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EDITIONS
Monday, 21 October, 2002, 13:57 GMT 14:57 UK
Powergen buys TXU's British arm
Power station
Germany's Eon could be poised to buy TXU's retail arm
TXU, the US energy group, has agreed to sell its UK arm to Powergen for 1.37bn ($2.9bn).


Today we become the UK's largest electricity supplier

Paul Golby, Powergen chief executive
The sale includes the former Eastern and Norweb regional supply companies - which have 5.5 million customers - and three coal-fired power stations.

Ipswich-based TXU's 1,900 staff will transfer to Powergen.

Paul Golby, Powergen UK's chief executive, said it was a transforming deal for the company.

"Today we become the UK's largest electricity supplier and number two in the highly competitive retail energy sector," he said.

Protection from price swings

Customers will not notice any immediate difference, and will continue to receive uninterrupted supplies of gas and electricity.

But in future their bills will come from Powergen.


Households have yet to benefit from declining wholesale prices

David Kurtz, Datamonitor

The company said that by becoming bigger it would be able to increase its efficiency and improve its services to customers.

It said the acquisition would also provide more of a balance between power generation and customer demand - and that would protect the company from fluctuations in wholesale energy prices.

Some analysts were less sure of the benefits for consumers.

Said David Kurtz of research group Datamonitor: "Households have yet to benefit from the declining wholesale prices - and with one less supplier, customers will have even less choice when it comes to choosing their gas and electricity provider."

European approval

Powergen is owned by the German energy group Eon, which is the world's biggest power company.

Before the deal can be finalised it must be approved by the European Commission.

But because of TXU's problems the Commission has agreed that the transaction can go ahead before the approval process is completed.

TXU's European businesses were left struggling after its parent company, in the United States, issued a profit warning and cut off $700m (448m) of funding.

The company hopes the proceeds from a sale will allow it to continue to operate its European supply and trading businesses without going into administration.

 WATCH/LISTEN
 ON THIS STORY
Walter Patterson, Royal Institute for Intl Affairs
"The industry has been burdened with an over-capacity of generation"
See also:

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