Afternoon:
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THE City was cheering British Gas group Centrica today.
Britain's leading supplier of gas and electricity managed to pull off a cut-price investment in the British Energy nuclear group leaving itself with more than £1 billion of change from its recent rights issue.
Centrica had spooked the City last autumn when it apparently agreed to spend more than £3 billion taking a 25% stake in French giant EDF's £12.25 billion takeover of British Energy.
Today, however, it announced that it is going to pay £2.3 billion for a 20% stake, which constitutes a 6% discount of EDF's original purchase price or a saving of £150 million for Centrica.
In a side deal Centrica has sold off its Belgian electricity business - a 51% stake in SPE - to EDF for £1.2 billion, around £350 million more than most analysts had the business valued at.
That, say analysts, means that not only has Centrica has achieved savings of £500 million on its co-investment in British Energy with EDF, its cash outlay has come in at only £1.1 billion - just half the money it raised in a major rights issue last November.
Neil Woodford, the Invesco Perpetual fund manager who was instrumental in leading a British Energy shareholders' revolt to force EDF into paying top dollar for the business last September, said Centrica's boss Sam Laidlaw has got himself a result.
"This transaction was a major step forward for Centrica," said Woodford. "Centrica has negotiated a good price for the deal package." Centrica shares rose 8p to 235½p.
While Centrica will share only a fifth of British Energy's earnings from its eight nuclear power stations around the UK, it has negotiated rights to take 25% of their output between 2011 and 2016 to supply British Gas's 5 million household electricity customers.
As importantly, said Laidlaw, the deal does not commit Centrica to EDF's expensive plans to build two new major nuclear power stations next to British Energy's existing plants at Sizewell in Suffolk and Hinkley Point in Somerset. On Centrica's spending plans, Laidlaw said: "We have the option to participate in nuclear new build if we believe the economics to be good. But we are investing in gas storage, and in upstream gas production. And we are encouraged in the recent incentives announced by the Government on offshore wind."
Centrica recently spent £250 million to take more than a fifth of North Sea gas company Venture Production and many think Laidlaw is prepared to spend another £1 billion to take control of the company.
