By the OGJ Online Staff
HOUSTON, Feb. 27, 2001The UK’s Innogy Holdings PLC Tuesday said it will buy Yorkshire Power Group Ltd. from Columbus, Ohio-based American Electric Power Co. Inc. and Xcel Energy Inc., Minneapolis, for $2.6 billion (£1.8 billion) in cash and assumed debt, creating a major UK energy supplier.
Innogy said it would pay £508.6 million cash and assume £1.3 billion of debt. The company was created last year when the former National Power split its domestic and foreign businesses.
Innogy forecast the Yorkshire deal will increase earnings in the first full year, create an integrated power business with generation and trading interests, and lead to economies of scale.
“With this one move we achieve retail critical mass with more than 5.3 million customer accounts,” said Ross Sayers, Innogy executive chairman.
Linn Draper, CEO of AEP, said the sale fit with the company’s strategy of focusing on the wholesale energy business. “AEP will continue to pursue its wholesale energy strategy in the UK and Europe through AEP Energy Services Ltd,” he said.
AEP said the sale price results in full recovery of AEP’s net sterling investment in Yorkshire; however, the company will take a one-time aftertax charge of $30.4 million relating to deferred foreign exchange losses in its 2000 results. AEP will receive $383 million cash, while Xcel will receive $343 million. Xcel will maintain a 5.25% interest in Yorkshire. AEP and Xcel acquired Yorkshire in April 1997.
Xcel Energy CEO Wayne Brunetti said Yorkshire Power no longer fits the company’s strategy for earnings growth.
“We will continue to participate in the UK and European markets, but concentrate on growth through our nonregulated subsidiary, NRG Energy,” he said.
Brunetti said Xcel Energy expects to replace this year’s anticipated Yorkshire earnings contribution by using proceeds from the sale to pay down short-term debt, allowing Xcel Energy to indefinitely delay a planned equity issue.