By Tara Patel
Dec. 22 (Bloomberg) -- Electricite de France SA, the world’s biggest operator of nuclear plants, won conditional European Union antitrust approval to buy British Energy Group Plc for 12.5 billion pounds ($18.7 billion), allowing the French utility to become the largest power producer in the U.K.
Approval from the European Commission, the 27-nation EU’s regulator in Brussels, is dependent on EDF’s agreement to sell two non-nuclear power plants in the U.K., electricity in the British wholesale market and land on which a new reactor may be built, the commission said today in a statement.
The Paris-based, state-controlled utility agreed in September to buy British Energy, the U.K.’s largest electricity producer, and gain control of eight atomic stations. The purchase will add commercial clients to the 5 million households supplied by EDF’s British unit and allow the company to build at least four new-generation Evolutionary Power Reactors in the U.K.
British Prime Minister Gordon Brown is seeking to expand nuclear power to replace aging generators, cut energy imports and lower carbon dioxide output. The U.K. this year passed a law requiring an 80 percent reduction in emissions by 2050 from 1990 levels. Under the Kyoto Protocol, which expires in 2012, Britain is obliged to cut greenhouse gases 12.5 percent.
‘More Expensive’ Deal
The terms of the EU endorsement “will make the deal more expensive for EDF because it will get less existing generating capacity, but this was to be expected,” Standard & Poor’s equity research analyst Alicia Carrasco said today by telephone. “When EDF decided to buy British Energy it was looking for future growth in nuclear power in the U.K.” Some 77 percent of France’s power is generated by the utility’s 58 reactors in the country.
EDF fell as much as 2.4 percent to 40.65 euros in Paris trading, and was at 41.51 euros as of 2:10 p.m. local time. British Energy was little changed at 770 pence in London.
“Although the combined entity would not have extremely high market shares, the commission found during its investigation that the transaction, as initially notified, would have been likely to raise serious competition concerns in four main areas,” the commission said in the statement.
The decision is conditional upon EDF’s commitment to divest the 790-megawatt gas-fired Sutton Bridge plant, owned by EDF Energy, and another at Eggborough, a 1,960-megawatt coal-fired station owned by British Energy. Bondholders have an option they can exercise next year, which they got as part of a 2002 deal that prevented British Energy from collapsing.
Competition Concerns
The EU was concerned that the merged company may “withdraw electricity supplies from the market in order to increase price,” according to the statement. That “would have led to a reduction of liquidity which could have had negative effects in both the wholesale and the retail supply markets.”
EDF confirmed plans to sell the two power stations and 5 to 10 terawatt-hours of electricity a year from 2012 to 2015.
“The European Commission’s decision marks a major step toward the conclusion of the acquisition of British Energy,” EDF said today in a statement, adding that it expects the takeover to become effective “in early January 2009.”
The EU also asked EDF to unconditionally divest a site potentially suitable for building a new nuclear station located at either Dungeness or Heysham in Britain, and to end one of the merged entity’s three grid-connection agreements with National Grid Plc at Hinkley Point in southwest England.
Hinkley Linkup
EDF on Nov. 3 agreed with National Grid to connect a power plant to the U.K. transmission network at the site of the Hinkley Point nuclear station, where it plans to build two reactors.
The commission expressed concern that there are a “limited number of sites” for new atomic generators and “high concentration” in ownership. “British Energy owns many of the sites likely to be suitable for new nuclear build while EDF owns key land at two such locations,” it said.
When EDF announced the planned takeover Sept. 24, it agreed to sell land for nuclear development to competitors under an accord with the U.K. government to boost competition. EDF said at the time it planned to build two reactors at each of the Sizewell and Hinkley Point sites owned by British Energy, the first starting up in 2017.
EDF is seeking to connect a 1,770-megawatt plant to the grid at Hinkley Point from October 2019, according to information on National Grid’s Web site.
The commission asked EDF to sell the third grid connection because it would have gone “beyond its combined capacity expansion plans with the risk of unduly delaying power generation projects of its competitors.”
Wylfa Approval
EDF also owns land next to a government-owned nuclear plant at Wylfa on the Isle of Anglesey in Wales. The utility on Oct. 8 got approval to connect a new power station to the transmission network at Wylfa from October 2017 and said it is a “good potential site for new nuclear build.”
The U.K. Nuclear Decommissioning Authority has invited expressions of interest for land next to Wylfa as well as at the Bradwell and Oldbury atomic plants.
“Part of the agreement that we have with the government is to create a credible site portfolio for others,” Vincent de Rivaz, chief executive officer of EDF’s U.K. unit, said Sept. 24. The company will probably sell for profit the land it acquired adjacent to nuclear sites over the past three years, he said.
EDF is also expanding in the U.S. The utility agreed on Dec. 17 to buy a 50 percent stake in Constellation Energy Group Inc.’s five reactors for $4.5 billion, prompting Baltimore-based Constellation to abandon a plan to sell itself to Warren Buffett’s MidAmerican Energy Holdings Co.
To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net; Matthew Newman in Brussels at Mnewman6@bloomberg.net.
By Tara Patel
Dec. 22 (Bloomberg) -- Electricite de France SA, the world’s biggest operator of nuclear plants, won conditional European Union antitrust approval to buy British Energy Group Plc for 12.5 billion pounds ($18.7 billion), allowing the French utility to become the largest power producer in the U.K.
Approval from the European Commission, the 27-nation EU’s regulator in Brussels, is dependent on EDF’s agreement to sell two non-nuclear power plants in the U.K., electricity in the British wholesale market and land on which a new reactor may be built, the commission said today in a statement.
The Paris-based, state-controlled utility agreed in September to buy British Energy, the U.K.’s largest electricity producer, and gain control of eight atomic stations. The purchase will add commercial clients to the 5 million households supplied by EDF’s British unit and allow the company to build at least four new-generation Evolutionary Power Reactors in the U.K.
British Prime Minister Gordon Brown is seeking to expand nuclear power to replace aging generators, cut energy imports and lower carbon dioxide output. The U.K. this year passed a law requiring an 80 percent reduction in emissions by 2050 from 1990 levels. Under the Kyoto Protocol, which expires in 2012, Britain is obliged to cut greenhouse gases 12.5 percent.
‘More Expensive’ Deal
The terms of the EU endorsement “will make the deal more expensive for EDF because it will get less existing generating capacity, but this was to be expected,” Standard & Poor’s equity research analyst Alicia Carrasco said today by telephone. “When EDF decided to buy British Energy it was looking for future growth in nuclear power in the U.K.” Some 77 percent of France’s power is generated by the utility’s 58 reactors in the country.
EDF fell as much as 2.4 percent to 40.65 euros in Paris trading, and was at 41.51 euros as of 2:10 p.m. local time. British Energy was little changed at 770 pence in London.
“Although the combined entity would not have extremely high market shares, the commission found during its investigation that the transaction, as initially notified, would have been likely to raise serious competition concerns in four main areas,” the commission said in the statement.
The decision is conditional upon EDF’s commitment to divest the 790-megawatt gas-fired Sutton Bridge plant, owned by EDF Energy, and another at Eggborough, a 1,960-megawatt coal-fired station owned by British Energy. Bondholders have an option they can exercise next year, which they got as part of a 2002 deal that prevented British Energy from collapsing.
Competition Concerns
The EU was concerned that the merged company may “withdraw electricity supplies from the market in order to increase price,” according to the statement. That “would have led to a reduction of liquidity which could have had negative effects in both the wholesale and the retail supply markets.”
EDF confirmed plans to sell the two power stations and 5 to 10 terawatt-hours of electricity a year from 2012 to 2015.
“The European Commission’s decision marks a major step toward the conclusion of the acquisition of British Energy,” EDF said today in a statement, adding that it expects the takeover to become effective “in early January 2009.”
The EU also asked EDF to unconditionally divest a site potentially suitable for building a new nuclear station located at either Dungeness or Heysham in Britain, and to end one of the merged entity’s three grid-connection agreements with National Grid Plc at Hinkley Point in southwest England.
Hinkley Linkup
EDF on Nov. 3 agreed with National Grid to connect a power plant to the U.K. transmission network at the site of the Hinkley Point nuclear station, where it plans to build two reactors.
The commission expressed concern that there are a “limited number of sites” for new atomic generators and “high concentration” in ownership. “British Energy owns many of the sites likely to be suitable for new nuclear build while EDF owns key land at two such locations,” it said.
When EDF announced the planned takeover Sept. 24, it agreed to sell land for nuclear development to competitors under an accord with the U.K. government to boost competition. EDF said at the time it planned to build two reactors at each of the Sizewell and Hinkley Point sites owned by British Energy, the first starting up in 2017.
EDF is seeking to connect a 1,770-megawatt plant to the grid at Hinkley Point from October 2019, according to information on National Grid’s Web site.
The commission asked EDF to sell the third grid connection because it would have gone “beyond its combined capacity expansion plans with the risk of unduly delaying power generation projects of its competitors.”
Wylfa Approval
EDF also owns land next to a government-owned nuclear plant at Wylfa on the Isle of Anglesey in Wales. The utility on Oct. 8 got approval to connect a new power station to the transmission network at Wylfa from October 2017 and said it is a “good potential site for new nuclear build.”
The U.K. Nuclear Decommissioning Authority has invited expressions of interest for land next to Wylfa as well as at the Bradwell and Oldbury atomic plants.
“Part of the agreement that we have with the government is to create a credible site portfolio for others,” Vincent de Rivaz, chief executive officer of EDF’s U.K. unit, said Sept. 24. The company will probably sell for profit the land it acquired adjacent to nuclear sites over the past three years, he said.
EDF is also expanding in the U.S. The utility agreed on Dec. 17 to buy a 50 percent stake in Constellation Energy Group Inc.’s five reactors for $4.5 billion, prompting Baltimore-based Constellation to abandon a plan to sell itself to Warren Buffett’s MidAmerican Energy Holdings Co.
To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net; Matthew Newman in Brussels at Mnewman6@bloomberg.net.
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