By RICHARD WACHMAN
LONDON, Oct. 18, 2000 (Knight Ridder/Tribune)PowerGen, the electricity generating company, is close to selling its 2,000 megawatt Cottam coal-fired power station for about UKpound 500 million. The purchaser of the Nottinghamshire plant is Electricite de France, owner of London Electricity.
The proceeds will be used to help PowerGen fund its $5.4 billion acquisition of LG&E, the Kentucky-based power group. The British company, headed by Ed Wallis, is in the process of re-inventing itself by selling more than UKpound 2 billion worth of plant both in the UK and overseas.
The sales will give Wallis a war chest with which to pursue further acquisitions in the US, where he wants to build on the purchase of LG&E, its first foray into America.
British power firms are looking to expand in the US in order to avoid some of the constraints imposed by the regulator on this side of the Atlantic. Wholesale electricity prices are being squeezed, which is affecting PowerGen’s financial performance, as well as its share price.
PowerGen is also selling Conah’s Quay, a gas-fired station in North Wales, and Rye House in Hertfordshire. City analysts believe that buyers of some will be announced in the next few weeks.
Last month, PowerGen’s shares were hit when it held the interim dividend and warned that second-half profits will be adversely affected by lower electricity prices.
Interim operating profit fell UKpound 50 million to UKpound 373 million, partly due to lower contract prices ahead of new electricity trading arrangements that come into force this month.
PowerGen’s shares closed on Friday at 530 pence, against a year’s high of 618 pence.
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© 2000, Sunday Business, London. Distributed by Knight Ridder/Tribune Business News.