Morning:
14°c
EDF is to power up its coffers to build Britain's next generation of nuclear reactors by selling its distribution arm delivering electricity around London, the South-East and East Anglia for as much as £4 billion.
The sale has been forced upon its Electricité de France parent because of a cash crunch directly linked to its takeover of the UK nuclear industry. Last year the French government-controlled power giant paid £12.5 billion for British Energy whose reactors provide about one-sixth of the UK's electricity.
However, with commitments to spend another £20 billion building new power stations in Suffolk and Somerset, EDF was forced to sell 20% of the business at a discount to British Gas group Centrica for £2.3 billion. There has been continuing speculation that EDF might have to sell another 20% of British Energy because of EDF's total group debts of £20 billion.
But today EDF said it will free up cash by selling the business which operates and maintains the wires of 8 million homes — built up during EDF's 1998-2002 spending spree when it bought the distribution businesses of the old London Electricity, Seeboard and Eastern Electricity companies.
Scottish and Southern Energy — the operator of the Southern Electric power distribution network delivering electricity to 2.8 million — was immediately installed as favourite to buy the EDF business — if it can afford it.
A raft of infrastructure funds awash with Middle Eastern, Far Eastern and North American money are also reckoned to be in the frame.
Distribution companies are the archetypal regulated utility. Heavy on capital expenditure because of the need to upgrade and maintain the ageing networks, lucrative profits streams are in effect guaranteed by Ofgem so long as the operator keeps a lid on operating and interest costs.
EDF's UK chief Vincent de Rivaz was said to have been against the sale but has been overruled by his Paris bosses who said the sale will be in the first half of next year and go some way to hitting a target of €5 billion (£4.6 billion) group debt reduction within the year.
