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EDF agrees takeover of British Energy

Pa,Holly Williams
Wednesday 24 September 2008 07:28 BST

French group EDF today agreed a £12.5 billion takeover of British Energy in a move set to kick-start the UK's nuclear power strategy.

The state-owned utility giant will pay 774p a share, 9p higher than the price offered in July which was rejected as too low by major British Energy shareholders.

British Gas parent Centrica is also in talks to buy a 25% stake in the new British Energy following the deal, it was confirmed today.

Prime minister Gordon Brown welcomed news of the takeover as "good value for the taxpayer and a significant step towards the construction of a new generation of nuclear stations".

Today's deal will see EDF take control of all of British Energy's (BE) nuclear power stations and play a leading role in the development of new stations in the UK, which are likely to be built on BE's existing sites.

It will also allow the UK Government to bank a multi-billion pound windfall from its 36% stake in the firm.

EDF said today it planned to build four new nuclear reactors in the UK and would maximise the potential of British Energy's eight nuclear power stations.

But the Government has stressed that it wants other players in Britain's nuclear power industry.

British Energy employs around 6,000 staff and produces around a sixth of the UK's electricity.

EDF pledged to "recognise and appreciate" the importance of BE employees and said it would safeguard their employment and pension rights.

Pierre Gadonneix, chairman and chief executive of EDF, said: "For EDF, this is an historic milestone in our strategic development plans in Europe and enables the EDF Group top develop significantly in the UK one of its key markets.

"For British Energy it places it at a the vanguard of new nuclear build in the UK and at the centre of the global nuclear renaissance."

Dougie Rooney, national officer of Unite, said: "We welcome the end of a long sales process. EDF was the only potential purchaser. Our job now is to ensure that EDF keep the existing plants open and maintain or improve investment."

Mr Rooney said it was vital that supply companies in the UK were involved in future investment in the nuclear industry which he said would help create thousands of skilled jobs.

Paul Noon, general secretary of Prospect, which represents around 2,000 managerial workers in British Energy, also welcomes the announcement.

He said: "I hope it gives security to the future of workers' jobs as well as Britain's energy supply.

"We have a good relationship with EDF and we are keen to ensure that will continue."

EDF wants to construct and operate two reactors each at Hinkley Point in Somerset and Sizewell in Suffolk, with the first new reactor on-stream by the end of 2017, the Government confirmed.

The group has also agreed with the Government to sell land to other potential nuclear operators in certain pre-agreed circumstances.

EDF's four new reactors could generate electricity to meet more than 13% of the UK's forecast energy demand by the early 2020s, saving more than 14 million tonnes of CO2 emissions a year, said the Department for Business and Enterprise and Regulatory Reform.

The Prime Minister said: "New nuclear is becoming a reality.

"Nuclear is clean, secure and affordable. Its expansion is crucial for Britain's long-term energy security, as we reduce our oil dependence and move towards a low-carbon future."

British Energy chairman Sir Adrian Montague said his company spent the last six weeks working with EDF to secure the new terms and seal a deal.

He told BBC Radio 4's Today programme: "This new transaction is regarded by the board as good for the shareholders, good for our staff, good for the nuclear industry and also good for the country.

"In the short term I think you will find a stronger supplier of energy in the UK as we bring together British Energy's generating capability with EDF's strength of the supply business.

"And I think that the other key issue here is that we are positioning the company as the lynchpin of a new nuclear future, and we are bringing together two very strong companies in the nuclear industry.

"EDF is a huge supplier of nuclear energy in France, and of course we have been a big supplier in the UK and together we want to build a new nuclear future."

Sir Adrian said the deal would help increase Britain's energy security, saying: "The new nuclear enterprise will be good for the country because it will increase the proportion of electricity that we generate here in a way that is not dependent on international oil and gas prices."

EDF - majority-owned by the French government and the world's biggest nuclear power provider - said the deal had the support of British Energy's largest shareholder, Invesco, which owns a 14.9% stake.

It is thought that the July offer from EDF was scuppered by opposition from institutional investors such as Invesco, which are said to have argued that the price undervalued BE at a time when the value of energy assets was rising.

Oil's slide from July's 147 US dollar peak is thought likely to have persuaded some investors to be more flexible over price demands.

The Government also announced it had committed to accept the EDF deal.

EDF plans to build longer-lasting EPR reactors in the UK, which are a type of pressurised water reactor, similar to those already in operation in nuclear industry-reliant France.

They are believed to last for 60 years compared with the normal 40-year lifespan.

Centrica said it was hoping to take part in EDF's new nuclear builds in the UK under negotiations to take an investment in the new BE.

It is also looking to secure a deal to take at least 25% of the energy output from BE's existing fleet of stations.

BE operates eight nuclear sites in the UK and has land around them where new reactors could be built.

Its eight nuclear power stations are Dungeness B in Kent, Hartlepool, Heysham 1 and 2 in Lancashire, Hinkley Point B in Somerset, Hunterston B in Ayrshire, Sizewell B in Suffolk and Torness in East Lothian.

The group also owns a coal-fired power station at Eggborough, North Yorkshire.

Speaking on Sky News, Mr Brown said: "The reason for this announcement is £25 billion of investment in nuclear power stations and we will start to lead the world in the new generation of nuclear power stations.

"They will probably be able to announce they are building four new nuclear power stations.

"It is exactly what I want to see, and that is, that we have the dependence upon oil reduced, that we are doing something that is more in tune with climate change, we are getting investment in nuclear power... this is a French-British deal in the end that will happen."

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