Iberdrola pulls out of the running for British Energy

Friday 13 June 2008 00:00

The sale of British Energy ran into further trouble as one of the front-runners walked away yesterday, citing the "unreasonable" asking price.

Ignacio Sanchez Galan, the chairman of Iberdrola, said his company had now formally pulled out of the race to buy British Energy, on the grounds that the UK nuclear power company's board had made demands "over what we consider reasonable". British Energy declined to comment.

The announcement by Iberdrola, which owns ScottishPower, comes just days after France's EDF said it would not raise its bid, after British Energy rejected an offer worth £11bn.

One analyst said: "Iberdrola walking away isn't a great surprise, but it looks like the end of the auction. I can't see an opposing bid."

British Energy rejected EdF's bid on Monday, saying: "Such proposals do not represent value for shareholders as they fail to take proper account of the current forward price of electricity and the value of the company's sites and people in the context of nuclear new build." Analysts at the time backed the UK group's decision, with one saying a recommendation at that price would have been "criminal".

While Iberdrola never made a formal approach to acquire British Energy, it had carried out due diligence with a view to a joint bid, with Germany's RWE strongly expected to be its partner. Neither company wanted the risk of buying the company alone.

A source close to the auction said RWE was still considering bidding, although there was talk in the market yesterday that it didn't want more than 50 per cent. A RWE spokesman declined to comment.

There was also a question mark over whether the only other serious suitor would launch a formal offer. French utility Suez has left itself the option of bidding, but no move will be made until it finalises its long-running merger with Gaz de France. Optimistic analysts say that could take months.

Industry sources said that should British Energy remain independent, it could seek joint ventures with its rivals as it prepares to take part in the construction of the next generation of nuclear power stations in the UK. It said earlier this week that it is looking at opportunities that might be available "through an offer for the company or other partnering agreements".

British Energy is 35 per cent owned by the UK government, which was hoping to pick up at least £4bn from any sale. Analysts had earlier this week said a deal could be valued at anywhere up to £12 a share.

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