Centrica is launching a £2.2bn rights issue to help fund its proposal to buy a 25 per cent stake in British Energy (BE), once the latter’s takeover by EDF goes ahead.
Centrica investors taking up the offer, which closes on 14 November, will receive three new shares for every eight they hold, at a price of 160p – only just more than half of Thursday’s closing price of 306.25p.
If all goes according to plan, the money raised will be added to £1bn of additional bank financing lined up by the company, to make up the £3.1bn valuation of the BE stake.
Sam Laidlaw, the Centrica chief executive, said: “Distinct from a lot of other rights issues and recapitalisations, this is about moving forward and delivering against a strategy.”
The plan for Centrica is to increase its access to secure power generation, cutting down its reliance on gas, and therefore its exposure to volatile wholesale prices. Buying into the EDF-run BE – a company central to the government’s plans for a nuclear renaissance in the UK – would help address such concerns.
Despite the appearance created by the big discount on the offer, all the group’s major shareholders are in support of the plan, according to Centrica. Mr Laidlaw said: “Although our share price has performed well in these uncertain times, the advice was to be prudent and price in a reasonable discount to ensure there will be a strong appetite to take up the offer.”
The EDF / BE deal is not expected to be completed before January, so until then Centrica’s plans remain unconfirmed. In the event that a deal cannot be agreed with EDF, the UK group will move to plan B. “We are raising the finance on the expectation of the BE deal happening, but if it doesn’t we will use the funds to buy other gas assets, primarily in the North Sea,” Mr Laidlaw said.
A trading statement, also issued yesterday, said Centrica’s performance is in line with expectations.