tenure, which ended in 1929 when he became the
government™s Minister of Transport. The nearly bankrupt English Electric
was then sold to Edmundson™s Electricity Corporation, owned by Americans
(see below); it did not disappear as an entity, however. Pybus served as a
director of Societe Generale Hellenique and of Power and Traction Finance
´´ ´ ´ ´
(and its Polish subsidiary), and in 1927 he joined the board of Phoenix
Insurance Co. and then became its chairman from 1933 to 1935.152
English Electric participated in several domestic and foreign power
projects. In Egypt, where the Belgian Empain and So¬na were involved, a
British Foreign Of¬ce dispatch of 1929 reported on English Electric™s joint
managing director Vernon Watlington™s ˜˜clumsy attempts at bribery™™ in an
unsuccessful attempt to win an Egyptian railway electri¬cation contract.
That year, Pybus at English Electric, a representative of Metropolitan
Vickers, and someone from the Belgian So¬na were engaged, or so it was
reported to the Foreign Of¬ce, ˜˜in abominable mud-slinging and vituper-
ation™™ in relation to an Egyptian electri¬cation project.153
Also on the board of Sudan Light and Power was George May, Secretary
of Prudential Assurance. His presence on that board was not unusual, for
Prudential Assurance was involved with a number of loans to encourage
British activities in supplying electricity overseas. When Prudential took part
and May was not on a board, E. H. Lever of Prudential represented the
insurance company.154 Prudential Assurance became an important actor in
the overlapping clusters, not only with free standing companies but also with
the ¬nancing of otherwise independent companies registered abroad. Thus,
in 1925 Prudential Assurance acquired foreign bonds issued by Toho Electric
Company that were guaranteed by the British Treasury under the Trade
Facilities Acts.155 Then, in 1926 Prudential Assurance provided a £2 million
loan, backed by the British Treasury, to the Athens af¬liate of the Power and
Traction Finance Co. Ltd., which the insurer followed in 1927 by partici-
pation in the ¬nancing of the Palestine Electric Corp.156 When potential
business involving the electri¬cation of Belgrade, Yugoslavia, was presented
to the British Pearson group in the spring of 1929, the group learned that
Prudential Assurance, ˜˜if they [the Pearson group] desired,™™ would come into
the ¬nancial arrangements with the Whitehall Trust or Whitehall Electric
Investments Ltd. ˜˜at every stage and would share any pro¬ts which might be
made on the ¬nance in proportion to the risks assumed.™™157
Other clusters existed. The Hong Kong Electric Company was registered
in Hong Kong. In 1929, its accounts were in Hong Kong dollars. Its board
Global Electri¬cation

was predominantly of British nationality, although it listed two men with
Chinese names. We found that the same sort of clusters that surrounded
U.K.-registered companies were present on that board, including representa-
tives from the British trading companies Jardine, Matheson (B. D. F. Beith)
and J. D.Hutchison & Co. (T. E. Pearce). These trading companies had
British bases: They monitored the performance of the company that was
registered overseas. Even though Hong Kong Electric Company had no British
registration, it was closely associated with those companies that did have
imperial home of¬ces. Was Hong Kong Electric controlled by ˜˜nonresident™™
Hong Kong investors? The chairman of the company was C. G. S. Mackie,
from Gibb, Livingston & Co., a ˜˜British™™ trading company long established
in Hong Kong. The matter of British nonresident ownership and control,
however, is controversial.158
Meanwhile, during the 1920s the British electrical manufacturing
industry remained noncompetitive in world markets. British industry
counted on division-of-market agreements to safeguard its domestic turf
and on the series of British Trade Facilities Acts to assist limping exports.
The acts (of 1921, 1922, 1924, and 1926) were used in the case of
numerous loans, both to companies incorporated abroad and to those
registered in the United Kingdom. These acts required the borrowing ¬rm
to use the money to purchase British goods. Other loans under these acts
were made to, for example, the Toho Electric Power Co. (1925), the Sudan
Light & Power Co. (1925), the General Hellenic Co. (1926), the Perak
River Hydro-Electric Power Co. (1926), the Palestine Electric Corp. (1927),
and the Hungarian Trans-Danubian Electrical Co.(1928).159 As this
chapter progresses, we will provide more details on the British role in
international investments in electric light and power in the 1920s, including
the use of holding companies, and we will show how U.S. capital took over
a (perhaps the) leading company within the U.K. electricity supply industry
and how internationally U.S. capital often came to replace that of the
Before we proceed, however, we need once more to cross the English
Channel and consider French outward investments, which should not be
underestimated. As in the case of all advanced countries in the 1920s, there
were both inward and outward foreign investments. French stakes abroad
appear, at least up to 1929, to have kept separate from the German, ones
unlike the cooperative ventures of the prewar years. And when, at the end
of the decade, there were attempts through So¬na to bring the Germans
back in, French companies “ and of course the French government “
During the late 1920s, electrical securities became a signi¬cant part of
French bank holdings.160 More of the French outward investments appear
to have been directed to ¬rms within the French empire.161 The story of the
electri¬cation of Morocco through French direct investments has been well
Chapter 4: War, the First Nationalization 161

told by Samir Saul.162 It was based on the needs of the mineral industry,
speci¬cally phosphates. La Societe Marocaine de Distribution d™Eau,
´ lectricite (SMD) provided electricity to Casablanca and Rabat
de Gaz et d™ E ´
after 1915. SMD was part of the Petsche group of companies: Societe ´´
Lyonnaise des Eaux et de l™Eclairage. There was a demand for a larger
hydroelectric facility to cover all of Morocco, and so on January 30, 1924,
´ ´
Energie Electrique du Maroc (EEM) was organized, domiciled in Paris. Saul
lists the cluster of French founders in ¬ve categories: railroad companies
(50 percent of the shares in the syndicate), banks (15 percent), builders
(constructeurs) (15 percent), entrepreneurs (15 percent), and customers
(5 percent). There were two railroad companies. The lead bank was Banque
de Paris et des Pays-Bas (Paribas), which was also represented among the
founders through its subsidiary Compagnie Generale du Maroc. The con-
structeurs included the manufacturers Schneider et Cie. and the French
Thomson-Houston. Among the customers was SMD (Albert Petsche). The
president of EEM was Gaston Griolet, chairman of Paribas.164 The coterie
of interested parties made the electri¬cation process possible. This is but
one example of French direct investments in electri¬cation within the

holding companies
By the late 1920s, holding companies in the electrical public utilities sector
had become omnipresent, and the best way to raise money for international
business. They varied substantially, with some designed to rationalize
business operations and others serving as ¬nancial holdings. Many of the
holding companies made direct investments and at the same time held
investment securities in companies in which they did not participate in
management. A substantial number of holding company structures were
tangled by cross-holdings, so that deciphering chains of ownership involves
making one™s way through a maze that became more and more complex as
time passed. So¬na, for example, not only participated directly in the
rationalization of electric utilities, but it had interests in other holding
companies in the typical late-1920s pyramids. We have discussed So¬na
and its labyrinth of holding and sub“holding companies and its substantial
1928“1929 restructuring. So¬na was not mere ¬nancial architecture.
Heineman was determined to apply the latest engineering knowledge and to
increase ef¬ciency. His goal was to disseminate within the So¬na organization
the best methods, and to do this required ¬nancial resources.166
In Belgium, a consolidation within the electric utilities sector occurred
during 1928“1930. There emerged (1) Tractionel (Societe de Traction et
´ lectricite, a holding company for tramways), formed in 1929, (2) Elec-
d™E ´
trobel (Compagnie Generale d™Entreprises Electriques et Industrielles), set
up in 1929 and dominated by the Banque de Bruxelles; also involved were
Global Electri¬cation

