TXU pays £117m for Amerada unit

The consolidation of the UK electricity supply market gathered pace yesterday as TXU, the owner of Eastern Electricity, bought the retail trading business of Amerada Hess for £117m.

The deal will lift TXU's domestic energy customer base to 5.5 million, increasing its share of the market to 13 per cent and cementing its position as the third biggest player in the UK behind Centrica and Innogy.

TXU is paying £37m for the underlying business of Amerada Hess – £15m for the domestic customers and £22m for Amerada's industrial and commercial business – and a further £80m for working capital. The cost of the deal works out at £37 a customer – compared with prices of up to £180 paid in previous transactions.

Although Amerada Hess was one of the first independent companies to move into the deregulated energy market when British Gas's customer base was thrown open to competition, it has struggled to build market share among domestic consumers, partly because of the negative connotations associated with its name. Some customers thought it had German origins.

Amerada has 400,000 domestic energy customers and a 7 per cent share of the industrial and commercial market. It also has a wholesale gas marketing operation capable of handling 4 per cent of the UK's daily gas production.

TXU also owns Norweb Energi in the North-west. Its acquisition of Amerada's retail supply business follows on the heels of other deals in the sector. Innogy bought Yorkshire Electricity's supply base while London Electricity snapped up Sweb's. Centrica recently acquired the UK supply business of the collapse US energy trader Enron.

The next business to come up for sale will be that of Seeboard, which supplies customers in south-east England. London, which is owned by Electricité de France, is favourite to win the contest.