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Last Updated: Tuesday, 21 October, 2003, 12:02 GMT 13:02 UK
Powergen doubles its size
Power station
The deal will transform Powergen into the UK's number two power firm
Energy group Powergen has agreed to buy power distributor Midlands Electricity for 1.15bn ($2.5bn).

The firm, owned by German energy group Eon, is buying Midlands Electricity from Aquila and First Energy of the US.

The move will double the size of the UK network operated by Powergen, which already runs East Midlands Electricity (EME).

It also sees the Coventry-based firm leapfrog to second place in the UK market, from the number five slot, in terms of customer numbers.

But Powergen said the deal was likely to result in job losses as it plans to combine EME and Midland's distribution operations.

Midlands employs 3,500 staff and Derbyshire-based EME around 1,500.

Powergen added it was too early to say where the cuts would come from, but added both firms would be affected.

'Long-held ambition'

Spokesman Jonathan Swift said: "We have not yet decided what we need and where we need it."

Chief executive Paul Golby said the deal would allow it to fulfil a "long-held ambition" to acquire Midlands.

"It is the last big piece in the jigsaw which Powergen has constructed to transform itself from a pure electricity generator into an integrated power company and major player in the UK energy market," he said.

The firm first tried to buy Midlands in 1996 but the government blocked the deal on the basis that it would be bad for competition. Ministers have since lifted the ban.

Powergen added that the combination of Midlands, which has 2.4 million customers, with EME, which also has 2.4 million customers, will unite two neighbouring networks "with complementary capabilities and significant scope to realise operating efficiencies".

The deal, which is expected to be completed early next year, is conditional upon successful completion of a bond offer, European Union approval and Kansas State Commission consent.

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