Business
The close of 1998 saw a flurry of mergers and acquisitions in the electric power sector.
Electricité de France (EDF) has bought London Electricity from Entergy for £1.9 billion. London Electricity, in addition to its distribution interests, has a 13.5 per cent share in the 1000 MWe plant at Barking, and operates several cogeneration units, including one that provides heat and power to Heathrow Airport. In 1997, London Electricity had a turnover of £1.25 billion. Entergy had acquired London Electricity in December 1996 for £1.3 billion.
The nuclear power generator British Energy was beaten in the bidding for London Electricity, and is still looking for a supply operation.
The acquisition of London Electricity reflects EDF’s new strategy of trying to become more customer focused and to expand in Europe. The new strategy is in response to impending liberalisation of the French electricity market, with the French currently in the process of ‘transposing’ the EU Electricity Directive into national law.
Britain’s National Grid will buy New England Electric System (NEES) of the US for $4.6 billion. The deal is subject to regulatory approvals in the US, and is expected to be completed only by early 2000.
The UK multi-utility Scottish Power and PacifiCorp of the US agreed to merge. Under the terms of the deal, Scottish Power will own 64 per cent of the new company, and PacifiCorp 36 per cent. The merger is subject to approval by the shareholders of both companies, the US Federal Energy Regulatory Commission, the regulatory commissions in several of the states served by PacifiCorp, and Australian regulatory authorities. The transaction is due to be completed by late 1999.
Meanwhile, National Power has announced that it will buy Midlands Electricity for £180 million. At the same time, it announced its intention to sell the 4000 MWe coal-fired Drax plant to comply with regulatory directives. Anlaysts estimated that Drax could fetch £1.5-2 billion. Analysts expressed mixed feelings. Nigel Hawkins at Williams de Broe, said: “They’re getting rid of the jewel in their crown. Core operating profit will come under severe pressure.” However, Philip Hollobane of WestLB Panmure said: “They’ve solved their regulatory problems and now have a more balanced UK business plus cash to finance expansion.”
PowerGen offered to sell two coal-fired plants totalling 4 GWe, in accord with the conditions imposed by the UK government, to allow the company’s bid for East Midlands Electricity to proceed. PowerGen must terminate an electricity price and supply agreement with Eastern Electricity ahead of schedule. PowerGen said that it would dispose of Ferrybridge C and Fiddler’s Ferry.