February 11, 2011 1:24 am

Suitors approach Eon over UK network

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Eon, Germany’s largest utility, is considering three fresh approaches for its UK electricity networks business in a sale that could fetch as much as $6bn, according to people familiar with the situation.

MidAmerican Energy Holdings, owned by Warren Buffett’s Berkshire Hathaway, has emerged as a suitor alongside PPL of the US and Cheung Kong Infrastructure, the investment vehicle of Hong Kong billionaire Li Ka-shing.

Eon is considering the new approaches after talks late last year to sell the business, the UK’s second-biggest electricity network that provides power to more than 5m customers in the Midlands, to a group of buyers led by Canada Pension Plan, stalled over price.

CKI, which has hired Deutsche Bank to advise it, first approached Eon late last year. The company last summer paid £5.8bn ($9.3bn) for the UK power transmission network of EDF and is seen to be keen to expand its portfolio of regulated assets in developed countries.

PPL, which is based in Pennsylvania, has also been on the acquisition trail, and last year bought Eon’s Louisville Gas & Electric and Kentucky Utilities units in America. The company already operates in the UK through Western Power Distribution, which owns the electricity lines in Wales and south-west England.

MidAmerican, meanwhile, owns CE Electric UK, which operates Northern Electric Distribution and Yorkshire Electric Distribution.

Eon, which is being advised by JPMorgan Chase and Barclays, declined to comment on Thursday night. Any purchase by one of the three suitors is likely to be looked at by competition authorities in the UK.

The sale of the electricity business is part of Eon’s plan to raise €15bn ($20.4bn) by the end of 2013 from asset sales as it seeks to cut debt and expand in growth regions outside Europe, such as Latin America. The company told investors last November that it expected its businesses outside Europe to deliver one-quarter of its total earnings by 2015.

Johannes Teyssen, Eon chief executive, said at the time that asset sales would complement divestitures of about €13bn concluded during the past three years. At least 50 per cent of the proceeds will be used to pay down debt. At the end of the third quarter, Eon’s economic debt – including provisions on the decommissioning of old power plants – stood at €44.9bn.

“Our objective is to sharpen Eon’s profile as an international energy specialist and to increase our earnings strength by placing it on a broader, more international foundation,” said Mr Teyssen at the time.

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