PowerGen eyes pounds 3.5bn strike for Cinergy of the US
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.PowerGen is contemplating a pounds 3.5bn strike for the American electricity utility Cinergy in a deal which would give it a 50 per cent stake in Midlands Electricity, the UK regional power company. Michael Harrison reports.
Ed Wallis, PowerGen's chairman, is understood to be ready to make his move as soon as the Government gives the power generators the green light to expand into electricity distribution and supply.
The Department of Trade and Industry is expected to indicate whether it will sanction further vertical integration in the sector when it gives its ruling on PacifiCorp's pounds 3.7bn bid for Energy group, owner of Eastern Electricity, early in the New Year.
PowerGen is understood to have examined buying out one of the 50 per cent stakes held in Midlands by Cinergy and GPU, who joined together as Avon Energy Partners to acquire Midlands for pounds 1.73bn in May last year.
The US takeover followed the previous government's decision to block a bid for Midlands by PowerGen and National Power's agreed takeover of Southern Electric.
Now, PowerGen is believed to have concluded that its strategy would be best served by acquiring one of the two US parent companies. This would give it exposure to both the American power market and the UK electricity supply industry as the domestic market is opened to full competition from next April.
PowerGen has examined the takeover of several US utilities but there are complications with a number of them since they own nuclear generating capacity which it is not interested in.
Cinergy, however, is a pure fossil-fuel generator. It owns an operates 11,000 megawatts of coal and gas fired generating plant in the mid-West. Headquartered in Cincinnati, it serves 1.3 million electricity customers and 434,000 gas consumers in Ohio, Indiana and Kentucky and has a market capitalisation of $5.4bn. It has 8,000 employees and made a net income of $340m on revenues of $3.2bn last year.
Cinergy is one of seven or eight US utilities examined by PowerGen and although a final decision has not yet been taken, it is thought to be the group's favoured takeover target.
Mr Wallis refused to comment on PowerGen's intentions but it is well known that he would like to acquire an interest in a UK regional electricity company.
PowerGen executives vehemently deny suggestions, however, that it has offered the Government a deal to stop coal closures in return for the green light to own a Rec. The Prime Minister Tony Blair announced on Tuesday that the three main generators had agreed a deal with RJB Mining to avert the threat of pit closures and redundancies for the next six months.
The deal has yet to be thrashed out in detail but is likely to involve the three generators taking an extra 7-8 million tonnes of coal on top of contracts so far signed, either to burn or stockpile. So far National Power and Eastern have agreed to take 12 million tonnes from RJB next financial year while PowerGen has contracted to buy 4.5 million tonnes from other UK coal producers.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments