Race for London Electricity
British Energy, the nuclear generator, and Electricité de France, France`s state-owned power monopoly, have lined up as the two main contenders in the bid to buy regional electricity supplier, London Electricity. Both companies have made similar cash offers of about £2bn ($3.3bn). The two companies have emerged from a short list of five bids after Germany`s RWE reportedly pulled out along with Singapore Power Ltd. The other bidders were National Power and an independent consortium of bidders backed by Goldman Sachs.
Entergy, the US owner of London Electricity put the firm up for sale in August as part of a wide restructuring to cut debt, just over a year after it snapped it up in a $2.16bn deal.
While EDF was being favoured by some analysts to win the bid, it could come under the scrutiny of competition authorities since France`s market is not yet open to competition. A more key issue, however, could be the fact that EDF sends low cost electricity through an interconnector to England and concerns have been expressed that this is at the expense of British coal fired generators.
It has been suggested that a concession by EDF on the interconnector could well pave the way for a deal on London Electricity. Not all agree. EDF has not bought electricity from the UK because of the high price of electricity traded in the wholesale pool. EDF sells electricity to England at about £8-9/MWh; if it were to buy electricity from the UK it would have to pay about £24-25/MWh.
British Energy has expressed an interest in buying coal fired power stations in the UK and more nuclear plant in the US.