PowerGen eyes pounds 3.5bn strike for Cinergy of the US

PowerGen is contemplating a pounds 3.5bn strike for the American electricity utility Cinergy in a deal which would give it a 50 per cent stake in Midlands Electricity, the UK regional power company. Michael Harrison reports.

Ed Wallis, PowerGen's chairman, is understood to be ready to make his move as soon as the Government gives the power generators the green light to expand into electricity distribution and supply.

The Department of Trade and Industry is expected to indicate whether it will sanction further vertical integration in the sector when it gives its ruling on PacifiCorp's pounds 3.7bn bid for Energy group, owner of Eastern Electricity, early in the New Year.

PowerGen is understood to have examined buying out one of the 50 per cent stakes held in Midlands by Cinergy and GPU, who joined together as Avon Energy Partners to acquire Midlands for pounds 1.73bn in May last year.

The US takeover followed the previous government's decision to block a bid for Midlands by PowerGen and National Power's agreed takeover of Southern Electric.

Now, PowerGen is believed to have concluded that its strategy would be best served by acquiring one of the two US parent companies. This would give it exposure to both the American power market and the UK electricity supply industry as the domestic market is opened to full competition from next April.

PowerGen has examined the takeover of several US utilities but there are complications with a number of them since they own nuclear generating capacity which it is not interested in.

Cinergy, however, is a pure fossil-fuel generator. It owns an operates 11,000 megawatts of coal and gas fired generating plant in the mid-West. Headquartered in Cincinnati, it serves 1.3 million electricity customers and 434,000 gas consumers in Ohio, Indiana and Kentucky and has a market capitalisation of $5.4bn. It has 8,000 employees and made a net income of $340m on revenues of $3.2bn last year.

Cinergy is one of seven or eight US utilities examined by PowerGen and although a final decision has not yet been taken, it is thought to be the group's favoured takeover target.

Mr Wallis refused to comment on PowerGen's intentions but it is well known that he would like to acquire an interest in a UK regional electricity company.

PowerGen executives vehemently deny suggestions, however, that it has offered the Government a deal to stop coal closures in return for the green light to own a Rec. The Prime Minister Tony Blair announced on Tuesday that the three main generators had agreed a deal with RJB Mining to avert the threat of pit closures and redundancies for the next six months.

The deal has yet to be thrashed out in detail but is likely to involve the three generators taking an extra 7-8 million tonnes of coal on top of contracts so far signed, either to burn or stockpile. So far National Power and Eastern have agreed to take 12 million tonnes from RJB next financial year while PowerGen has contracted to buy 4.5 million tonnes from other UK coal producers.

PROMOTED VIDEO
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Life and Style
life
News
Melissa and Joan Rivers together at an NBC event in May 2014
peopleDaughter Melissa thanks fans for 'outpouring of support'
Life and Style
tech
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
One in six drivers cannot identify a single one of the main components found under the bonnet of an average car
motoringOne in six drivers can't carry out basic under-bonnet checks
News
i100
Voices
Pupils educated at schools like Eton (pictured) are far more likely to succeed in politics and the judiciary, the report found
voices
Arts and Entertainment
Shady character: Jon Hamm as sports agent JB Bernstein in Million Dollar Arm
filmReview: Jon Hamm finally finds the right role on the big screen in Million Dollar Arm
News
Orson Welles made Citizen Kane at 25, and battled with Hollywood film studios thereafter
people
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

Recruitment Consultants - Banking & Finance

£20000 - £30000 per annum + OTE £40 - £50K first year: SThree: SThree Group an...

Business Analyst,HR,Halifax,£400-450pd

£400 - £450 per day + competitive: Orgtel: My client, a leading bank, is curre...

Recruitment Consultants - IT - Trainee / Experienced

£20000 - £30000 per annum + OTE £40-50K first year: SThree: The SThree group i...

Cost Reporting-MI Packs-Edinburgh-Bank-£350/day

£300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone