German energy major RWE makes £11-billion power play for British Energy

11 April 2008

British Energy finds itself receiving attention from several suitors to take over of the UK's only private nuclear power producer. Reports indicate that Germany's RWE and Britain's Centrica have both made indicative bids for British Energy valuing the nuclear power operator at up to £11 billion ($22 billion), with the former extending an all-cash offer today at almost £7 per share.

Rival Centrica, owner of British Gas, is mulling an all-share deal, also valuing the energy major at just below 700 pence a share, which sources indicate, could well rise to 760 pence per share, or a total valuation in excess of £12 billion pounds.

Equally interested are German power utility EON and its Spanish counterpart Iberdrola who have also expressed an interest in acquiring British Energy, and are considering bids at the moment, while Electricite de France (EDF) is said to be another potential candidate. Analysts feel that the other contenders have been put under pressure by RWE's move and may soon come up with competing offers of their own. Joint bids may also be in the offing.

RWE, Europe's third-biggest utility and the second-largest German energy group, had submitted the proposal before 17 March, when British Energy said it was in talks that could lead to a takeover or partnerships, and is now in the process of carrying out due diligence of the company records. RWE also owns British energy supplier nPower.

The UK government, which owns 35 per cent of British Energy, finds its own stake valued at £4 billion. If the deal goes through, the sum would be paid to the British government in the form of a contribution to a fund to finance the clean up of old nuclear reactor sites.

Why is British Energy so coveted?
The reason behind the enthusiastic interest to British Energy is not hard to find. Even though it has seen profits declining and been forced to shut down four reactors by end-2007 due to safety concerns, its existing assets would provide a fillip to any company looking for a formidable presence in the UK's changing energy scenario.