French Nuclear Operator to Buy British Energy for $23 Bil.
rench power provider EdF said Wednesday it has agreed to acquire British Energy Group PLC for about $23.2 billion in cash in a deal that would create a powerhouse in nuclear energy.
EdF is already the world's largest nuclear plant operator, running all 58 of France's nuclear reactors. British Energy operates eight nuclear power stations.
The deal also comes as European government officials are seeking energy independence and less reliance on oil and coal that contribute to global warming.
The combined company would be Britain's largest power company overall as measured by generating capacity — with 16.5 gigawatts of installed capacity.
EdF Chairman Pierre Gadonneix said the deal fulfills his company's "strategic aims of consolidating our leadership in nuclear power globally, and consolidating our development in the UK."
British Energy chairman Sir Adrian Montague said it will combine British Energy's generating capability with EDF's strength of the supply business.
EdF got British Energy's support by raising its bid to 774 pence per share, an increase of 9 pence per share from its July bid, which was rejected by British Energy. The deal requires the approval of shareholder and regulators.
But British Energy's two largest shareholders, the British government and investment fund Invesco, have both pledged to tender their shares. Along with other pledges from British Energy board members, EdF said it has won approval from shareholders representing a total of 45 percent of British Energy's capital.
The British government said EdF had agreed to continue operating British Energy's eight existing nuclear power stations as well as invest in four new reactors.
Also Wednesday, Centrica PLC, Britain's largest gas supplier, said it was in talks with EdF about an option for Centrica to take a 25 percent stake in the company after the EdF-British Energy deal is completed. Centrica said it would be at the same price paid by EdF for British Energy — or 774 pence a share.
In Paris trading on Wednesday, shares of EdF rose 3.6 percent to 51.95 euros ($76.53). In London, shares of British Energy climbed 5.7 percent to 765 pence ($14.21). Shares of Centrica fell 0.5 percent to 329 pence ($6.11).
British Energy's Montague said his company spent the last six weeks working with EdF to seal a deal.
"This new transaction is regarded by the board as good for the shareholders, good for our staff, good for the nuclear industry and also good for the country," Montague told BBC Radio 4.
"In the short term I think you will find a stronger supplier of energy in the UK as we bring together British Energy's generating capability with EDF's strength of the supply business," Montague said.
The British government was in favor of the deal.
"This deal is good value for the taxpayer and a significant step towards the construction of a new generation of nuclear stations to power the country," British Prime Minister Gordon Brown said in a statement.
"Nuclear is clean, secure and affordable; its expansion is crucial for Britain's long term energy security, as we reduce our oil dependence and move towards a low carbon future," he added.
The statement said the British government had agreed to sell its 36 percent stake for 774 pence a share.
French Prime Minister Francois Fillon also praised the deal, noting the role of nuclear power "to strengthen Europe's energy independence and security of supplies, while combating climate warming and carbon dioxide emissions."
British Business Secretary John Hutton said the deal could improve Britain's energy mix, create jobs and offer good opportunities for British manufacturers. He added it amounts to "one of the largest foreign direct investments ever made in Britain."
Dougie Rooney of the British union Unite welcomed the deal, saying the union's job now was to make sure that EdF kept existing plants open and maintained investment.
Anti-nuclear campaigner Greenpeace criticized the deal, saying it would do nothing to promote British energy security or tackle climate change.
"Just yesterday Gordon Brown promised the U.K. a million green-collar jobs in the manufacturing sector, but his push for nuclear power has led to a deal which will benefit the French taxpayer and create French jobs," said Nathan Argent, head of Greenpeace's nuclear campaign.
The French power provider has been looking to gain access to new nuclear sites in Britain, which has announced plans to invest billions to develop renewable energy sources — including nuclear.
EdF is already present in Britain via its EdF Energy subsidiary, which employs 13,000 people and handles 5.5 million customer accounts. It operates two coal-fired power stations as well as a natural gas fueled power plant.
EdF has said it wants to build several new nuclear reactors in Britain. Besides its eight nuclear power stations, British Energy has a coal-powered station.
The British government has a target of generating 10 percent of electricity from renewable sources by 2010 and 15 percent by 2020. It has emphasized the importance of a new generation of nuclear power stations in meeting a broader target to cut carbon dioxide emissions by at least 60 percent of 1990 levels by 2050.
EdF is also in the midst of another buyout bid: It has also offered to purchase U.S. wholesale power supplier Constellation Energy Group Inc. in hopes of overturning a deal Constellation made last week to be sold to MidAmerican Energy Holdings Co., a unit of Warren Buffett's Berkshire Hathaway Inc.
EdF already owns 9.5 percent of the Baltimore-based company and said it is willing to pay $35 per share in a deal that would be valued at $6.2 billion. MidAmerican's offer is for $26.50 per share, or $4.7 billion, and came after Constellation's shares plummeted and liquidity concerns had analysts worried that the company would go out of business.
Buying Constellation Energy would not be easy for EdF. Nuclear Regulatory Commission rules prohibit outright ownership of Constellation Energy's five reactors by a foreign company. Constellation has two reactors in Maryland and three in upstate New York.
EdF's Gadonneix said that he is open to working with another U.S. partner if EdF fails to take over Constellation.
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Associated Press Writer Emily Flynn Vencat in London contributed to this report.
9/24/2008 9:07 AM
By GREG KELLER
AP Business Writer
PARIS
rench power provider EdF said Wednesday it has agreed to acquire British Energy Group PLC for about $23.2 billion in cash in a deal that would create a powerhouse in nuclear energy.
