French beat British Energy again with pounds 160m Sweb deal
Saturday 12 June 1999
In addition EdF will take on liabilities of around pounds 75m relating to Sweb's power purchasing agreements, increasing the cost of the takeover to pounds 235m.
The deal accelerates the consolidation taking place in the UK electricity industry and follows EdF's takeover of London Electricity last year, when it beat off British Energy with a bid of pounds 1.9bn. The combination of London Electricity and Sweb will give EdF a UK electricity supply business with 3.3 million customers and a 12 per cent share of the market. London Electricity has just under two million customers while Sweb has 1.3 million.
Unions immediately voiced fears for the 2,000-strong workforce of the combined business. Bruno Lescoeur, the chairman of London Electricity, refused to rule out job losses but he did pledge that it would retain a presence in the South-west as well as London and Sunderland, where London Electricity's call centre is based.
Regulatory approval for the deal is expected to take up to six months. The takeover will be examined initially by the European Commission but the main task of approving it is likely to fall to the Department of Trade and Industry and the electricity regulator Offer. Mr Lescoeur said: "I am confident there will be no regulatory problems because this deal makes sense for the consumer and there are no competition issues."
London Electricity executives also said that the Sweb deal would accelerate the separation of electricity supply from distribution, which the regulator has been pressing for.
EdF's acquisition of Sweb follows National Power's purchase of Midlands Electricity's supply business, which has 2.2 million customers, in a deal costing about pounds 300m.
The Sweb transaction works out at around pounds 180 per customer compared with the pounds 150 a customer National Power paid in the Midlands deal.
British Energy's failure to win Sweb means it is likely to redouble its efforts to buy the supply business of South Wales Electricity, which is also up for sale.
United Utilities is also planning to merge the supply business of Norweb with another electricity company. Eastern, which also bid unsuccessfully in the Sweb auction, is a possible partner.
EdF has set its sights on capturing 15 per cent of the UK electricity supply and generation markets and becoming one of the five or six big players that are expected to dominate the energy industry.
But its aggressive bid for Sweb may rekindle concern that it is exploiting its position as a state-owned business to gain an unfair advantage.
In addition to its 1.95 million electricity customers, London Electricity has 250,000 gas customers. Sweb, which is jointly owned by the two US utilities Southern Company and Pennsylvania Power and Light, covers Cornwall, Devon, Somerset, the Isles of Scilly and parts of Dorset and Gloucestershire.
Sweb's gas customers are excluded from the deal. A spokesman also emphasised that Sweb's electricity distribution business was not up for sale.
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