the Banque de Paris et des Pays-Bas (Paribas); Societe Generale, Brussels;
´´ ´ ´
Mutuelle Solvay; and So¬na, and (3) Electrorail (Compagnies Reunies ´
´ lectricite et de Transport), one of the Empain group™s holding compa-
d™E ´
nies, organized in 1930, an ˜˜outcome of the Empain group™s desire to unify
the management of its companies™ ¬nancial services™™ after the 1929 death
of the group™s founder. All of these holding companies had sizable domestic
(Belgian) investments in public utilities and in fact dominated the domestic
market. Electrobel (the successor to So¬na™s onetime rival Societe Generale
´´ ´ ´
´ lectriques, but now associated with the So¬na) had a
Belge d™Entreprises E
vast set of international direct and portfolio investments in light and power
companies, as did the Empain group (including more than Electrorail), which
as we have seen continued to be heavily involved in French direct invest-
ments.167 During 1928“1930, historian Ginette Kurgan-Van Hentenryk
writes of the rivalries within Belgium between Societe Generale and Banque
´´ ´ ´
de Bruxelles. Ultimately, the latter would draw back from its involvements in
electricity, obliged to give up its controlling interest in So¬na and accept with
Societe Generale an equal one-¬fth share in Electrobel.168 While the span of
´´ ´ ´
investments of these Belgian holding companies was ˜˜global,™™ Europe was
foremost in their investment strategies.
Belgian involvements in electri¬cation had long been impressive; in the
early days, its companies had led in tramway investments, but by the 1920s
investments in electricity supply companies were far more extensive than
those in tramways. In Belgium, the older companies and their successors
remained, but there continued to be new enterprises as well. For example,
in July 1928 the Compagnie Financiere d™Exploitations Hydroelectriques
Societe Anonyme (Hydro¬na) was formed in Belgium, to hold shares in and
to raise money for a number of Romanian electricity supply companies. By
1929, the key shareholders in Hydro¬na were Belgian (Societe Generale´´ ´ ´
de Belgique, Banque d™Anvers, and Electrobel), French (Banque de l™Union
Parisienne, Demachy, and Compagnie d™Enterprises Electromecaniques), ´
¨ sterreichische Brown Boveri and Niederosterreichische
and Austrian (O ¨
Escompte-Gesellschaft). The technical direction was undertaken by Elec-
trobel, which managed the building of a new hydroelectric facility and
parceled out the equipment orders among Belgian, French, and ˜˜Austrian™™
suppliers (Osterreichische Brown Boveri was, of course, a subsidiary of the
Swiss Brown, Boveri.)169
And then there was the Compagnie Italo-Belge pour Enterprises d™Elec-
tricite et d™Utilite Publique (CIBEE) or, in one English rendition, Italian-
´ ´
Belgian Electric & Public Utility Co. (Italo-Belge), formed in 1928 by Count
Giuseppe Volpi. We will encounter Volpi, who had long experience in the
electrical industry, frequently in connection with other international holding
companies. Italo-Belge has been described as a ˜˜construction and managing
company,™™ and it was said to have at its disposal engineers from Societa `
Adriatica di Elettricita (SADE), a major power company that Volpi headed.
Chapter 4: War, the First Nationalization 163

Italo-Belge, in turn, owned shares in another Belgian registered company, the
Compagnie Europeenne pour Entreprises d™Electricite et d™Utilite Publique,
´ ´ ´
also known as European Electric & Public Utility Company (Europel),
formed in 1929, which held minority interests in ˜˜many European compa-
nies.™™ According to one source, Europel was organized by Volpi along with
the Swiss Elektrobank; a second source has Europel created by So¬na as an
investment trust destined to acquire interests in numerous German and
Italian electrical companies (this source compared it with Caninlipo, which
So¬na had organized in 1929 to combine various holdings in French public
utilities). Both were probably true, for the networks were linked.170
In France, there was Societe Centrale pour l™Industrie Electrique (SCIE),
which during the late 1920s made new investments for the ¬rst time in
Portuguese utilities. It seems to have assisted the linkages between French
banks and So¬na. It joined So¬na in the organization of Caninlipo. At
decade™s end, SCIE was making further investments in electric utilities in
French colonies. SCIE was a ¬nancial holding company engaged in port-
folio management, opening of current accounts for its subsidiaries, and
selling its subsidiaries™ bonds and shares to expand the pool of investors.171
Its prewar relations with the manufacturing company French Thomson-
Houston were retained, but SCIE clearly had a separate life.
Sweden, too, had new holding companies. In the summer of 1929, the
Stockholms Enskilda Bank (SEB) and the large Swedish electrical manu-
facturer Allmanna Svenska Elektriska (ASEA) organized a jointly owned
power-holding company, Electro-Invest, to acquire concessions abroad,
especially in Eastern Europe.172
In Britain, holding companies qua investment companies emerged. Often,
it was dif¬cult to distinguish British holding from investment companies. For
example, the Power Securities Corp. Ltd., formed in 1922, as a ˜˜means of
handling new issues of electrical securities,™™ appeared to be an investment
company, with no direct investments in any of the electricity supply com-
panies that were part of its portfolio, although key to its formation was
Balfour Beatty, a British consultancy and management ¬rm, with engineering
experience; controlling interest was held by George Balfour and three British
manufacturers: Armstrong Whitworth, Babcock & Wilcox, and British
Thomson-Houston. It became the largest electric-utility holding company in
Great Britain, with most of its investments domestic.173
More important in relationship to British international business was the
Power and Traction Finance Co. Ltd. (PTFC), also established in 1922 by a
group that included English Electric.174 In 1929, Prudential Assurance
(which had been involved from the start) was described as the ˜˜¬nancial
member™™ of the Power and Traction Finance Co. Ltd. group.175 PTFC tried
to identify light and power opportunities and to facilitate the translation of
the prospects into working projects. In 1923, the National Bank of Greece
had approached PTFC for aid in ¬nancing Greek electri¬cation. In 1926,
Global Electri¬cation

with a group of Greek banks that were involved in the Syndicato Meleton
kai Epichiriseon (sometimes translated as Syndicat des Etudes et des
Enterprises), PTFC formed a Greek af¬liate, General Hellenic Company
(Societe Generale Hellenique), which for the next thirty-one years would
´´ ´ ´ ´
supply electricity to Athens and its environs.176 For these Greek operations,
in 1926, as previously indicated, Prudential Assurance provided a
£2 million loan, guaranteed by the British Treasury under the Trade
Facilities Acts. English Electric Co. and Babcock & Wilcox were among the
British manufacturers that hoped to export to the new Greek subsidiary.
Babcock & Wilcox was a large producer of boilers that were used in steam-
generating plants.177 What was in evidence in this Greek investment was
once again the cluster of related companies, an investment company,
manufacturers, and an insurer, coordinated through PFTC. In these nego-
tiations, the British government and the guarantee by the British Treasury
of the Prudential loan were critical to the transaction.
All of the Greek electri¬cation needs were not, however, ful¬lled by
General Hellenic Co. There was no monopoly “ at least for the country as a
whole. Earlier in this chapter, we noted that in 1923 the largest supplier of
electricity in Greece in 1923 had been Compagnie Hellenique d™Electricite
´ ´
(CHdE). As the Greek State and the National Bank of Greece were
negotiating with Power and Traction Finance Company, the ChdE made its
own plans and submitted a separate proposal to the National Bank of
Greece. After the PTFC (and General Hellenic Co.) received its concession,
CHdE obtained a concession for many of the other more important cities of
Greece “ outside of Athens and Piraeus, which was reserved for the PTFC
group. CHdE got most of its ¬nancing from an Austrian group, which, in
turn, was very much involved in international business “ both inward and
outward investments.179
PFTC™s Greek activities involved General Hellenic (it did not take part in
ChdE, nor as far as we can establish in any of the Austrian group that was
¬nancing the latter). But PFTC™s business was not con¬ned to Greece; it
made investments in Eastern Europe and was heavily engaged in Polish
electri¬cation, establishing in 1923 an af¬liate Power and Traction Finance
Company (Poland) Ltd., which acquired the assets of an earlier British free
standing company, the Anglo-Polish Electrical Development Corp.180
During the 1920s, ten companies in which foreign capital was involved
were established in Poland to construct and operate electric power stations
on the basis of concessions. PFTC became an investor in several of these
companies. When at decade™s end an opportunity emerged for a large-scale
electri¬cation project in Belgrade, Yugoslavia, PTFC served as the inter-
mediary in developing the plans.181 While PFTC seems to have been
entrepreneurial in these electricity supply ventures, its own holdings of
securities do not re¬‚ect this. As of March 1927, its name notwithstanding,
PTFC had less than 20 percent (19.92 percent) of its overall investment
Chapter 4: War, the First Nationalization 165

