French energy giant Electricitie de France (EdF) may take a stake in Centrica’s wind farms and other assets as part of a deal to bring the UK into its planned £11bn-plus takeover of nuclear generator British Energy (BE).
Centrica, the UK’s biggest wind farm investor and owner of British Gas, is desperate for a slice of the BE takeover but wants to avoid spending £3bn in cash that would give it a seat at the table.
Advisers to EdF, BE and Centrica were working this weekend in a race to conclude a deal that could be announced this week – before Parliament rises for the summer and France “closes” for its traditional August break. “If it’s not done now, this will slip to September,” said one source involved in the talks.
An EdF takeover of BE would give the French company control of eight nuclear power stations and, importantly, a key role in the UK Government’s plans to build a new generation of reactors.
Centrica wants to be able to tap new-nuclear’s generating capacity, because the company is currently dependent on gas, the price of which is soaring. All Centrica’s power stations are gas fired.
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The UK company is understood to be negotiating for a stake of 20pc-25pc in the takeover vehicle EdF will use to buy BE. While Centrica has low debt and could easily raise money for the deal, it is trying to involve EdF in investing in its winds farms and gas storage projects.
Centrica has plans for a £3bn expansion of its alternative energy projects, specifically wind farms. It is already building the world’s largest offshore wind farm at an initial cost of £300m and has another £600m project in the pipeline. But these costs are spiralling out of control. Jake Ulrich, the departing managing director of Centrica Energy, warned in March that the projects risk running hundreds of millions of pounds over budget.
A source said this weekend: “Centrica needs partners on other projects, and I see no reason why EdF shouldn’t get involved in these. The bulk of Centrica’s contribution to the BE deal will be cash but EdF is certainly interested in its wind portfolio, along with other assets.”
Centrica has three UK windfarms in operation, two under construction and three projects in the pipeline.
The UK Government, which owns 35.8pc, would like to see EdF back Centrica’s wind farms. Ministers have laid down targets for energy companies to build 33 gigawatts of offshore wind by 2020. Three years ago, the industry estimated meeting this figure would mean investment of about £40bn. Today, the figure is £80bn. Having Centrica team up with EdF also avoids criticism that the Government is selling Britain’s nuclear future to the French.
By Russell Hotten
28 July 2008
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