Go-ahead for pounds 1.9bn power takeover
Thursday 24 September 1998
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.
- 1 Double chins could be 'cured' without surgery or dieting using new injection
- 2 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 3 Dog thinks owner is drowning in lake, dives in and tries to pull him out
- 4 Christian blogger says she will not wear leggings in public because they entice men and cause them to look at her 'lustfully'
- 5 Thank heavens for Louise Mensch and her foul-mouthed tweets to world leaders
Scientists discover way to unboil an egg – and the results are not as pointless as that sounds
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Greece elections: Greek PM Alexis Tsipras takes aim at 'neo-liberal' Europe as country gears up for prolonged austerity battle
Auschwitz liberation 70th anniversary: Woman sent to three Nazi death camps describes surviving gas chamber
Chilling drone footage captures Auschwitz ahead of 70th anniversary of liberation
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
iJobs Money & Business
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...