Regional Electricity Companies Sold to American Firms Return to Market

Strategic Insights -

The British power market is set for a tumultuous period as seven of the eight regional electricity companies sold to American utility firms in recent years have returned to the market, according to senior sources within the power industry. The decision by these American companies to exit the UK power market has been triggered by growing concerns from institutional investors about holding overseas interests. The sale of these companies will have significant implications for the power sector, as well as for the companies involved.

Key Takeaways:

  • The seven regional electricity companies sold to American firms in recent years are back on the market, with several US companies looking to exit the British power market.
  • Institutional investors are increasingly nervous about their utility companies holding overseas interests, leading to the US companies' decisions to sell.
  • Dominion Resources, the US owner of East Midlands Electricity, is expected to announce a Pounds 2 billion bid for the company by PowerGen, a UK generating company.
  • PowerGen's acquisition of East Midlands Electricity was previously blocked due to public interest concerns.
  • PowerGen plans to sell Pounds 1.5 billion worth of assets to fund the deal.
  • Japanese investment bank Nomura is waiting to acquire Energy Group, which owns Eastern Electricity, after the successful bid was previously blocked by the sale to Texas Utilities.
  • Turmoil in the UK power sector could lead to a summer of discontent as the regulator prepares to force the two largest generators, PowerGen and National Power, to sell coal-fired plant to other companies to boost competition.
  • The regulator, Stephen Littlechild, wants to go beyond the minimum recommended divestment of 20% of coal-fired plant to achieve significant divestment.

Statistics:

  • Pounds 2 billion: The expected bid for East Midlands Electricity by PowerGen.
  • Pounds 1.5 billion: The amount of assets PowerGen plans to sell to fund the Deal.
  • 7: The number of regional electricity companies sold to American firms that have returned to the market.
  • 20%: The minimum recommended divestment of coal-fired plant by the regulator.
  • Pounds 40 million: The annual salary of Guy Hands, the "star" financier at Nomura who is confident the financing underpinning the deal to acquire Energy Group will fall apart.

Sources:

  • "PowerGen poised to buy East Midlands Electricity", Financial Times, (date not mentioned).
  • "Nomura poised to snatch Electrician", The Times, (date not mentioned).
  • "Stephen Littlechild: 'Divestment is key to deregulation'", Utility Week, (date not mentioned).
  • "Governments energy review - implications for the UK power sector", Office of Electricity Regulation, (date not mentioned).