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Tuesday, August 4, 1998 Published at 07:48 GMT 08:48 UK


Business: The Company File

London Electricity sale sparks interest

Entergy is the second US power firm to pull out from the US

London Electricity is up for sale as part of a major restructuring by US power firm Entergy.

New Orleans-based Entergy bought London's power supply and distribution firm in December 1996 for 1.3bn ($2.1bn).


Barry Abramson, Utilities Analyst at Paine Webber: 'Entergy needs cash to pay down debt'
It hopes the reorganisation will help to cut debt and boost earnings.

Entergy has estimated the sale of London Electricity, plus its Australian power interests and other companies will raise about $4bn (2.4bn).


[ image: Several power firms are likely to be interested in buying London Electric]
Several power firms are likely to be interested in buying London Electric
Entergy, which also cut its annual dividend, has been one of the US industry's poorest-performing stocks in recent months after disappointing earnings.

In June, another US utility, Dominion Resources sold East Midlands Electricity to Britain's PowerGen for 1.9bn.

Speculation over buyers

Some analysts doubt whether Entergy will be able to realise the full asking price for the utility. They estimate that London Electricity could be worth up to 2bn ($3.2bn).

A number of European, UK and US utilities are likely to show an interest.

The sale will take place by auction, and details will be sent out towards the end of August.

Analysts said there were no obvious front-runners, but Amercia's PacifiCorp of the US might be interested after losing out to Texas Utilities in a bitter takeover battle for Britain's Energy Group earlier this year.

Other possible buyers include German and Spanish power firms, or there might be buyers closer to home such as Thames Water or PowerGen.

However some foreign firms may not want to risk buying London Electricity so close to a major review of power distribution prices in the year 2000.

Americans pull out

Entergy's move makes it the second US power firm to pull out from the UK after a string of American utility companies bought into Britain's newly privatised electricity industry in the mid-1990s.

They were attracted by strong balance sheets, cash flow and potential for cost savings.

But a more hostile regulatory climate, a windfall tax from Britain's Labour Government and deregulation of the domestic market have created greater uncertainty for US players.

Dominion Resources' deal with PowerGen in June marked the first move out of the UK and at the time analysts predicted other US firms were likely to follow.





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