Power companies seek US acquisitions

THE UK'S largest power companies are lining up to get into the US, confident they can overcome obstacles that have thwarted their attempts to buy utilities there so far.

Veterans of deregulation at home, the UK utilities think they can put their knowledge to profitable use in a US market that is just opening up to competition. In the most publicised transaction, British Energy and Peco Energy of Philadelphia said in July they would buy the one working reactor at the Three Mile Island plant, scene in 1979 of the worst nuclear accident in US history.

At $100m (pounds 61m) analysts say Three Mile Island is a great buy for the two partners. Still, that a foreign company would want such a notorious asset is an indication of how attractive the US electricity market, the biggest in the world, has become to UK utilities whose growth prospects are limited at home.

"It's an enormous opportunity. . . This is a market that has been fossilised for 50 years and is at the early stages of being opened up to proper competition," said Peter Atherton, an analyst at Dresdner Kleinwort Benson.

The UK push into America faces enormous risks and formidable obstacles. To succeed, British companies must be prepared to outbid well-heeled US rivals and deal with regulators who so far have prevented foreign control of American utilities.

While they have had some success buying assets such as power plants, UK companies have been frustrated in their efforts to merge with or acquire US utilities.

After more than three months of negotiations, merger talks collapsed last week between PowerGen, which generates 19.5 per cent of the power used in England and Wales, and Houston Industries, one of the biggest utilities in Texas. Together, the two companies would have had a market value of more than $16bn.

Earlier this year, Scottish Power abandoned efforts to buy Florida Progress, an electric utility, in what would have been a more than $4bn acquisition. Yet both Scottish Power and PowerGen say they won't give up on finding US acquisitions or merger partners.

"We continue to talk to a number of people," said Peter Hickson, PowerGen finance director. "We're very enthusiastic about the US."

UK companies, which want to become global competitors, cannot ignore emerging opportunities to grab a piece of $230bn in annual US power sales. Driven by the prospect of lower electricity prices, 16 states

are preparing to eliminate utility monopolies over the next few years and let new players vie for customers. The entire market is expected to open in the next decade.

Five of the biggest power companies in the UK have said they are planning to buy or merge with US utilities, or acquire multimillion-dollar assets such as power plants and transmission lines.

Entering a foreign market is full of pitfalls, as US companies know from their own experiences in Britain. American power companies have acquired eight UK utilities over the last three years, but they have not earned nearly as much as they expected on the other side of the Atlantic.

UK companies can expect similar problems with regulation in the US, where state officials often view utilities as public trusts run on behalf of local customers rather than profit-making enterprises entitled to global aspirations.

"There are 56,000 people involved in electricity regulation in the US. The regulatory burden should be in no way underestimated," said Mike Bottomley, group manager of KPMG's global utilities team.

US regulators can delay acquisitions for two years or more, increasing the risk that a bid will fail or giving competitors time to come up with rival offers. State regulators often demand big rate cuts for consumers before approving acquisitions, biting into returns.

Start your day with The Independent, sign up for daily news emails
Voices
Tony Blair’s time as Middle East envoy representing the US, Russia, the UN and the EU has come to an end
voicesRobert Fisk: How come a war criminal ever became a 'peace envoy' in the first place?
News
people
Life and Style
food + drink
News
peopleKatie Hopkins criticises River Island's 'seize the day' bags for trying to normalise epilepsy
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Night job: Pacha nightclub DJ, Joan Ribas, is the new kingmaker on the island
news
Arts and Entertainment
Nicole Kidman plays Grace Kelly in the film, which was criticised by Monaco’s royal family
film'I survived it, but I’ll never be the same,' says Arash Amel
Life and Style
Retailers should make good any consumer goods problems that occur within two years
tech(and what to do if you receive it)
Life and Style
healthIf one was missed, vomiting blood was seen as a viable alternative
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Guru Careers: Graduate Editor / Editorial Assistant

£16 - 20k: Guru Careers: A Graduate Editor / Editorial Assistant is needed to ...

Day In a Page

Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor
The ZX Spectrum has been crowd-funded back into play - with some 21st-century tweaks

The ZX Spectrum is back

The ZX Spectrum was the original - and for some players, still the best. David Crookes meets the fans who've kept the games' flames lit
Grace of Monaco film panned: even the screenwriter pours scorn on biopic starring Nicole Kidman

Even the screenwriter pours scorn on Grace of Monaco biopic

The critics had a field day after last year's premiere, but the savaging goes on
Menstrual Hygiene Day: The strange ideas people used to believe about periods

Menstrual Hygiene Day: The strange ideas people once had about periods

If one was missed, vomiting blood was seen as a viable alternative
The best work perks: From free travel cards to making dreams come true (really)

The quirks of work perks

From free travel cards to making dreams come true (really)
Is bridge the latest twee pastime to get hip?

Is bridge becoming hip?

The number of young players has trebled in the past year. Gillian Orr discovers if this old game has new tricks
Long author-lists on research papers are threatening the academic work system

The rise of 'hyperauthorship'

Now that academic papers are written by thousands (yes, thousands) of contributors, it's getting hard to tell workers from shirkers
The rise of Lego Clubs: How toys are helping children struggling with social interaction to build better relationships

The rise of Lego Clubs

How toys are helping children struggling with social interaction to build better relationships
5 best running glasses

On your marks: 5 best running glasses

Whether you’re pounding pavements, parks or hill passes, keep your eyes protected in all weathers
Joe Root: 'Ben Stokes gives everything – he’s rubbing off on us all'

'Ben Stokes gives everything – he’s rubbing off on us all'

Joe Root says the England dressing room is a happy place again – and Stokes is the catalyst
Raif Badawi: Wife pleads for fresh EU help as Saudi blogger's health worsens

Please save my husband

As the health of blogger Raif Badawi worsens in prison, his wife urges EU governments to put pressure on the Saudi Arabian royal family to allow her husband to join his family in Canada