portfolio in ˜˜electrical railways and public utilities,™™ with the other
80 percent in diversi¬ed investments; moreover, we do not know how much
of the 20 percent was within Great Britain and how much was abroad (at
that time, 36 percent of its total portfolio was in investments within Great
By 1929, General Hellenic had built a new power station to supply the
Athens-Piraeus area, but substantial added funding was needed. Thus, in
1930 Whitehall Securities/Whitehall Electric was ready to ¬ll its require-
ments with a large capital contribution in exchange for control of the
company in Athens. Like the earlier loan from Prudential, the money
Whitehall Electric raised for this project seem to have had a British-
government guarantee.
Whitehall Securities/Whitehall Electric conducted the international activ-
ities of the British Pearson group. In the early part of the 1920s, it looked as
though the group might become a major player in global electri¬cation.
Based on Lord Cowdray™s investments, the group had experience in Mexico
and Chile and seemed committed to additional entrepreneurial activities in
the electricity supply sector. Yet during most of the 1920s, its direct invol-
vements in electric utilities did not extend beyond those two Latin American
countries.183 Then, in 1928“1929, during the sweep of U.S. business
expansion throughout Latin America (see below), Whitehall Electric sold
these large public utilities interests in Mexico and Chile to American &
Foreign Power Company. The sale included electric light and power systems
in Vera Cruz, Tampico, Puebla, Cordoba, and Orizaba, Mexico; street
railway properties in Tampico and Vera Cruz, Mexico; and the electric light
and power and street railway systems in Santiago and Valparaiso, Chile, and
nearby.184 The Pearson group™s pro¬ts on the transaction were reported to be
£2.7 million.185 The Pearson group had sold out in Chile not only because of
the attractive price, but mainly because its dealings with the Chilean gov-
ernment had over the years steadily deteriorated, so much so that in 1927,
with a breakdown in negotiations, its Chilean af¬liate, Compan±a Chilena,
was actually worried about the possibilities of expropriation.186 After
Whitehall Securities/Whitehall Electric retreated from Mexico and Chile, it
entertained the possibilities in 1929“1930 of other major electrical industry
propositions in Europe, including the one in Athens.187
Another British holding (free standing) company with large interests in
Latin America was Atlas Light and Power Co. Ltd., organized in 1926 with
a capital of £6,282,235 (ca. $30.5 million); Atlas Light was the successor to
a series of British free standing companies, and at origin it controlled ¬ve
separate companies in Argentina and Uruguay. In the standard pattern of
holding companies, it consolidated existing companies and to do this raised
money in the United Kingdom.188 As Atlas Light, its role in Argentina
proved to be short-lived, and like Whitehall Securities/Whitehall Electric, it,
too, sold out in 1929 to the expanding American & Foreign Power.189
Global Electri¬cation

In April 1928, British and Foreign Utilities Development Corporation
(BFUD) registered to do business in the United Kingdom with the goal ˜˜to
secure openings for the employment of capital throughout the world.™™190
Its board chairman was Arthur C. D. Gairdner, whose other directorships
included the British Overseas Bank and the Anglo-Polish Bank. A repre-
sentative of Prudential Assurance was a director of BFUD, which, invested
in Poland in the newly established Utilities Corporation (Poland) Ltd.,
formed in October 1928, which in turn controlled Elektrownia Okrege
Warszawskiego, a Polish public utility.191
With the quali¬ed exception of Power and Traction Finance, the clear
exception of Whitehall Securities/Whitehall Electric, perhaps Atlas Light
and Power, and possibly BFUD, the ˜˜holding company™™ form (as distinct
from the investment company and the free standing company) does not
appear to typify British overseas stakes in electrical public utilities in the
1920s, although there were clusters of companies that had certain pyramid
relationships. Yet in Britain, there was little that approximated the use of
Canadian and U.S. holding companies for international investments where
the holding company “ as an entrepreneurial actor developing, rationaliz-
ing, and ¬nancing public utility properties “ took on immense signi¬cance
during the 1920s.192
Prior to the 1920s, Canadian-headquartered (Canadian-registered)
holding companies had not been the norm. The prewar exception was
International Light & Power Co. Ltd., Toronto, organized in 1913, with its
interests in public utilities in Argentina, Mexico, and Venezuela. The
Canadian pattern had been to set up free standing companies, which
became holding companies within Mexico and Brazil. The holding com-
pany structure as such had not been evident in Canada as a means of
carrying forth investments across borders. The Canadian style for business
abroad in utilities, as we have seen, had been one of loose groups and
clusters “ that is, concentric circles. Some of this remained, but in the 1920s
overall there was a change in the Canadian approach.
Very important, in a pyramid fashion, were foreign (non-Canadian)-
owned companies that held stock in and continued to ¬nance Canadian-
registered ¬rms, which did business abroad, sometimes as direct investors
and sometimes as simply ¬nancial intermediaries. Thus, in 1928 Whitehall
Securities/Whitehall Electric organized Whitehall Canada Ltd., which had a
portfolio of ˜˜quoted and unquoted investments,™™ most of which were
U.S.-dollar-denominated securities.193 For Whitehall Securities/Whitehall
Electric, the investments made through Whitehall Canada were not foreign
direct investments, but were part of its overall investment strategy.
Similarly, as we have noted, in the 1920s, although the Canadian reg-
istration persisted, Brazilian Traction, Light and Power Co., Mexican
Tramways Co. and its af¬liate Mexican Light & Power Co., as well as
Barcelona Traction, Light and Power passed to So¬na control, and these
Chapter 4: War, the First Nationalization 167

¬rms became part of the So¬na/Sidro multinational network of enterprises.
At the same time, the stock-holding interests notwithstanding, Canadians
managed them.194 In 1926, promoter I. W. Killam (head of Royal Securi-
ties, Montreal) founded the International Power Company, which joined
under one corporate umbrella a collection of foreign utilities in Latin
America that had been loosely associated with (controlled by) Royal
Securities. Royal Securities and its subsidiary Montreal Engineering
had electric utility interests in Bolivia, El Salvador, Venezuela, and
Newfoundland. Royal Securities had followed the Unternehmergeschaft ¨
form of behavior for its group of companies even before 1926, when
International Power was formed to furnish a formal unity to these Latin
American utilities and to raise added funding. Royal Securities held 51
percent of the shares in International Power, which in turn had controlling
interests in the foreign operating companies. During the late 1920s, Inter-
national Power, one of the major utility holding companies in Latin
America, expanded its activities.195
Another Canadian holding company qua investment company was the
Hydro-Electric Securities Corp., registered in Canada in 1926 with the goal of
acquiring interests in electric utilities. It was to be a ˜˜super Sidro,™™ (an
undertaking of Belgian entrepreneur Loewenstein replicating his existing
Sidro). At ¬rst, its principal assets were Loewenstein™s own holdings in Sidro “
Barcelona Light and Power Company Ltd. “ and in Rio de Janeiro “ Tramway,
Light and Power Company Ltd., one of the af¬liates of Brazilian Traction.
Loewenstein used the new ¬rm for speculative purposes, and its holdings
expanded even after its founder™s death in 1928. Hydro-Electric Securities held
stock and bonds of Brazilian, Italian, Mexican, and Spanish, utilities, but as of
1929 roughly 90 percent of its capital was placed in the United States. This
¬rm was organized under the Canadian tax designation ˜˜4-K,™™ meaning that it
paid minimal Canadian taxes. However, under Canadian law it was not
allowed to derive income from Canada or to own properties in the Dominion.
By 1929, its ˜˜Belgian™™ origins notwithstanding, most of the investors in the
stocks and bonds issued by Hydro-Electric Securities were from the United
States and Canada.196 In 1929, Hydro-Electric Securities and Central States
Electric of New York formed Electric Shareholdings Corporation and helped
organize U.S. Electric Power Corporation.197 In short, like many other com-
panies, Hydro-Electric Securities participated in pyramiding, the ¬nancial
architecture so common in the 1920s. In the end, it was an investment
company rather than an entrepreneurial venture.
Because of the favorable tax status and registration rules, holding
companies registered in Canada were, as we have noted, not necessarily
controlled from Canada: Whitehall Canada was English-controlled; So¬na,
when it brought the large Brazilian, Mexican, and Spanish (Barcelona)
properties into its sphere of in¬‚uence, retained the Canadian registration;
and Caninlipo, with its French investments, was So¬na-controlled. Canada
Global Electri¬cation

