ScottishPower won fight for RBS power station with lower offer

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ScottishPower persuaded a consortium of lenders led by Royal Bank of Scotland to accept £30m less for a power station they owned than was offered by a rival bidder, it has emerged.

ScottishPower persuaded a consortium of lenders led by Royal Bank of Scotland to accept £30m less for a power station they owned than was offered by a rival bidder, it has emerged.

RBS, which has close and long-standing ties with ScottishPower, also lent the company the money to buy the Damhead Creek gas-fired plant in Essex from the banking consortium.

ScottishPower's chief executive Ian Russell last week agreed to pay £317m for the station which was taken over by the banks in 2002 after its US owner Entergy got into financial difficulties. This compares with an offer worth about £350m tabled by a rival bidder, CGE, which was attempting to create a new force in the electricity market by buying up financially distressed power stations.

The failure of CGE to acquire Damhead Creek and another gas-fired power station - Killingholme in north Lincolnshire - led to the collapse of its plan and the winding up of the company. Killingholme was bought on Tuesday for £142m by Centrica, the parent company of British Gas.

CGE was chaired by Jim Forbes, the former chief executive of Scottish & Southern Energy, the rival electricity company north of the border. During his time at the company, Mr Forbes and Mr Russell became well-known sparring partners because of persistent speculation about whether their companies would merge and who might run the combined business.

The price paid by ScottishPower is regarded widely in the industry as the bottom end of the range that Damhead Creek was expected to fetch. However, ScottishPower's winning offer was in cash. CGE, on the other hand, was offering shares and its bid was conditional on the owners of other power stations agreeing to sell up in exchange for shares in the new company.

Although the Killingholme deal worked out at £2.18 a kilowatt hour compared with the £2.71 which ScottishPower paid for Killingholme, it was reckoned to be a better price because Damhead Creek is a younger and more efficient station and much closer to the area of highest electricity demand, meaning that transmission charges for connecting to the National Grid are considerably lower.

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