RWE offers £11 billion for British Energy

10 April 2008


German utility RWE has made an indicative cash offer for British Energy that values the company at £11bn. The proposed offer of almost 700p per share would net the UK government around £4 bn for its 35pc stake in the business, which operates the entire UK nuclear power fleet. BE shares fell 9p on the news to 701½p.

The UK government is considering a sale of all or part of its holding, with any proceeds going to the Nuclear Liabilities Fund to pay for cleaning up old sites. British Energy said on 17 March that it was in talks that could lead to a takeover of the business and RWE, along with Centrica and EDF, was immediately touted as a potential bidder.

It is believed RWE made its approach several weeks ago and is now at the initial due diligence stage. EDF Energy, the UK arm of Electricité de France, is also believed to have been granted access to the necessary BE data, a precursor to making a bid of its own, though is thought to be reluctant to acquire the whole group.

Any bid by foreign companies for British Energy is likely to be controversial. Some observers believe they would need to team up with a UK partner, such as British Gas-owner Centrica, to smooth any deal. Only a few days before it had been reported that Electricite de France and RWE were in tentative talks to with Centrica Plc, the owner og British Gas, to buy BE, and its shares rose 2.5 pence (o.4 per cent) as a result.

It is plain that the UK government and prime minister Gordon Brown support nuclear power as an option to replace reactors scheduled for closure and coal-fired plants whose emissions contribute heavily to global warming. British Energy owns sites where new units may be built, and has reputedly met with at least ten companies to choose possible partners. BE said on 17 March that it was in talks that could lead to a merger or takeover.

Centrica, the owner of British Gas, is an interested party for another reason – it does not produce as much natural gas and power as it sells and wants to reduce the amount it needs to buy in the wholesale markets. Consequently it is looking for nuclear and renewable assets to reduce its exposure to natural gas prices as a fuel for its power plants. The company failed to make the shortlist of bidders for Suez SA's stake in Distrigaz SA last month.




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