had long had good corporate legislation, and in the 1920s, with new taxes
everywhere, Canadian registration became even more attractive. In 1928,
U.S. investors acquired 72 percent of the shares of International Light &
Power, Toronto, formed in 1913 as the ¬rst of the Canadian holding
companies. In 1928, J. G. White (of the eponymous construction company)
became president of that holding company, which maintained its role in
Latin America. At the end of the 1920s, International Light & Power held
˜˜all the capital, stocks, and debentures of the companies owning electric
lighting, gas plants, and distributors systems in the cities of Caracas
(Venezuela) and Merida (Mexico),™™ as well as the entire share capital of the
South Brazilian Railways Co. Ltd., which owned electric lighting and
tramways systems in Curitiba, in Southern Brazil.198
In 1917, the construction company J. G. White & Co. had become a
subsidiary of the British trading ¬rm Alfred Booth; by then, the White ¬rm
was already considered to be a specialist in the management of public utilities
in Latin America and in contracting work. Once within the Booth group,
however, it did not ¬‚ourish. As a result, in 1929 Booth sold it back to its
founder.199 Before that occurred, in 1928, Foreign Light & Power Ltd.,
Montreal (allied with J. G. White) had been set up by Motor-Columbus.200
Indeed, within Canada, coincident with and sometimes indistinguishable
from, the holding companies were the investment companies that specia-
lized in electric light and power securities. Other investment companies did
not specialize, but held sizable portfolios of light and power securities.
Many of these companies were modeled after U.S. holding companies (or
other U.S. enterprises) or after British investment trusts.201 Canadian
investment companies were typically linked with an investment banking“
stock broker group: (1) Wood, Gundy & Co. Ltd., Toronto; (2) Nesbitt,
Thomson & Co. Ltd., Montreal; and/or (3) Arthur Meighen of Montreal.
For instance, Wood, Gundy in May 1928 organized London Canadian
Investment Corp., with Sir Herbert S. Holt, head of Montreal Light &
Power, as president. LCIC had three British directors on its eight-person
board. It was purely an investment company. In February 1929, Wood,
Gundy formed Consolidated Investment Corporation of Canada. Holt was
a director, as was George H. Montgomery, a lawyer and chairman of the
previously mentioned Hydro-Electric Securities.
A. J. Nesbitt of Nesbitt, Thomson had in 1925 set up the Power Cor-
poration of Canada, designed to provide technical, managerial, and
¬nancial services to operating public utilities companies. Along with its role
as a ˜˜utility holding company,™™ which managed a range of utilities, it also
had minority interests in numerous other Canadian and American utilities.
Interestingly, in a 1928 bidding war Power Corporation of Canada
acquired from English ownership the British Columbia Electric Railway
Co., which in the course of the 1920s had itself become a utility holding
company. This was a domestication of the largest U.K. direct investment in
Chapter 4: War, the First Nationalization 169

Canada.202 The prior year (1927), Nesbitt, Thomson (with A. Iselin & Co.
of New York) organized the Foreign Power Securities Corporation (FPSC),
which bought substantial interests in key light and power companies
throughout France (and in a French company that had a small plant in
Madagascar). In all, as of April 30, 1929, FPSC™s operations served 2,539
communities, and the entire system had 601,709 connected customers.203
In short, there was an extraordinary number of holding companies qua
investment companies, often not independent of one another, but with
substantial cross-pollination.
Just as in Britain, so in Canada insurance companies accumulated sizable
¬nancial resources. And just as in Britain, Canadian insurance companies
took part in the ¬nancing of electric utilities at home and abroad. Sun Life
Assurance Company of Canada in particular became heavily involved in
U.S. public utilities investments, especially in the Insull group of companies.
By May 1929, that Canadian life insurance company had almost 20 percent
of its investment portfolio in electric power, light, and gas companies,
mainly in the United States.204

u.s. business and ¬nance
So far, we have barely captured the vast, complicated international activi-
ties of European and Canadian ¬rms in providing light and power in the
late 1920s. The number of companies staggers the imagination. There were
many countries, from Syria to Kenya and beyond, with foreign direct
investments that we have not discussed and separate companies established
for such purposes. Even were we to extend our coverage, it would seem less
impressive than that of the spread of U.S. enterprise; U.S. involvements in
electric utilities catapulted upward in the late 1920s, at home and abroad.
In this decade, the United States became the world™s ¬rst consumer society,
and electrical goods that required the supply of electric power became
commonplace. From irons to vacuum cleaners to radios, American house-
holds acquired appliances. While the ¬gures vary, one set indicated that in
1922 a mere 39 percent of U.S. homes had electric light and power; by
1929, 68 percent were served with electricity. There was still a distance to
go, especially in rural America, but the diffusion was dramatic.205 Owing to
the sizable rural areas in America and the country™s huge geographical
expanse, by 1929 certain other nations had a greater percentage of homes
hooked up to electricity, but no nation had more capital invested in pro-
viding electric light and power. At the same time, as U.S. companies were
providing for U.S. needs, U.S. companies and capital also went to foreign
lands. No single sector attracted more outward foreign direct investment
from the United States than public utilities.206
The U.S. private sector™s international involvements were not only in
direct investments; ¬nancing of foreign public utilities projects was
Global Electri¬cation

similarly impressive. Often, as in the European and Canadian setting, there
was the combination of outward U.S. foreign direct investment and ¬nance.
Sometimes, however, the foreign ¬nancing was separate from the foreign
direct investment.207 In the 1920s, the United States possessed what no
other nation in the world had: a strong electrotechnical industry combined
with a capital-rich economy. Its enterprises were investing in an ef¬cient
manner in establishing American electrical systems. The nation™s important
multinational enterprises developed resources around the globe and in
enclaves they had instituted electri¬cation. So, too, the country had tech-
nologically advanced industries that founded businesses abroad to obtain
cheaper power. The United States had a vibrant stock market and a
dynamic international banking community.
In manufacturing, the front-runner, General Electric, augmented its
long-established strategy; as in the past, this included participation in
international agreements accompanied by foreign direct investments. In the
1920s, GE and its subsidiary International General Electric set out to have a
tranche in every major electrical manufacturing enterprise outside the
United States. Its cartel arrangements in no way dampened these plans.
Toward the end of the decade, Westinghouse™s international investments
were renewed, although when compared with GE its international stakes
seemed modest.208 In general, in the 1920s GE and Westinghouse had a
separate set of international alliances, although the management of each
¬rm was cognizant of what the other was doing. Just as with Siemens and
AEG, albeit tempered by U.S. antitrust law, there was both competition and
cooperation between the two leading enterprises (and with the German
giants and with other electrical manufacturers around the globe).209 Of the
late 1920s, economist Frank Southard wrote, ˜˜Unquestionably ¬rst among
European industries in which American corporations have a stake is the
electrical industry.™™210 GE also had sizable direct investments in Japanese
electrical manufacturing.211
Toward the end of the decade, Gerard Swope of GE attempted to merge
the four largest British lamp and heavy electrical equipment manufacturing
companies: (1) British Thomson Houston, already controlled by GE;
(2) Metropolitan Vickers, in which GE had ˜˜clandestinely acquired™™ a
majority interest (and that had agreements with Westinghouse, stemming
from the former™s wartime absorption of the British Westinghouse enter-
prise); (3) English Electric, which had earlier taken over Siemens™s British
dynamo plant in Stafford and was by decade™s end a weak company, soon
to come under the control of the Chicago-based Utilities Power and Light
Corporation; and (4) the independent General Electric Company Ltd.,
London. These merger plans did not materialize, although in their wake
emerged in January 1929 the new Associated Electrical Industries which
combined British Thomson Houston, Metropolitan Vickers, and a number of
smaller British electric companies. GE had a large enough interest in AEI to
Chapter 4: War, the First Nationalization 171

