UK government seeks power sale

Sunday, March 16, 2008

Britain’s leading energy suppliers have been approached by government advisers to sound out interest in its 35.2 per cent stake in British Energy, which is valued at £2bn-plus.

The government has mandated UBS to help with a potential sale process, while British Energy has appointed NM Rothschild as its adviser. Eon and RWE of Germany, Électricité de France, Iberdrola of Spain and Centrica of the UK have all been asked if they would be interested in acquiring part of the stake, people close to the situation said.

Under takeover rules, any company that buys the whole stake would automatically be forced to make a full takeover bid for British Energy.

The government declined to comment, but one insider said: “Of course, we would look at any offer carefully.”

However, the government is unlikely to want British Energy to be bought outright. It is the UK’s biggest electricity generator and owns most of the country’s nuclear power plants. It also controls many of the best sites for building new reactors and the government hopes to get as many companies as possible to share in the huge investment needed for a new generation of nuclear power stations.

Rob Cormie, who leads work on the nuclear industry for KPMG, said: “The government wants to maintain a degree of competition between nuclear suppliers and it is unlikely they would let a single consortium buy British Energy.”

One option being discussed is that companies which set up joint ventures with British Energy to build new nuclear plants could also buy a stake in it. British Energy has been talking to the UK’s leading energy suppliers about possible alliances and has said it hopes to sign up to “one or two” joint ventures for new reactors early next month.

John Hutton, the business secretary, revealed in the Financial Times last week that the government would pull out all the stops to maximise expansion of nuclear power and would drop its previous commitment to holding a minimum 29.9 per cent stake in British Energy. A government insider said on Friday that the future of the stake was under review. He said UBS had been appointed to give commercial and financial advice on investment in new nuclear power stations and would advise the government on any proposals that emerge, including proposals for other companies to buy stakes in British Energy.

He denied UBS was actively trying to sell the government’s shareholding, but advisers to energy companies say they have been approached to see if they would be interested in buying shares.

Copyright The Financial Times Limited 2008

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