麻豆社

Centrica to go nuclear?

• Robert Peston
• 12 May 08, 09:00 AM

Whisper it ever so softly, but it's just possible that a business of strategic value to the UK won't be sold to an overseas buyer.

I'm referring to the auction of British Energy, the power company that is our nuclear past, present and future.

Right now, there is only one serious bidder, of France, largely because the government - which through a complicated arrangement owns 35% of British Energy - was insisting that any buyer should pay cash alone.

Only EDF appears to have the appetite and resources for a pure cash bid of 拢10bn-ish for the whole of British Energy.

Or to put it another way, as auctions go this one has so far been on the lame side.

As for , it's been widely reported that if the owner of British Gas were to enter the fray, it could only do so as the junior partner in a takeover led by the likes of EDF (or of Germany).

Centica simply doesn't have the borrowing capacity for a pure cash takeover.

But I am hearing that Centrica is exploring whether it could do a deal with British Energy on its own.

How so?

Well the penny seems to have dropped at the Treasury that it will get more for the British Energy stake if there is a proper bidding contest.

Which means that it may well entertain offers consisting of shares and cash. And that would let Centrica into the game as a bidder in its own right.

And since, for now at least, the government's veiled threats of a windfall tax on power companies have abated, Centrica's share price may recover enough to turn its shares into valuable currency.

The advantages for Centrica of buying British Energy are written in almost every line of which it published this morning.

That's largely about how its profit margins on supplying 15.9m customers with power are being squeezed in this era of rising energy prices.

The reason is that it owns gas resources equivalent to only around 28% of its needs and it can never raise retail prices quickly enough to match the increments in wholesale prices.

By the way, the short term significance for most of us of Centrica's statement this morning is that what we as consumers pay for power is set to rise again.

That's inevitable given that the forward price of wholesale gas for the fourth quarter of this year is 80 pence per therm, compared with 44 pence in the same period of last year.

If Centrica owned British Energy, it would have a stable source of power that would help to protect its margins when wholesale prices are volatile.

And there would be a second benefit, which is that when negotiating with the lucky owners of gas, such as the Norwegians and the Russians, Centrica would no longer be such a needy buyer with no ability to strike a hard bargain.

So there is a strong commercial case for Centrica and the Treasury to create the conditions in which it could make a proper offer for British Energy.

But the slight frustration for British Energy's board and its shareholders is that the process for selling the company would take a lot longer than they originally hoped.

I would imagine the Takeover Panel may want British Energy to make clear to the market fairly promptly that uncertainties about its future ownership will continue for some considerable time.

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