BE shares boosted by bid rumours

10 April 2008

Shares in British Energy (BE) have risen dramatically over the last month as speculation on takeover bids has built. Meanwhile BE reported nuclear output slightly down on last year, but a little ahead of market expectations.


BE's share price has increased in value by more than 25% over the past month, reaching a high of 744 pence per share today. The share price rose more than 5.5% today in response to further reports of takeover bids.


EOn, RWE, Electricité de France (EdF) and Iberdrola, as well as the UK's Centrica, have all been linked to the potential purchase of an interest BE - and particularly the UK government's 35.2% stake. BE owns the most attractive ready-licensed and grid-connected sites for possible new reactors. The company has been in talks with many European utilities and every major reactor vendor, while observers eagerly await an announcement on its final plans for new nuclear build.


The latest reports, carried in the Financial Times, suggest that RWE has made an £11 billion ($22 billion) cash offer for the whole of BE, including the government-owned share. A UK government spokesperson recently said that the country would not oppose British Energy becoming entirely foreign owned. However, others have suggested a joint bid involving Centrica, thereby retaining some British interest, would be more politically attractive.


The reported RWE bid would value BE shares at just below 700p each, considerably higher than previous reported offers. Germany's Die Witt previouly said that RWE had been cleared to bid around £1.9 billion ($2.9 billion) for a 35.2% share, which would value the whole company at just under £5.5 billion ($11 billion). France's La Tribune had reported that EdF was considering a £6.7 billion ($13 billion) offer for the whole company. However, the latest RWE bid is still below the 800p per share value The Times had earlier reported traders considered possible as a final bid price.


Meanwhile, BE reported that the output from its nuclear power plants for the year to March 31 was 50.3TWh, down from the previous year's 51.2 TWh but marginally ahead of current market expectations. Output from the coal-fired Eggborough power plant was 8.1 TWh, up from the previous year's 7.2 TWh.

The company warned that the reduction in output as a result of planned refuelling operations over the next 12 months was expected to be 4 TWh, rather than the 3 TWh previously estimated. This increase was due to slower than expected recovery to normal refuelling at its Dungeness B power plant.