exercise control. At origin, AEI was the premier British electrical ¬rm, fol-
lowed by the smaller General Electric Company Ltd. and English Electric.212
On the continent of Europe and around the globe, GE™s in¬‚uence was
pervasive. It had long been involved in the giant French Thomson-Houston.
In 1928“1929, it was instrumental in the merger of certain properties of
FTH and the Societe Alsacienne de Constructions Mecaniques into the
´´ ´
Societe Generale de Constructions Electriques et Mecaniques (known as
´´ ´ ´ ´
Als-Thom and then Alsthom). This new company, the largest French
electrical manufacturer, was 14 percent owned by GE and the rest owned
by its two French founding entities.213 In 1929, German businessmen were
complaining of ˜˜Uberfremdung “ the unwelcome purchase . . . of equity
shares in German corporations.™™ That fall, owing to a ˜˜cash-¬‚ow squeeze,™™
Allgemeine Elektrizitats Gesellschaft (AEG) sold one-quarter of its equity to
GE. With resentment, Siemens™s head of ¬nance, Max Haller, cried out in
frustration in a note of November 11, 1929, to Owen Young of GE, ˜˜The
whole world belongs to the Americans.™™214 He was right. Even though
German manufacturers had sought to resume their worldwide role, their
activities were dwarfed by the U.S. expansion. The interests of GE (and to a
lesser extent Westinghouse) in manufacturing were global and far more
important than those of either Siemens or AEG, much less Brown, Boveri
(in which GE had a minority interest) or any other European electro-
technical manufacturing ¬rm.215
Although GE and its af¬liates™ principal domestic and international
interests were in manufacturing, GE directly and through its af¬liates
spurred the development of electric utilities. As in years past, manufacturers
desired to encourage public utilities so as to enlarge their markets.216 Long
before World War I and clearly by the 1920s, electric utilities and their
holding companies might be in clusters with the manufacturers, but the
activities from a corporate standpoint were now distinct. This is very
important, for as we document the role of U.S. direct investment in utilities,
the big interests were not by the manufacturers. GE was ubiquitous, but it
became increasingly remote from direct investments in foreign (and
domestic) utilities. The latter were now separate. Indeed, in February 1925
GE completed the distribution to its shareholders of its interest in the
important holding company Electric Bond and Share. The latter, however,
continued as the parent company of American & Foreign Power, and the
chairman of the GE board remained on the board of directors of American
& Foreign Power long after the spin-off.217 GE and Westinghouse did keep
(or establish) minority interests in European public utilities and in U.S.
holding companies designed for international business, interests that were
primarily for information purposes and part of the manufacturers™ general
network of contacts.218 When, for example, the U.S. holding company
Intercontinents Power Company was formed in 1928 to obtain properties
in Argentina, Brazil, and Chile, on its board were the president and the
Global Electri¬cation

general manager of Westinghouse Electric International.219 However, as we
consider U.S. investments in foreign electric utilities, we must go far beyond
the role of the manufacturers.
By the 1920s, the requirements of electric utilities had reached propor-
tions that only the wealthiest countries could, and did, ¬ll: U.S. ¬nance was
there to support the spread of public utilities worldwide. The London
market “ with its bond and share offerings in the electric utility sector “ was
small relative to its U.S. counterpart. Continental European stock markets,
from Paris to Zurich, handled the securities of electric utilities, but each
transacted less than London, and London transacted much less than the
New York Stock Exchange and the Curb. Many electric utility securities in
the 1920s were listed on two or more stock exchanges at home and abroad
and were traded internationally. The incomplete Table 4.2, which covers
only 1922 to 1925 (that is, the beginnings of the U.S. ¬nancing story)
provides an idea of the start of what became a crescendo of bond and stock
issues in the United States for public utilities abroad. American participants
in foreign public utilities created and took part in a very tangled web of
international corporate structures. Indeed, the very word ˜˜foreign™™ in the
title of the table is indicative of the labyrinth. ˜˜Foreign™™ could mean an
otherwise independent ¬rm resident abroad, where there were no direct
investment interests “ as in the case of the Japanese public utilities or, by
1922, the Melbourne Electric Supply Co. Alternatively, it could signify
¬nancing for a company set up in the United States that, in turn, invested in
utilities abroad, as, for example, the collection of holding companies par-
ticipating in Italian ¬nance or the holding company American & Foreign
Power Company. For instance, the Havana company listed on the table was
an operating company under the hierarchy of American & Foreign Power.
Bankers raised money for utilities around the world. The large
New York banks were not allowed to underwrite securities, but that did
not stop them: Chase, National City, and Guaranty Trust (controlled by
J. P. Morgan & Co.) formed af¬liates (Chase Securities, National City Co.,
Guaranty Co., respectively) to take part in underwriting and distributing
securities of electric utilities at home and abroad.220 This was especially
true of National City Co. and Guaranty Co. J. P. Morgan & Co.™s
participation in international public utility ¬nance was not only through
Guaranty Co., but its partners took on an especially critical role in
¬nancing the Japanese electric utilities industry. Japanese electric utilities
relied heavily on U.S. bond markets and to a lesser extent on borrowing in
London (dollar borrowings of Japanese electric utilities far exceeded their
sterling-denominated debt).221 Thomas Lamont, a key Morgan partner,
facilitated the U.S. transactions. J. P. Morgan & Co. was the ¬scal agent for
the Japanese government in the late 1920s, so it had access to an immense
amount of information on the Japanese economy. In 1927, Lamont visited
Japan, where he was lavishly entertained at the highest levels of the
Table 4.2. Some Securities of ˜˜Foreign™™ Electric Light and Power Companies Outstanding in the U.S. Market, 1925

Date of Issue/ Offering or
Rate (%) Maturity Amount ($000s) Lead (L) House Notes
Country Company
7½ 1922/1946 2,500
Melbourne Electric Lee, Higginson £ issue; $2.5
Supply million in U.S.
6½ 1924/1946 3,000
Lower Austria Hydro- F.J. Liseman (L) Guaranteed by
Electric Power province
7½ 1925/1955 3,000
Tyrol Hydro Electric F.J. Liseman (L)
6 1924/1929 8,000
Montreal Tramways Partly sold in
& Power Canada

6 1924/1949 12,000
Duke Price Power
5 1922/1954 3,600
Havana Electric Ry National City Co.
Light & Power
6½ 1924/1954 4,000
International Power Aldred & Co. Indirectly con-
Securities (Union nected with GE
6½ 1925/1950 7,500
Electric Power Corp. Harris, Forbes;
Lee, Higginson;
Brown Bros.

