TXU Entrenches Position as UK's Largest Electricity Retailer with Norweb Purchase

US energy group TXU has solidified its position as the UK's biggest electricity retailer after acquiring Norweb's supply business in a deal worth over £500m. The purchase of the business from United Utilities for £310m in cash adds 1.8m customers in north-west England to TXU's portfolio, making it the largest electricity retailer in the UK. TXU has also taken on long-term power contracts, which analysts estimate will add over £200m to the deal's cost.

Key Takeaways:

• TXU has purchased Norweb's supply business from United Utilities for £310m in cash, adding 1.8m customers to its portfolio.
• The deal is valued at over £500m, with analysts estimating that long-term power contracts will add over £200m to the cost.
• TXU has subcontracted customer services, including billing, call centres, and debt collection, to Vertex, the customer service arm of United, for all 5.6m electricity and gas contracts.
• The seven-year contract with Vertex is worth £650m, making Vertex the UK's largest independent customer service organisation.
• United's shares rose 24 ½p to 694 ½p on the news, while Nick Pink, utilities analyst at UBS Warburg, stated that the Vertex contract compensates for the lower-than-expected cash price.
• The deal benefits TXU by providing a larger UK customer base, which serves as a hedge for its generation activities.

Statistics:

• £500m: Estimated value of the deal
• £310m: Price paid by TXU for Norweb's supply business
• £200m: Estimated cost of long-term power contracts
• £650m: Value of the seven-year contract with Vertex
• 1.8m: Number of electric customers added to TXU's portfolio
• 5.6m: Total number of electricity and gas contracts
• 19.2%: TXU's stake in Hidroelectrica del Cantabrico, Spain's fourth largest generator
• 10%: Electrabel's stake in Hidroelectrica del Cantabrico
• 24 ½p: Increase in United's shares on the news

Sources:

• Bloomberg
• Reuters
• Financial Times
• Independent