PowerGen's pounds 1.5bn sale exceeds best hopes

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The Independent Online
POWERGEN is set to raise up to pounds 1.5bn from the sale of two of its coal-fired power stations - far more than the auction had been expected to raise.

Five bidders have submitted offers for the stations - Ferrybridge and Fiddler's Ferry - all of which are well in excess of the reserve price of pounds 900m originally indicated by PowerGen.

Leading the bidders are the nuclear generator, British Energy, and the recently merged Scottish and Southern Energy. Mission Energy of the US, which bought the National Grid's pumped storage power stations, has also submitted a bid, as has John Devaney, the former chairman of Eastern.

The fifth bidder is thought to be the US utility Entergy, which recently sold London Electricity to Electricite de France for pounds 1.9bn. Centrica, the trading arm of the former British Gas, has not made a bid.

The sale of the two stations, which have a combined output of 4,000 megawatts, is due to be completed in April. The sale was forced on PowerGen by the electricity regulator in return for approval to buy East Midlands Electricity.

Once East Midlands is fully bedded in PowerGen, led by chairman Ed Wallis, is expected to make the purchase of another regional electricity company its priority. It is also looking at further overseas expansion and has targeted India, Thailand and China, where it could buy generating plant that is already running.

PowerGen also remains interested in a US acquisition despite the failure to pull off the pounds 10bn merger of equals with Houston Industries. The deal was called off last summer just four days before it was due to be signed. PowerGen had even completed the corporate staff video explaining the rationale for the merger.

Meanwhile the new energy regulator, Callum McCarthy, said Scottish Power may have to hive off its Scottish supply and transmission business into a completely separate company to gain approval for its acquisition of the US electricity company PacifiCorp.

Southern Electric and Scottish Hydro-Electric agreed to hive off their generating activities within three years as a condition of being allowed to merge.

In a consultative document, Mr McCarthy said Scottish Power's US deal raised concerns about its ability to fund its UK operations. He said safeguards might have to be put in place to prevent resources being diverted elsewhere.