UK utility Centrica Plc is to pay £2.3 billion (US$3.4 billion) for a 20 percent stake in British Energy — the nuclear operator bought by France’s EDF earlier this year.
The two companies said yesterday that EDF would also buy Centrica’s 51 percent stake in Belgian generation and supply business SPE for 1.3 billion (US$1.8 billion) as part of the deal, with the balance to be paid in cash.
Centrica, which owns British Gas, said the acquisition of the British Energy stake helps it enter the nuclear sector — seen as protection against volatile energy prices — while the sale of its stake in SPE would strengthen its balance sheet and give it scope for further deals.
“The deal represents good value for Centrica shareholders, improves the strategic balance of our business and further underpins our green energy credentials,” Centrica chairman Roger Carr said in a statement.
“The attractive price secured for the sale of SPE will help preserve our balance sheet firepower as we focus the group on growth opportunities in the UK and North America,” he said.
MEETING EXPECTATIONS
Centrica added in a separate statement that its earnings outlook for this year remained in line with expectations.
It said lower wholesale gas prices were positive news for its household business, although the same factor would hit operating profit from its upstream, or producing assets.
EDF agreed to sell Centrica a stake in British Energy when it finally agreed terms for the acquisition last year, but the deal was complicated by a severe fall in wholesale electricity prices — key to British Energy’s performance.
EDF will continue to operate British Energy, while Centrica will have board representation at the UK nuclear power group and take part in the building of four new stations.
Centrica will also assume 20 percent of the liability for contingent guarantees given by EDF in respect of the contingent value rights (CVRs) issued as part of its acquisition of British Energy.
MORE POWER
EDF will provide Centrica with an additional 18TWh (teraWatt hours) of power at market prices over five years from 2011.
The two companies said that they plan to construct and operate four European Pressurized Reactors (EPRs).
EDF said that buying control of SPE would make it the second-largest generator in Belgium.
The deals are expected to be completed toward the end of the third quarter.
Centrica shares closed at £2.275 on Friday, while EDF shares closed at 36.46 euros.
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