Go-ahead for pounds 1.9bn power takeover

POWERGEN IS today expected to agree the sale of 4,000 megawatts of generating capacity, in return for government approval of its pounds 1.9bn takeover of East Midlands Electricity.

This is twice the amount of capacity that the generator initially volunteered to sell and will mean disposing of two of its five coal-fired power stations.

In his second major competition decision in as many days, Peter Mandelson, Secretary of State for Trade and Industry, is today expected to agree not to refer the PowerGen deal to the Monopolies and Mergers Commission subject to undertakings. These are likely to include conditions relating to ring-fencing and cross-subsidies, as well as the requirement to dispose of stations.

The move will come as a boost to the coal industry, which was further bolstered by news yesterday that Eastern Group is to invest pounds 100m on environmental clean-up kit for its West Burton station in Nottinghamshire to allow the plant to continue burning British coal.

Mr Mandelson's ruling could also clear the way for a spate of further deals involving vertical integration between electricity generators and suppliers. Southern Electric and Scottish Hydro-Electric have already announced plans for a pounds 5bn merger, and the nuclear generator, British Energy, is one of the front-runners to take over London Electricity.

The electricity regulator, Professor Stephen Littlechild, had wanted the two big fossil-fuel generators, National Power and PowerGen, to dispose of half their coal-fired stations - equivalent to 10,000 megawatts of coal-fired capacity to increase competition in the generating market.

He will have to settle for a lower figure than that but it will still permit three or four new players to enter the market. Negotiations over how much plant National Power must dispose of are continuing but it will be not less than 4,000 megawatts.

A range of prospective bidders have been lined up to take power stations off the hands of the two generators.

John Devaney, the former chairman of Eastern Group, was considering a bid for one of PowerGen's stations. Other potential purchasers include Mission Energy of the US, which bought National Grid's pumped storage power stations, and Southern Company of Georgia.

When PowerGen announced the East Midlands deal in June, it said that it had already received 10 approaches to buy generating capacity. The Ferrybridge plant in Yorkshire is one of the two stations likely to be sold and PowerGen believes it will raise pounds 500m.

The merger will create a combined group with sales of pounds 4.1bn and pre- tax profits of pounds 623m. It is expected to yield savings of pounds 30m a year.

Ed Wallis, the PowerGen chairman, took a risk that the deal would not be blocked by the MMC by making the takeover unconditional. PowerGen completed the purchase and handed over the money to East Midlands' US owners, Dominion Resources, two months ago.

The sale of two power stations will reduce PowerGen's portfolio to 10,000 megawatts, of which 6,000 will be coal fired. National Power has about 16,000 megawatts of capacity.

Arts and Entertainment
Lena Dunham
booksLena Dunham's memoirs - written at the age of 28 - are honest to the point of making you squirm
Jacqueline Bisset has claimed that young women today are obsessed with being 'hot', rather than 'charming', 'romantic' or 'beautiful'
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvDownton Abbey review: It's six months since we last caught up with the Crawley clan
Frank Lampard and his non-celebration
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
Life and Style
A new app has been launched that enables people to have a cuddle from a stranger
techNew app offers 'PG alternative' to dating services like Tinder
Arts and Entertainment
Jake Quickenden sings his heart out in his second audition
tvX Factor: How did the Jakes - and Charlie Martinez - fare?
premier league
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
ebooksAn unforgettable anthology of contemporary reportage
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
Plenty to ponder: Amir Khan has had repeated problems with US immigration because of his Muslim faith and now American television may shun him
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments