Grid sale raises cash for EOn
02 March 2011
A £4 billion deal will see EOn sell a major section of the UK power grid to PPL of the USA - the second major network sale by a firm planning nuclear new build.
Changing hands is EOn's Central Networks business, which serves over five million customers and includes 133,000 kilometres of overhead lines in a wide central portion of Great Britain. EOn said the sale "represents excellent value" while PPL said it was a "win-win." The deal comprises £3.5 billion ($5.7 billion) in cash and covers another £500 million ($816 million) in debt to be consolidated.
EOn has owned the network for nine years, since its purchase of PowerGen. It said that "due to strict regulation, there is no possibility to leverage synergies with other EOn businesses in the UK."
UK energy regulator Ofgem told World Nuclear News that it focuses on ensuring value for energy consumers, noting that they can have no choice of electricity distribution network. Ofgem sets limits on the amount of revenue that distribution grid operators can make in any five-year period and has progressively reduced these sums with the aim of making distribution ever more efficient.
Apart from the relative business economics of grid operation, EOn has a plan to divest some €15 billion ($20.8 billion) of assets by the end of 2013. "The proceeds of this sale will increase EOn's financial flexibility and strengthen our balance sheet," said the firm. Major investments coming up for EOn include financing its 50% share of the Horizon Nuclear Power joint venture (with RWE), which intends to build up to 6000 MWe of new nuclear generation capacity at Wylfa and Oldbury. These potential new power plants could all come online by 2025 at a total cost of £15 billion ($24 billion).
PPL will add Central Networks to the adjacent Western Power Distribution business it already owns that covers south Wales and the south west of England. Combined, PPL will have the UK's largest distribution network, covering 7.7 million customers. "Opportunities as compelling as this do not come along very often," said Jim Miller, chair of PPL. The company is based in Allentown, Pennsylvania. It owns and operates the 2500 MWe Susquehanna nuclear power plant as well as a portfolio of coal, hydro, natural gas and oil generation.
Another major player in UK new nuclear build is EDF Energy, which plans two Areva EPR units at Hinkley Point C and two more at Sizewell C. Last year it sold the single largest part of the UK grid, covering 8 million customers in London and the south east of England, for €6.9 billion ($9.5 billion). The buyer was Cheung Kong group, based in Hong Kong.
Researched and written
by World Nuclear News