July 27, 2008

EDF is Seen Near Deal to Buy a British Nuclear Utility

By Julia Werdigier

Electricite de France is close to buying British Energy Group, Britain's largest producer of nuclear power, for as much as pound(s)12 billion to gain control over its eight atomic plants and land where more plants could be built, a person briefed on the takeover plan said Friday.

An agreement on the deal, worth the equivalent of $23.9 billion, might be reached as early as this coming week, said the person, who declined to be identified because the discussions were not public. A takeover would end five months of negotiations about the future of British Energy, in which the government holds a 35.8 percent stake and stock market investors the rest. The deal would leave the company, the supplier of about 17 percent of Britain's electricity, in foreign hands.

A deal would bring EDF, the world's biggest nuclear power company, closer to its goal of building 10 nuclear plants by 2020 at a time when high energy prices and concerns about global warming made nuclear power more attractive. Britain's government in January invited companies to help refresh Britain's fleet of nuclear reactors, a step that made the country more attractive as an investment for foreign energy companies.

"The deal would have a strong strategic rational," said Matthias Heck, a utility analyst at Sal. Oppenheim Jr. in Frankfurt. "EDF would get access to the nuclear sites of British Energy and the possibility to build new nuclear plants. EDF has also the strongest nuclear expertise in Europe and thus could help optimize the nuclear fleet of British Energy."

British Energy said in a statement Thursday that its board was in "advanced discussions with one party" though declined to give further information. There can be no certainty that the discussions will lead to an offer, it said. A spokeswoman for EDF declined to comment.

EDF shares rose euro 2.90 Friday, or 5.6 percent, to close at euro 54.35, or $85.32, in Paris. Shares of British Energy fell 2 pence, or 0.3 percent, to 726.5 pence in London.

British Energy had rejected previous offers as too low after shares of energy companies increased earlier this year on higher oil prices and rising demand. But a decline of the price of oil this past week dented British Energy's share price and that of its rivals and may have facilitated an agreement with EDF, some analysts said.

The British Broadcasting Corp. reported Friday that Centrica, a British natural gas utility, might join EDF in a takeover bid for British Energy and help appease the government by keeping at least some parts of the company in British hands. A spokesman for Centrica declined to comment.

Britain's energy minister, Malcolm Wicks, said previously that the country did not object to foreign ownership of its nuclear plants, most of which were built 40 years ago. Many of the country's utilities are already in foreign hands. Iberdrola of Spain acquired Scottish Power, RWE of Germany owns National Power and E.ON, also of Germany, controls Powergen.

British Energy was privatized in 1996 but a slump in energy prices and an array of operational problems led it to seek government aid in 2002. The proceeds of the sale of British Energy's government stake are likely to go to the Nuclear Liabilities Fund, which helps to make nuclear power stations in Britain safer and pays for the decommissioning of existing plants.

EDF, based in Paris, operates 58 nuclear plants in France and is eager to expand abroad, including in Britain, Spain and South Africa. It attempted but failed to take control of a power company and a natural gas supplier in Belgium over the past two months. EDF already owns a British energy company that supplies about 6 percent of the country's electricity.

Originally published by The New York Times Media Group.

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