Table 4.2 (continued)

Date of Issue/ Offering or
Rate (%) Maturity Amount ($000s) Lead (L) House Notes
Country Company

6½ 1923/1928 2,000
Italian Power
7 1924/1944 15,000
Gt. Consolidated Dillon, Read
Electric Power
6½ 1925/1950 13,500
Gt. Consolidated Dillon, Read (L)
Electric Power
7 1925/1955 15,000
Toho Electric Dillon, Read;
Power Guaranty Co. NY;
Harris, Forbes

7 1925/1945 14,000
Ujigawa Electric Guaranty Co.
Power NY (L)
6 1925/1928 24,000
Tokio Electric Guaranty Co.
Light Co. NY (L)
Latin America
1923 40,000
American & Stock, sold partly
Foreign Power in Europe,
Guatemala, Cuba,
Source: Robert W. Dunn, American Foreign Investments (New York: B.W. Huebsch and Viking, 1926), 36“43, supplemented by ibid., 11“12. The above
table only covers borrowings speci¬c to electric light and power; it does not include borrowings by manufacturers (Siemens, for example) or by enclave-
type companies that installed electric power as part of their resource development. Even so, it is incomplete. Note that the name of Italian Power Company
was changed to International Power Securities Corporation in November 1924; Dunn™s book does not re¬‚ect that change.
Chapter 4: War, the First Nationalization 175

government. While there, he advised on the merger between Tokio Electric
Power and Tokio Electric Light and how the combination would make the
¬nancing process in the United States easier. In December 1927, Lamont
received a cable from Yasuzaemon Matsunaga, the principal person on the
Japanese side in this combination: ˜˜Merger done Matsunaga responding
Your advise splendid Merry Christmas.™™ The merger occurred in April
1928.222 In that year, when its 1925 bond issue matured, Tokio Electric
Light refunded it; and in the same year, a New York banking group, led by
the Guaranty Co., ¬‚oated $70 million 6 percent ¬rst mortgage gold bonds
for the Tokio Electric Light, due in 1953. A lesser amount of that same
issue was introduced in London by Lazard Brothers and Whitehall Trust
Ltd.223 Other Japanese companies borrowed in New York, including Great
Consolidated Electric Power Co., Toho Electric Power Co., and Ujigawa
Electric Power Co. Some of these also had smaller sterling issues.224 By
year-end 1930, Japanese corporate bonds held in the United States
amounted to $143 million and were entirely the obligations of electric light
and power companies. These large borrowings were all publicly offered
between 1924 and 1929. By way of comparison, the level of the entire (all
sectors) U.S. foreign direct investment in Japan at year-end 1930 was a mere
$61 million.225 There were no foreign direct investments by Americans or
other nationalities in Japanese electric utilities. However, Japanese inves-
tors were making outward foreign direct investments in electric utilities in
Korea and Manchuria.226
If the large New York commercial banks were involved in international
electric utilities ¬nance, so, too, were U.S. investment bankers: Prominent
examples were Kuhn, Loeb; Dillon, Read; Lee, Higginson; W. A. Harriman
& Co.; Brown Brothers (these last two combined into Brown Brothers
Harriman in 1931); Harris, Forbes; Bonbright & Co.; and Aldred & Co.
Display advertisements in the New York Times covered share and bond
offerings, and on the ˜˜tombstones™™ (as the advertisements for the securities
listings were called) appeared the subsidiaries of the commercial banks
along side the investment banks. Foreign banks, often with agencies in New
York, might join in the offerings. Typically, for a securities issue there
would be a lead bank, with other banks participating.227
The principal foreign corporate borrowers in the United States in the
1920s were from Canada, Germany, Italy, and Japan.228 A large part of the
Italian borrowings appear to have been through public utility holding
companies set up in the United States, which we will discuss shortly. On the
other hand, Societa Generale Italiana Edison di Elettricita (the Edison
` `
Company, Milan) “ the dominant factor in the hydroelectrical industry in
the Lombardy region of northern Italy “ issued on October 10, 1929
American depository shares for the convenience of U.S. securities holders,
shares that were traded on the New York Stock Exchange. The ¬rm (like
some of the other big Italian electric utilities) also issued dollar bonds.229
Global Electri¬cation

ADSs (American depository shares) and ADRs (American depository
receipts), which became very popular in the United States toward the end of
the 1980s, were ¬rst introduced in the late 1920s, as Americans came to
hold sizable foreign portfolio investments. Investors paid for the stock in
dollars. The shares or receipts traded on exchanges along with other dollar-
denominated issues.230
German corporate borrowers included manufacturers as well as electric
utilities; we do not know the proportion of German corporate borrowings
that went to the electric utilities.231 Among the German light and power
companies that raised money in the United States in the late 1920s were the
Electric Power Corp. (1925), Consolidated Hydro-Electric Works of Upper
Wurttemberg (1926), Silesia Electric Corp. (1926), Berlin City Electric Co.
(1926 and 1929), Brandenburg Electric Power Co. (1928), and East Prussia
Power Co. (1928).232 Beginning in 1925, National City Bank™s subsidiary,
National City Co., managed a series of sizable bond issues for the majority
state-owned German public utility Rhine-Westphalia Electric Power
Corporation.233 National City Bank had close relationships with General
Electric and American & Foreign Power Co. Networks of participants in
these ¬nancial transactions were conversant with the ins and outs of the
electric utilities sector, with German, Italian, and Japanese borrowings.
The largest of all foreign corporate borrowings in the United States in the
1920s were by Canadian ¬rms. Far more than in previous years, Canadian
companies drew on U.S. capital resources. Canadian brokers were com-
fortable trading on U.S. exchanges, and it is not at all surprising that
Canada ranked ¬rst in the number of corporate issues. During the 1920s,
there were important U.S.-dollar-denominated bond issues for Canadian
power companies.234 At the same time, U.S. direct investors in Canada
supplemented their own reinvested earnings with added U.S. borrow-
ings.235 A large number of American electric utilities had Canadian
investments, some of which were direct investments; typically, these U.S.
utilities obtained outside ¬nancing “ that is, they went to the public for such
When there were offerings of the foreign securities, U.S. and foreign
public utilities, holding companies, investment companies, and individuals
would ¬ll their portfolios with the securities. Much criss-cross ownership
occurred by (and of) holding company and operating company securities
doing business outside the United States (that is, foreign ¬rms invested in
securities of electric utilities in the United States as these same companies
were investing abroad). This cross-ownership story involving inward and
outward investments was not merely a U.S. phenomenon; it was true of
European and Canadian ¬rms as well. Moreover, after 1924, as bonds of
light and power companies came to be seen as reliable investment securities,
insurance companies operating in the United States acquired foreign, par-
ticularly Canadian, corporate bonds for their portfolios.237
Chapter 4: War, the First Nationalization 177

Bankers, who placed their ¬rms™ names on the ˜˜tombstones,™™ were often
active in structuring the ¬nancing of the foreign (or domestic) utility, as in
Thomas Lamont™s role in the large Japanese merger. At other times,
bankers did far more. Thus, by the end of the 1920s Harriman & Co. was
making ambitious plans for the electri¬cation of Poland, plans that were
clearly those of a direct investor.238 In 1929, press reports indicated that
Harriman had acquired a ˜˜large block of shares in Oberschlesischen
Elektrizitats und Gas AG, which accounted for more than 25 percent of
Polish power production.™™239
As an intermediary for U.S. investments in Germany, there was Paul
Warburg™s American & Continental Corporation, designed to provide
¬nancial assistance to German borrowers. Many European banks took part
in this holding company, and its general ¬nancial contribution to German
business included electric utilities. The initiative was a combination of
Americans and Germans.240
Longer and more deeply engaged in international business in the electric
light and power sector was the Boston banker John E. Aldred. In the 1920s,
he set up investment houses in New York, London, and Paris, and he
became a participant in complex holding company structures that related to
Italian and French ¬nancing of public utilities (see below). We have men-
tioned his involvements in the Shawinigan and Saguenay developments in
Canada. In January 1927, the Shawinigan Water and Power Co. purchased
all the common stock of Eastern Canada Power Company Ltd.; it also held
interests in a number of other Canadian utilities.241 William J. Hausman
and John L. Neufeld described Aldred ˜˜as both a utility executive and a
¬nancier.™™ He had a vast web of contacts, but no full-scale in-house
engineering and managerial services unit.242
By contrast, the engineering ¬rm qua underwriter and investment banker
Stone & Webster continued to be engaged in ownership and contractual
dealings with foreign public utilities during the 1920s. Thomas Hughes
writes that ˜˜Stone & Webster, while performing most of the functions of a
holding company,™™ did not take the ¬rst step in that direction until 1925,
when it participated in the formation and ¬nancing of the Engineers Public
Service Corporation. While heavily involved in domestic utilities, Stone &
Webster also participated (with Aldred) in holding companies that were
engaged in ¬nancing Italian and French electric utilities. Separately, Stone &
Webster, for example, had interests in utilities in Poland in Utilities
Corporation (Poland) Ltd. (12 percent of the voting stock), in Italy in
Societa Idroelettrica Piemonte, Turin (18,702 shares), and in Jamaica in
Jamaica Public Services Ltd. (a joint venture with the Canadian industrialist
Russell Bell).243
In the United States, by the end of 1929, key utility holding companies
dominated the domestic market; each was domestically controlled as were
the subsidiary operating companies. All were traded on stock exchanges
Global Electri¬cation

