E.On’s supervisory board has approved a deal to sell the company’s UK electricity distribution business, Central Networks, to PPL Corporation of the USA for £4 billion.
Central Networks is the UK’s second largest electricity distributor and operates the regional grid that covers the UK’s Midlands region. Its disposal will make a key contribution towards E.On’s planned €15 billion divestment target.
“After nine years of full ownership, the [Central Networks] business offers E.On limited value enhancement opportunities and, due to the strict regulation, there is no possibility to leverage synergies with other E.On businesses in the UK,” said E.On CEO Johannes Teyssen. “The proceeds of the sale will increase E.On’s financial flexibility and strengthen our balance sheet.”
E.On last year sold its US Midwest power business to PPL Corporation for $7.6 billion. In the UK, PPL also owns Western Power Distribution, which distributes electricity to 2.6 million customers in England and Wales.
Central Networks serves 5 million customers in the UK. After completing the acquisition, PPL will own and operate the largest network of electricity delivery companies in the UK in terms of regulated asset value, at a combined £4.9 billion ($7.8 billion).
“We are very pleased to have successfully reached this agreement, which will allow us to further expand our regulated electricity operations in a way that enhances shareowner value and is immediately accretive to 2011 earnings and cash flow,” said James H. Miller, PPL’s chairman, president and chief executive officer. “And, we are confident that our highly successful UK management team is prepared to implement operational improvements and other efficiencies that will benefit customers and contribute additional accretion to PPL earnings in 2012 and beyond.”
He continued: “Opportunities as compelling as this do not come along very often. The UK provides a progressive regulatory environment; Central Networks is adjacent to our existing, high-performing operations; and there are very real opportunities for retainable synergies that further enhance what already is a compelling transaction.”
PPL and E.On expect the transaction to close in April this year.
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