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Last updated: July 23, 2008 6:28 pm
Centrica has fulfilled a long-standing vow to take control of Belgian power company SPE, frustrating Gaz de France’s plans to sell its stake to EDF.
The British-based utility exercised a pre-emption right over GDF’s 25.5 per cent stake in SPE for €515m (£407m) in cash, with another €105m to be paid later, taking its holding in SPE to 51 per cent.
In 2005, Centrica and GDF formed a joint venture to acquire 51 per cent of SPE, Belgium’s second largest power generator. That valued the whole of SPE at €969m. The 49 per cent of SPE not held by the joint venture is controlled by Belgian banks and municipalities. GDF was required to dispose of its stake in SPE as a condition for European Commission approval of its merger with Suez.
In late June it said it would sell its shares to compatriot EDF, but Centrica said as far back as September last year that it intended to exercise its pre-emption rights over the SPE stake.
The group, owner of British Gas, has been trying to expand in continental Europe for some time in an effort to diversify away from the UK market, where its market share is in decline.
Sam Laidlaw, Centrica’s chief executive, said the deal was “a logical next step” for his group in Belgium, which “has one of the most dynamic energy markets in Europe”.
Analysts said the price paid by Centrica seemed reasonable. One said it was a good idea for the company to lessen its reliance on its UK energy supply business, which is struggling in an environment of high commodity prices.
The soaring oil price has pushed up wholesale gas prices, increasing the cost at which Centrica supplies its customers. The group is expected to raise its energy bills in the future in order to restore profit margins.
Shares in Centrica shares rose 6¾p to close at 310p.
European View by Paul Betts
EDF’s summertime blues
It is turning out to be a pretty disappointing summer for EDF and Pierre Gadonneix, its chairman. A few weeks ago, he and 700 of his staff had to move out of the French electricity behemoth’s headquarters in central Paris. The building had been undergoing some heavy reconstruction that seems to have seriously damaged its structure. So Mr Gadonneix has had to exile himself to EDF’s offices in the modern business ghetto of La Défense.
If this were not bad enough, the EDF chairman has also continued to face a string of setbacks in his efforts to expand his European activities. on Wednesday, Centrica, the owner of British Gas, exercised its option to buy a large stake in Belgian electricity supplier, SPE, which EDF hoped to acquire. A month earlier, EDF thought it was in a strong position to buy a 57.5 per cent stake in the Belgian gas distributor Distrigas. Instead, its French rival Suez decided to dispose of this stake through a €2.7bn asset swap with Italy’s ENI.
For months there has been intense speculation that EDF was looking to make a big move in Spain. But the very mention of the French state-controlled group seems to bring Spain’s biggest utilities out in spots.
A small consolation has been a recent deal by EDF’s German affiliate to acquire a strategic stake in another German utility. It would be even better if EDF could finally pull off its acquisition of British Energy, but the odds are not looking too good.
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