Centrica takes control of Belgium’s SPE

Wednesday, July 23, 2008

Centrica on Wednesday fulfilled its long-standing vow to take control of Belgian power company SPE, frustrating Gaz de France’s plans to sell its stake to EDF.

The UK energy group exercised a pre-emption right over GDF’s 25.5 per cent stake in SPE for €515m (£407m) in cash, with another €105m later. The deal is expected to be completed in September.

In 2005, Centrica and GDF formed a 50:50 joint venture to acquire 51 per cent of SPE, which is Belgium’s second largest generator. That deal valued the whole of SPE at €969m.

The 49 per cent of SPE not held by the joint venture was controlled by Belgian banks and municipalities, and will remain so.

GDF was required to dispose of its stake in SPE as a condition for European Commission approval of its merger with Suez, a move that created a utility with a market capitalisation of some €90bn. In late June it said it would sell its shares to compatriot EDF, but Centrica had said as far back as last September last year that it intended to exercise its pre-emption rights. It repeated that intention when the two French behemoths announced their agreement in June.

The increased stake in SPE, although seen as earnings neutral in 2009, builds a stronger platform for Centrica to expand in northern Europe. The group has operations in Spain, Germany and the Netherlands as well as the SPE stake.

Centrica will control the 1.6 gigawatts of mainly gas-fired generating capacity of SPE, plus 400 megawatts of capacity secured under contracts. It will have a 20 per cent share of the retail power market in Belgium with 1.5m accounts.

The additional, deferred payment will depend on the detail of an agreement under which Electrabel, which provides 6 gigawatts of nuclear capacity in Belgium, makes that capacity available to third parties.

In 2007, SPE made pre-tax profits of €39m and had assets valued at €1.8bn. It operates under the name Luminus.

In early London trading, Centrica shares, which have fallen 19 per cent over the past year, rose 1.7 per cent to 308.3p.

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