London Electricity in bid for Seeboard

French state-owned utility in second stab at clinching £1.5bn South-east power company
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The Independent Online

London Electricity is in early takeover talks with the American owners of Seeboard, the South-east England electricity company, less than a month after an initial £1.5bn approach was spurned.

Controlled by state-owned Eléctricité de France (EDF), London Electricity is desperate to bring its customer base to five million, and Seeboard is seen as the best fit.

The move could herald a second wave of consolidation in Britain's deregulated electricity market that has seen numerous utilities snapped up by continental European and American rivals. Sources close to the talks said that discussions had taken place between the two companies over the last few weeks, and a deal could be sealed at the end of the summer.

But Seeboard's owners, American Electric Power (AEP), and EDF first have to overcome two hurdles before any agreement can be reached.

AEP acquired Seeboard as part of its merger with Central & South West in 1997. AEP is keen to offload the British company, but it has been warned by the US authorities that it would face a multi-million-dollar tax bill if it sells before June 2002. Sources close to the US utility said that AEP would only sell if EDF footed the tax bill.

It is understood that EDF, which sees Seeboard as critical to its growth ambitions, may now be prepared to pay the bill to force an early sale.

London Electricity refused to comment, but a source close to talks said: "EDF is still interested in Seeboard and is working to overcome the obstacles."

The other hurdle facing EDF is a political one. The French state-owned company has been one of the most aggressive utilities in Europe, following the partial deregulation of the market. As well as buying London Electricity in 1999, EdF's spending spree has extended to Italy, Spain and Germany .

But there is growing political opposition, at both European Commission and at member state level, to EDF's romp through Europe.

Of all the member states, France has been the slowest to open up its electricity market to competition. While EDF can acquire former state-owned utilities in Europe, it is difficult for rival European electricity companies to enter the French market. Because EDF is owned by the French government, the company has access to cheaper rates of borrowing over its privatised European rivals.

European Competition Commissioner, Mario Monti, fears the growing power of EDF, warning that future deals will go through the Competition Commission's fine tooth-comb.

The UK government has expressed concern about EDF. Peter Hain, the British Trade Minister, has raised the issue with Europe. Any proposed deal to buy Seeboard would have to be approved by the DTI.

Meanwhile, RWE, the German electricity, gas and water business that owns Thames Water, is eyeing the UK for further acquisitions. Last week the company's chief executive, Dietmar Kuhnt, said he was interested in UK acquisitions.

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