and attracted inward portfolio investors at the same time as the holding
companies made outward foreign direct investments.244 In September
1929, Harris, Forbes and the American Founders group (a U.S.-based
investment company group) organized the Public Utility Holding Corpo-
ration, with plans for South American, French, and German investments.
(Above, we noted that it picked up shares in International Paper and Power
Co., which operated in Canada.) The Deutsche Bank und Disconto-
Gesellschaft (from a 1929 merger of Deutsche Bank with Disconto-
Gesellschaft), for example, made investments in this U.S.-based holding
company.245 The inward investments in U.S. utilities were part of the
complicated cosmopolitan ¬nance of the 1920s that combined inward and
outward international investments and foreign portfolio and foreign direct
It was the outward foreign investments from the United States, however,
that made the difference and truly mattered, and the holding companies
took on great importance. Most of the large domestic holding companies
had outward foreign investments “ and not only in Canada.247 In addition,
some holding companies held foreign portfolio investments, but more sig-
ni¬cant were the sizable foreign direct investments, often replacing
(substituting for) the overseas investments of other nationalities, particu-
larly the British in Latin America. For the direct investors, the strategy for
the most part became that of merger and acquisition, not ˜˜green¬eld™™
(new) operations.248 This was in keeping with the wave of mergers
occurring in the United States in the late 1920s. It was also in line with the
fact that many separate electric utility companies had been set up around
the world, and U.S. utility holding companies perceived the need for
rationalization of these often inef¬cient units. American engineers could do
this, and their companies would pro¬t in the process. Americans did what
the Belgian-based So¬na was undertaking, so they were not exceptional
in this regard.
Holding companies took different forms, as our text above and the
U.S.-Italian ¬nancing story that follows illustrate. The latter had a subtext
of U.S.-French ¬nancing. As in the case of the American & Continental
Corporation, in German ¬nance these U.S. holding companies were created
with the cooperation of Italians and Frenchmen in order to ¬nance their
enterprises. Many of the key players in the internationalization of electric
utilities participated. Right after the World War I armistice, a representa-
tive of American International Corporation (see above) traveled to Italy to
study the opportunities in electri¬cation, and in the immediate postwar
period it developed a ¬nancing plan that came to naught.249 In 1920, Count
Giuseppe Volpi, the founder and head of a leading Italian power company,
Societa Adriatica di Elettricita (SADE), organized a ¬nancial holding
` `
company in Italy, with subscriptions from the principal Italian electric
groups and with the aim of obtaining support from Wall Street. Volpi
Chapter 4: War, the First Nationalization 179

contacted General Electric and John E. Aldred; the latter formed companies
in New York City and London to issue bonds to ¬nance Italian electric
companies. Once again, nothing came of these trial runs. Not until 1922“
1923 was the ¬rst noteworthy agreement reached between representatives
of Societa Generale Italiana Edison di Elettricita (the Italian Edison Com-
` `
pany), Credito Italiano (a large Italian bank and one of the main share-
holders in the Edison enterprise), Stone & Webster, Aldred, and General
Electric (the last three had been active in the formation of American
International Corporation). The result was that in April 1923 the Italian
Power Co. came into being and started business that October. Its stated
purpose was to ¬nance in the United States electric light and power com-
panies operating in Italy. It would invest American capital, under the
˜˜supervision of a specialized group of American businessmen.™™ Italian
Power raised $2 million in the U.S. market for the Italian Edison Com-
pany.250 The next step (in November 1924) was the renaming of Italian
Power; it morphed into International Power Securities Corporation (IPSC),
which would acquire securities of electric utilities in the United States and
abroad; like its predecessor, it was involved in the ¬nancing (through
credits and/or bonds) of the Italian Edison Company and other key Italian
electrical enterprises. The name change, however, re¬‚ected the extension of
its activities into French electric utilities ¬nance. The prime mover contin-
ued to be Aldred, IPSC™s president. Aldred was also on the board of the
Italian Edison Company. Alcoa™s head, Arthur Vining Davis, along with GE
and Stone & Webster representatives served on the IPSC board, continuities
from Italian Power. In 1926, Giangiacomo Ponti, a member of the Italian
parliament and head of Societa Idroelettrica Piemonte (Turin), one of the
Italian ¬rms for which IPSC raised money, applauded the signi¬cance of
the marriage between ˜˜Italian electrical and American ¬nancial genius in
the development of electricity and its application to industry in Italy.™™ In
addition, IPSC developed ¬nancing for French electric utilities through
Union d™Electricite, a utility identi¬ed with the French entrepreneurs Albert
Petsche and Ernest Mercier (French Thomson-Houston was also involved).
Petsche joined the IPSC board (he had not been on the board of its pre-
decessor). IPSC had shareholdings in Union d™Electricite and extended a
$4 million long-term loan to that company. Aldred, with his investment
house in Paris, built up strong French connections.
As IPSC expanded, an agreement was signed between the Italian and
U.S. governments on Italian war debts. (Negotiations were led on the
Italian side by Giuseppe Volpi, Italian Minister of Finance, 1925“1928.)
This accord gave new and stronger guarantees of reliability to all the Italian
economic actors coming to Wall Street in search of capital. Between 1925
and 1928, a number of projects were discussed within Italy and the United
States on how to move greater amounts of capital from the United States to
the burgeoning Italian electric power industry.251
Global Electri¬cation

This would not occur through IPSC. In Moody™s Manual (Utilities)1928,
Carlo Orsi of Credito Italiano was listed as being on the board of IPSC, but
in Moody™s Manual (Utilities) 1929 and subsequently, IPSC had no Italian
directors. Petsche, however, remained on the IPSC board, indicative of that
holding company™s new focus on French ¬nance. Indeed, it was suggested
that IPSC™s role in Italy might bring orders to French manufacturers.
Throughout the 1920s, IPSC continued under Aldred™s direction.252
Meanwhile, in January 1928 Italian Superpower Corporation was
incorporated in Delaware to acquire a substantial interest (but in no case a
majority) in the stock of a large number of the principal electric light and
power companies in Italy. The latter provided their shares in return for
preferred shares in Italian Superpower. All the major Italian electric utilities
participated. Accordingly, the ownership of Italian Superpower was shared
between Americans and Italians. The board had 23 members “ 12 Italians
and 11 Americans. There were representatives from such utilities as SADE
(Volpi), Unione Esercizi Elettrici, and Societa Idroelettrica Piemonte. First
and foremost among the Italian banks involved was Banca Commerciale
Italiana (BCI), but also taking part in the new venture were Credito
Italiano, Banco di Roma, and Banca Nazionale di Credito. Also included on
the board were Italian manufacturers, among them Pirelli (which made
insulated cables). At origin, the vice chairman of Italian Superpower was
Giuseppe Toeplitz, managing director of BCI. Toeplitz hoped through
Italian Superpower to reduce the number of electric utility shares in the
portfolio of BCI in order to introduce more liquidity in BCI™s balance sheet.
From the U.S. side, Italian Superpower was governed by individuals asso-
ciated with Electric Bond and Share and American & Foreign Power Co. Its
chairman and president was S.A. Mitchell, who was on the board of
American & Foreign Power and was vice president of Bonbright & Co. The
new company would furnish ¬nancing for the Italian electricity sector.
In June 1929, barely a year and a half after Italian Superpower had been
organized, American Superpower Corporation (which had been formed
by Bonbright & Co. in October 1923 as a public utility holding company)
acquired 50 percent of the voting stock of Italian Superpower. American
Superpower, which was categorized by the Securities and Exchange Com-
mission under the rubric ˜˜Management Investment-Holding Companies,™™
was huge, with assets totaling $225.5 million on December 31, 1929. By
way of comparison, at that date the assets of International Power Securities
(IPSC) were $43.7 million, while those of Italian Superpower were $38.9
million. The pyramiding did not stop. American Superpower, in turn, came
to be one of the companies controlled by the Morgan-led public utility
holding company United Corporation, organized late in 1929. As of
December 31, 1929, United Corporation™s assets were $332.5 million.253
Through these holding and sub“holding companies, U.S. ¬nance and
expertise became embedded in assisting the spread of electri¬cation in Italy as
Chapter 4: War, the First Nationalization 181

