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Monday, November 30, 1998 Published at 10:11 GMT

Business: The Company File

London Electricity goes to France

France's EDF extends its connections to the UK market

Electricite de France (EDF) has won the battle to buy London Electricity from US owner Entergy for a total price tag of £1.9bn ($3.14bn).

The figure includes £1.39bn ($2.3bn) in cash however, the deal also sees EDF taking over £500m in debts bringing the overall price to £1.9bn.

However, tax benefits flowing to Entergy will see its final proceeds approach £2bn.

EDF beat the main rival bidder British Energy after a long-running auction process over the last six months.

Under the terms of the deal, EDF will acquire all London Electricity capital and assume all debts, the New Orleans-based Entergy said.

[ image: Attracts £1.9bn price tag]
Attracts £1.9bn price tag
Entergy bought London Electricity in late 1996 for £1.3bn ($2.1bn) but decided to sell the company after it proved a drag on overall earnings and had raised debt.

"We are happy that a company as successful as EDF, with a long list of successes, buys London Electricity," said Entergy chairman Robert Luft.

London Electricity has more than 2m customers in the London area, was privatised in 1990 and has since diversified into gas distribution.

French move into Europe

The state-owned French electricity company is determined to move into Europe ahead of the partial deregulation of the European electricity market next year.

EU governments have agreed to open up 25% of the electricity market to competition in 1999, rising to 33% in 2007.

Francois Roussely, EdF's chairman, said,
"Our presence in Europe, at the moment of deregulation, needs to be better woven together with a complementarity between production and distribution."

Electricite de France is one of the world's largest energy utilities with revenues of £20.3bn ($33.5bn).

The utility has 30 million customers, and already supplies 5% of the UK's electricity via the cross-Channel inter-connector, which it says is cheaper than that currently purchased by London Electricity.

British Energy undeterred

Losing bidder British Energy says its strategy of looking for distribution assets to complement its production business has not changed.

"We see real advantages in vertical integration within the UK electricity market, and we have a very clear view on what that is worth to British Energy," chief executive Peter Hollins said.

British Energy, which runs most of Britain's nuclear power stations, is one of the three major electricity generators in the UK.

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