PPL buys E.ON's British power network for £4bn

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The Independent Online

E.ON is selling its British networks business to US power group PPL for £4bn as part of the German electricity giant's plans to pay down its debts and expand into new global markets.

E.ON Central Networks delivers power to up to 10 million people from the Peak District to Bristol through 94,000 substations and 82,600 miles of cabling, enough to go around the world three times.

The change of ownership will make no difference to energy users in theregion, but E.ON will now pay the heavily regulated distribution charges to Pennsylvania-based PPL, rather than to its own networks division.

The German group said it sold Central Networks because strict regulation of distribution networks left itunable to boost efficiency across its British business by centralising operations such as call centres.

The sale also produces a slug of cash that will help to meet the group's target of €15bn (£12.7bn) of divestments by the end of 2012.

E.ON chief executive Johannes Teyssen said: "The proceeds of the sale will increase our financial flexibility and strengthen our balance sheet."

The company launched a new strategy at the end of last year focused on expansion into new markets outside its traditional heartlands in Northern and Central Europe. It is creating a new market unit, and industry-watchers are forecasting expansion into fast-growing areas such as China.

The transmission of super-high-voltage electricity from Britain's power stations is under the purview of theNational Grid. From there it flows into lower-voltage distribution networks, such as Central Networks, whichinclude everything from pylons and wooden poles to the wires running intoindividual properties.

PPL saw off competition for Central Networks from the Asian billionaire Li Ka-shing, who already owns Britain's biggest electricity distribution business through his £5.8bn acquisition of EDF's 100,000 miles of networks in July last year.

Hong Kong-based Mr Li's Cheung Kong Infrastructure was widely tipped to win the battle, but is understood to have been outbid by PPL.

Distribution networks are particularly attractive to foreign companies or long-term investors such as pension funds because of the low risks associated with annual investment andincome specified in advance by regulator Ofgem.