well as in France. Did these holding companies make U.S. direct investments
abroad? Were they entrepreneurial in nature? The answer is ˜˜yes™™ to both;
but when we turn the coin over and ask, Through their ownership interests,
did they ˜˜control™™ the Italian and French enterprises that they ¬nanced?,
the answer becomes far more dif¬cult. Clearly, the funds raised were sig-
ni¬cant and were provided with care and supervision. Both International
Power Securities and Italian Superpower were administered by experienced
men in the electric utilities sector. Yet to argue that these holding companies
(and the U.S. participants involved) “ rather than Giacinto Motta with the
Edison company or Volpi with SADE “ for example, ran the utilities would
be wrong. It was Italian entrepreneurship that did that. Neither Motta nor
Volpi ˜˜reported™™ to any American ˜˜boss™™; and it is unlikely that the chief
executives of the holding companies could have ˜˜¬red™™ the Italians, who
appear to have made the basic operating-company decisions. It is also
improbable that Petsche™s French businesses were U.S.-controlled. So
perhaps we have a curious paradox, as suggested in Chapter 2, where direct
investments could be made by a multinational enterprise (with overall
strategic content) but without ˜˜control™™ of the companies in which it
Among the new activities of the U.S. holding companies in the 1920s
were the sizable foreign investments by Utilities Power and Light Corpo-
ration (UPLC). These were incontrovertibly U.S. direct investments abroad,
and UPLC exercised control over the companies in which it invested. UPLC
was a relatively small U.S. holding company, controlling less than 1 percent
of the generating capacity in the United States, yet its investments in the
United Kingdom have been described as the ˜˜most aggressive American
initiative in electricity supply in Britain.™™254 In 1925, Harley Clarke, head
of the Chicago-based UPLC, dispatched his employee Massingberd Rogers
to London to establish the Greater London and Counties Trust (GLCT).
Rogers became the managing director, and on the board were Sir Philip
Dawson, a prominent British consulting engineer and Conservative member
of Parliament, along with William May of the London solicitors Slaughter
and May. The initial capital came from America, and GLCT proceeded to
acquire and to combine a number of small British electricity supply com-
panies that could take advantage of British plans for a grid.
In a dramatic takeover in 1928, GLCT bought 95 percent of Edmund-
son™s Electricity Corporation, a British enterprise that controlled directly or
indirectly twenty-nine electricity supply companies. GLCT used the secu-
rities of these supply companies as collateral and borrowed from U.S. and
British banks to ¬nance that acquisition as well as others. By the end of
1929, virtually overnight, GLCT had control of ¬fty-four companies. As
the purchases were occurring, Clarke™s UPLC reorganized the group,
rationalizing the operations and creating ef¬ciencies in the process. When it
¬rst invested, UPLC had been secretive about its role, but after substantial
Global Electri¬cation

equivocation in 1929 UPLC acknowledged publicly that it had obtained
controlling interest in GLCT. By then, GLCT was either one of the largest
(according to one source) or the largest (according to another source) dis-
tributor of power in the United Kingdom. U.S. business now had a major
role in the U.K. light and power sector.255
Of all the U.S. holding companies that engaged in international business
in light and power, by far the most substantial was Electric Bond and Share
and its subsidiary American & Foreign Power Company. Electric Bond and
Share, which had during the war and postwar years expanded in Cuba,
Guatemala, and Panama, in December 1923 organized American &
Foreign Power to acquire those foreign operations and to pursue further
growth outside the United States. In February 1925, General Electric spun
off its long-standing interest in Electric Bond and Share, severing GE™s
ownership, albeit retaining its ˜˜network™™ relationship with both Electric
Bond and Share and American & Foreign Power.256
In the late 1920s, Electric Bond and Share had two principal subsidiaries
with foreign investments. One was Electric Investors Inc. (formed in 1909)
to trade, deal in, underwrite, and hold a diversi¬ed portfolio of securities
(minority equity interests or bond holdings) in companies with operations
(directly or indirectly) in Latin America, Canada, Europe, and Asia. By
1929, its holdings in public utilities included American & Foreign Power
Co. (United States), Great Consolidated Electric Power Co. Ltd. (Japan),
Toho Electric Power Co. Ltd. (Japan), Shawinigan Water and Power
(Canada), British Columbia Power Corp. Ltd. (Canada), and Italian
Superpower Corporation (United States). Electric Bond and Share did not
exercise control over any of these companies (except for its American &
Foreign Power subsidiary).257
American & Foreign Power was the more important of the two Electric
Bond & Share subsidiaries, and in contrast with Electric Investors Inc., it did
make direct investments; its activities were those of a multinational enterprise.
The directors of American & Foreign Power in 1929“1930 re¬‚ected its cluster
of contacts. Its chairman was S. Z. Mitchell, who had been president of
Electric Bond and Share since its inception in 1905. On its board was Owen
Young, chairman of the board of General Electric. Thus, even though after
1925 GE had no direct or indirect stock holdings in American & Foreign
Power, GE sustained its association with that ¬rm, and typically the utilities
managed by American & Foreign Power purchased GE equipment.258 The
American & Foreign Power™s board had several bankers: Charles E. Mitchell
(National City Bank, New York), S. A. Mitchell (son of S. Z. Mitchell, a
principal in Bonbright & Co., and chairman and president of Italian Super-
power), Clarence Dillon (Dillon, Read & Co.), and A. A. Tilney (Bankers
Trust Company). No Morgan representative adorned the board, but there
were Morgan ˜˜connections.™™ George H. Howard, president of Morgan™s new
United Corporation, the major public utility holding company established in
Chapter 4: War, the First Nationalization 183

¬gure 4.2. S. Z. Mitchell (1862“1944)
Note: Sidney Zollicoffer Mitchell led Electric Bond and Share from its formation in 1905 until
his retirement in 1933. He was also Chairman of American & Foreign Power Company from
its formation in 1923 until 1933.
Source: Photograph from Sidney Alexander Mitchell, S. Z. Mitchell and the Electrical Industry
(New York: Farrar, Straus & Cudahy, 1960), Frontispiece.

1929, served as a director of American & Foreign Power, as he had in earlier
years. (In 1927, he was identi¬ed as being with Simpson, Thacher & Bartlett,
a Wall Street ¬rm specializing in utility law that had been the ¬rm of Morgan
partner Dwight Morrow.) Also on the American & Foreign Power board was
Sosthenes Behn, president of International Telephone & Telegraph (some of
the American & Foreign Power concessions in Latin America involved tele-
phones as well as light and power), who had close Morgan ties. Not only was
United Corporation represented on the board, but so were two other U.S.
holding companies: American Gas and Electric Company and United Electric
Securities Company.259
From its origins in 1923, American & Foreign Power furnished mana-
gerial and technical expertise to the companies in which it invested. To use
Global Electri¬cation

the German vocabulary, it followed an Unternehmergeschaft form. It made
sizable direct investments in public utilities in Argentina, Brazil, Chile,
Colombia, Costa Rica, Ecuador, Mexico, and Venezuela and China and
India, as well as enlarging its investments in the countries where at its


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