Iberdrola Withdraws Interest in Takeover Bid for British Energy Chairman Galan Cites Prices As ‘Very Far From What is Possible’

By MARK SMITH DEPUTY BUSINESS EDITOR IN NEW YORK

IGNACIO Sanchez Galan, the chairman of ScottishPowerowner Iberdrola, yesterday signalled that the Spanish electricity giant would officially withdraw its interest in bidding for British Energy.

Speaking directly to The Herald yesterday in New York, Galan said: “The price is very far from what we consider possible.”

What had previously been billed as an auction for British Energy has dwindled in recent weeks from a race with five potential bidders, to two, then one, and now none, at least in terms of those willing to offer what the nuclear generator views as an acceptable price.

Galan’s comment came after the up-for-sale East Kilbride-based nuclear power generator earlier this week rejected the bid approach from France’s EDF, and effectively also interest from other European groups, saying they did “not represent value for shareholders”.

EDF was the only company to have tabled a firm offer, although its bid stood at between 680p and 700p. Suez, another French utility, ended talks over a possible offer for British Energy last month.

Germany’s RWE also made an indicative cash offer of almost 700p a share earlier this year, but it did not return with a firm bid.

However, it is clear why British Energy might expect more. Electricity prices in the UK have risen more than 50per cent so far this year, driven mainly by high oil prices.

With electricity prices rising so rapidly, British Energy has now rebuffed all offers for the company as too low, and it said the current future price for electricity, as well as the potential to build sites, justifies a price of at least 735p a share, or GBP12bn.

Galan, who was in New York yesterday to accept the Business Leader of the Year award from the SpainUS Chamber of Commerce, added: “In light of the information from British Energy, we are withdrawing our interest. But we don’t withdraw our interest in nuclear energy, only in British Energy. That price is not for us, we are therefore out.”

Galan’s comments also end speculation that Bilbao-based Iberdrola had been sounding out other firms, including Centrica, the owner of British Gas and Scottish Gas, about putting together a joint bid.

Separately, Galan was asked if recent remarks made by Spanish Prime Minister Jose Luis Rodriguez Zapatero suggesting that he was backing away from his defence of national energy champions made Iberdrola vulnerable to takeover.

Earlier this year, takeover rumours swirled that Spanish construction giant ACS and EDF had held preliminary talks on an offer which could lead to the break-up of Iberdrola and its smaller rival Union Fenosa, which ACS controls.

At the same time, Galan is known to be adamant about Iberdrola’s independence.

While Spain has a history of protecting its power market against foreign invaders, and in 2000 it created regulatory legislation nicknamed the “anti-EDF law”, which blocks foreign firms from owning more than 3per cent of a Spanish power utility without government approval, Zapatero’s recent remarks seemed to signal an end to that protection.

“This is not a problem for us, ” he said. “What Zapatero meant was the individual countries should not have energy champions, but instead there should be European energy champions. Iberdrola is already a European energy champion.”

Originally published by Newsquest Media Group.

(c) 2008 Herald, The; Glasgow (UK). Provided by ProQuest Information and Learning. All rights Reserved.