France's EDF to launch formal sale of EDF Energy in weeks

French power company EDF is set to launch the sale of its British distribution arm at the end of January, sources told Reuters.

France's EDF to launch formal sale of EDF Energy in weeks

French power company EDF is set to launch the sale of its British distribution arm at the end of January once new chief executive Henri Proglio completes a management team, sources close to the deal told Reuters.

The sale timeline for EDF Energy has slipped due to management changes at EDF and a ruling by the British regulator in December that revalued the multi-billion euro unit.

Before bids are accepted, Proglio, who left water group Veolia to take over EDF in November, hopes to lure Thomas Piquemal, Veolia's finance director, to become EDF's new finance chief.

"Proglio wants to bring in his team, especially Piquemal, so he can take a look at it (the sale) before he makes any big decisions," said a banker close to the deal. Piquemal advised Proglio in his capacity as an investment banker for Lazard.

"Piquemal has a strong reputation among investors and is very well regarded by the markets," said a Paris-based analyst, an opinion echoed by another source close to the situation.

"Piquemal comes with a strong background as a number cruncher and a good technician," said the source.

Several sources told Reuters a detailed information memo on the sale of EDF Energy was expected to go out at the end of January or at the latest, the beginning of February.

First round bids are likely due in late March or April.

EDF, the world's largest single generator of nuclear power, is hoping to get more than 4 billion euros ($6 billion) for its British electricity network to help cut its debts.

The network delivers electricity to more than 20 million Britons and generated earnings before interest and tax of 500 million euros on sales of 8.24 billion euros in 2008.

Difficult sale process

British regulator Ofgem ruled in December it would restrict post-tax returns on capital at the network and would review merger policy by mid-2010.

The news caused EDF rival Scottish & Southern Energy, which already owns two of Britain's 14 networks and had said it was considering an offer alongside Canada's Borealis, to say it would reconsider its bid plans.

Bankers close to the deal said it was too early to say who would bid and many investors were waiting to see what kinds of financing is available.

"This deal very much depends on the level of leveraging the UK authorities allow," the banker close to the deal said.

The second source who is close to the situation said that the process had been delayed by the Ofgem ruling and the difficulties in gauging the assets' debt.

High-voltage network operator National Grid and Hong Kong's Cheung Kong Infrastructure Holdings (CKI) have both said they are interested in the business, while people familiar with the matter have said Australia's Macquarie, the Canada Pension Plan (CPP), and the Abu Dhabi Investment Authority (ADIA) have formed a consortium and are also likely to bid.

Abu Dhabi recently turned down a bid by a French consortium of energy companies including Areva, EDF, GDF Suez and Total to build up to four new nuclear reactors.

The loss of that deal to a consortium led by South Korea Kepco has caused analysts to speculate that EDF's Proglio is more focused on raising French state-set electricity tariffs than landing projects abroad.

Proglio's policy on EDF Energy remains under review, the banker said.

EDF has said it wants to sell 5 billion euros of assets by the end of 2010. Group debt stood at 24.5 billion euros at the end of 2008, up from 16.3 billion a year earlier following the acquisition of British Energy.

Neither EDF nor Veolia would comment.

Reuters

Last Mod: 12 Ocak 2010, 00:54
Add Comment