Innogy has struck a deal to buy Yorkshire Power from its US owners, American Electric Power (AEP) and Xcel Energy, for $726 million. The deal will render the company among the largest electricity retailers in the UK and the second largest gas retailer.
Announcement of the deal led to a fall in value of Innogy’s shares by 5 per cent. Analysts suggested that the company was paying too much, around £295 for each new customer, when the expected price would have been between £200 and £250. Even so the deal will lift Innogy’s retail customer base to 5.3 million, exceeding its own target of 5 million four years early.
Under the terms of the deal, AEP will receive $383 million for its entire interest in Yorkshire Electricity while Xcel will receive $343 million and will retain a 5.25 per cent stake, for tax reasons, until October 2002. Innogy has an option to buy the outstanding shares. It will also take on Yorkshire Power’s debt of around $2 billion. The US companies acquired the UK energy company in 1997.
Innogy is expected to sell Yorkshire Power’s 7 per cent interest in the Armada gas fields and surplus office properties, together valued at around $130 million. The customer base acquired by Innogy with Yorkshire Power will bring its retail demand in line with its generating capacity.
