PowerGen closes US deal, on course to cut debt
UK energy group PowerGen plc has completed its $3.2bn acquisition of LG&E Energy Corp. of the USA, and said it was confident of hitting its year-end target of reducing debt. PowerGen and LG&E formally began joint operations in December after receiving all the necessary approvals.
The LG&E-PowerGen deal creates a global power company with assets of nearly $14bn, total revenues of $9bn and serving 4m customers worldwide. LG&E’s Louisville, Ky., headquarters will serve as the headquarters for PowerGen’s North American operations.
PowerGen recently announced a round of divestments in Europe, Asia and Australia to reduce debt by £1bn ($1.4bn) by the end of 2000 and help finance its acquisition of LG&E. It recently sold assets in Asia to CLP Holdings (see p.9) and in Europe to RWE (see p.7).
PowerGen has cut debt by £890m since February 2000.
Endesa-Iberdrola merger approved by Spain’s national regulator
The merger of Spanish electricity groups Endesa and Iberdrola has received the approval of Spain’s National Energy Commission (CNE), marking a positive step forward in the companies’ ambitions.
The CNE has attached several conditions to the approval that will entail a revision to the companies’ restructuring plans submitted at the time of the merger announcement.
The merger still requires the go-ahead from the government and the competition regulator.
CNE has said that the new group’s share of the Spanish market cannot exceed the share currently held by Endesa. Combined, Endesa and Iberdrola have a capacity of 38 000 MW and will have to sell off 16 600 MW.
The merged group will be unable to build new power plants for a five year period, although this may be cut to three years if capacity sell-offs exceed 16 600 MW. In addition, the new company’s share of the distribution market will be limited to 41 per cent.
E.ON sets out spending plans
German energy group E.ON has announced an investment plan for the next two years that will see the expansion of its core energy businesses in Germany and throughout Europe. It has also said that it is interested in the acquisition of assets that could come onto the market through the merger of Spain’s Endesa and Iberdrola.
Overall, the group has earmarked a15.5bn ($13bn) of capital for investment for 2001-2003, with a7.3bn planned for the energy division. Around 60 per cent of the energy division’s allocation will fund small and medium-sized acquisitions, while investment in fixed assets will total a1.8bn.
The E.ON Group announced in December that overall sales rose 40 per cent in the first nine months of 2000 to a70bn, although profits were dragged down nine per cent on the same period last year owing to lower prices in the electricity markets.
Siemens to double production of gas turbines
Siemens Power Generation has announced that it is to expand its worldwide gas turbine manufacturing network, and aims to double annual production to meet global demand.
Over the next two to three years, the company wants to increase gas turbine production to 100 machines annually.
It is planning to make an investment of a21m ($19.8m) to achieve the expansion, which has been fuelled mainly by the gas turbine order boom in the USA.
The money will be spent at its Berlin and Canadian factories.
UK multi-utility Centrica has extended its energy retailing operations in the USA through the acquisition of Energy America. The group’s retail operations in the UK have also continued to grow, and it is set to become the UK’s largest energy supplier in 2001.
Centrica has purchased a 72.5 per cent stake in Energy America from Sempra Energy for $56m. The move follows a deal made in August 2000 when it indirectly purchased a 27.5 per cent stake in Energy America through its acquisition of Canada’s Direct Energy Marketing (DEM).
Centrica plans to integrate Energy America, a gas and electricity retailer which serves 400 000 customers in the US, with DEM. Centrica is already one of the largest unregulated energy retailers in North America.
In the UK, Centrica now controls 70 per cent of the domestic retail gas market.