Powergen buys US firm

Electricity generator Powergen has become the latest UK utility to power into the US energy market.

It has agreed a £2bn ($3.2bn) takeover of Kentucky based electricity and gas company, LG&E.

The deal finally gives PowerGen a foothold in the US after several earlier attempts failed.

It held two sets of abortive merger talks with Houston Industries - since renamed Reliant Energy - in 1998.

America's energy business was deregulated later than in the UK, with firms such as ScottishPower and Powergen seeking to take advantage of the experience they have gained.

However, PowerGen shares fell 12p, or 2.8%, to 424p on the news, as the deal will drive up its debt load to £5bn.

Regulators remain tough

PowerGen has offered to pay $24.85 per share in cash for LG&E shares, a 58% premium over Friday's closing price of $15.75.

In afternoon trading on the New York Stock Exchange, LG&E Energy shares were up 39% or $6.125 a share, at $21.875.

Powergen hopes to assume operating control of the US firm within a year and then look to expand the operation to other states.

Ed Wallis, Powergen chairman said: "We feel we are in a good position to achieve strong organic growth and that the UK and America will be the areas in which we hope our customer base will grow rapidly."

Mr Wallis said the firm aimed to double its 2.6 million UK customer base in the next five years.

Powergen produced a pre-tax profit, not including exceptionals, of £580m for the 1999 calendar year compared with £523m in 1998.

It produced a 16% increase in turnover, up to £3.75bn against £3.24bn before.

PowerGen has been under assault from industry regulators and prices for electricity and gas have been squeezed by new competition in the energy supply market.