Energy Group set for $100m US takeover

Energy Group, the electricity and coal producer demerged from Hanson last month, is set to make its first significant investment, paying up to $100m (pounds 62m) for a US power marketing company.

The deal, due to be unveiled next week, is one of several acquisitions being examined by the group, which consists of the regional electricity company Eastern and Peabody of the US, the world's largest coal producer.

The US company that Eastern is taking over is based in Boston and acts as a wholesaler of electricity, matching generators with buyers of power. The deal has been constructed as an earn-out, allowing the company's current owners to maximise their profits from the sale. Energy Group's initial outlay is expected to be about $60m but this could rise to as much as $100m depending on the financial performance of the business in future years.

When Energy Group outlined its strategy following the demerger, it said a number of its investments could prove to be "significant", raising fears among investors that it was about to strain its balance sheet by embarking on a spending spree in the US.

But Derek Bonham, Energy Group's executive chairman, was quick to reassure investors that it was only planning smaller-scale acquisitions in the US.

In the UK, Eastern, headed by John Devaney, chief executive, is also looking at buying further generating capacity. As well as being the country's biggest regional electricity company, with 3 million customers, it is also the fourth biggest electricity generator with about 10 per cent of total capacity, having bought coal-fired power stations from National Power and PowerGen.

However, Mr Devaney has made it clear that the biggest expansion is likely to be into the liberalised gas market. Eastern Natural Gas is already the country's second biggest gas shipper after British Gas and is involved in all three trial areas where the domestic gas market is being opened up to competition, including Kent and Sussex where 900,000 households will be able to chose their supplier from today.

In domestic electricity supply, Eastern is likely to use its own brand name to expand into other areas of the country rather than linking up with retailers such as supermarket groups once the market is opened to competition from April next year.

The electricity regulator, Stephen Littlechild of Offer, has announced that competition will be phased in over six months to give the industry time to bed down the very complex computer system needed to enable Britain's 20 million consumers to shop around.

The plan is to begin trials among 2 million households next April, building up to cover the entire country in three further stages.