Page last updated at 15:24 GMT, Wednesday, 24 September 2008 16:24 UK

EDF agrees to buy British Energy

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Pierre Gadonneix says he is 'delighted' at the deal

French energy firm EDF has unveiled plans to build four new nuclear reactors in the UK after it agreed to buy British Energy in a 12.5bn deal.

Subject to shareholder and regulatory approval, EDF - 85% owned by the French government - will take over British Energy's eight UK nuclear power plants.

In addition, British Gas owner Centrica said it was in talks to take 25% of the power generated by the enlarged group.

British Energy power plants generate about one sixth of UK energy supply.

But its reactors are old and many are due to be shut within 15 years.

Secure energy supply

The management of both firms said the tie-up was a "good fit" with little overlap.

Pierre Gadonneix, EDF chairman and chief executive, said the purchase of British Energy and investment in Britain's nuclear future would help EDF to stick to its commitment of reducing carbon emissions by 2020.

He said: "This investment will help to secure less volatile energy prices for our customers for the long term."

BRITISH ENERGY'S NUCLEAR PLANTS
Torness
Hartlepool
Sizewell B
Dungeness B
Hinkley Point B
Heysham 1
Heysham 2
Hunterston B

British Energy chairman Sir Adrian Montague said the deal was "good for shareholders, good for staff, good for the nuclear industry and good for the country".

In an interview with the BBC, he played down concerns about the extent to which the UK's energy provision would fall into foreign hands should the tie-up be successful.

"This country has had a history of being very open to foreign capital. All the investors in the energy industry have sustained jobs and investment in the UK," he said.

"I think it's more important to look at the strength of the supply we enjoy in the UK rather than who owns it."

Terms of the deal

EDF's all-cash bid values British Energy at 774p a share, 9p more than a previous bid which was rejected.

It has also proposed an alternative offer of 700p a share plus "one nuclear power note".

The note changes in value with wholesale energy prices and power output levels from British Energy's existing nuclear stations.

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The French utility, which already supplies gas and electricity to more than five million customers in the UK, said it was committed to maintaining British Energy's headquarters in East Kilbride in Lanarkshire.

It said that British Energy's 6,000-strong workforce staff would benefit from the takeover.

Unions welcomed the announcement and the prospect of new jobs being created.

Prospect national secretary Anne Douglas said: "We know EDF and have worked with them constructively elsewhere in the UK.

"What we have to ensure now is that they understand that it is the staff that bring value to the company, more than any of the sites or grid connection points."

Major coup

British Energy said that its largest shareholder - Invesco - which had played an instrumental part in scuppering a deal at the beginning of August, had agreed to accept the sweetened offer.

The deal still needs to be approved formally by British Energy's shareholders and the relevant competition authorities, but the government, which owns a 36% stake in the firm, gave its support.

It signals a major step forward for its plans to revive the nuclear industry and reduce the UK's dependence on oil and coal for its energy needs.

About 25 years ago, the supply of energy was organised along state lines, but now the industry is dominated by firms that operate across borders
Nuclear energy expert Malcolm Grimston

Prime Minister Gordon Brown said: "This deal is good value for the taxpayer and a significant step towards the construction of a new generation of nuclear stations to power the country."

EDF already has in place plans to build four nuclear reactors at Hinkley Point in Somerset and Sizewell in Suffolk. The first is due to begin operating by the end of 2017.

In addition, once the deal is completed, EDF has agreed to the government's request that it sells land to other nuclear operators to foster a competitive industry.

Separately, the Nuclear Decommissioning Authority is also looking for buyers for its sites at Wylfa on the island of Anglesey, Oldbury in Gloucestershire and Bradwell in Essex.

Cross-border

The deal is set to be controversial, BBC business editor Robert Peston says, because it will be seen by some as handing the UK's nuclear future to a company owned by the French state.

HAVE YOUR SAY
Nuclear was always the future - as long as EDF does indeed spend the money needed it should be welcomed.
Philip Charles Le Roux, Aldershot

But nuclear energy expert Malcolm Grimston told the BBC that it would be "a mistake" to see it as a French takeover.

"About 25 years ago, the supply of energy was organised along state lines, but now the industry is dominated by firms that operate across borders," he said.

Even so, Centrica's investment, which will cost it about 3bn, may placate some critics.

The deal with EDF is seen by Centrica as vital to reducing its dependence on imported gas.

EDF was set to buy British Energy in July this year, but the deal was called off on the eve of the announcement when shareholders protested that it was being sold too cheaply.

Pie chart of UK electricity companies




SEE ALSO
EDF completes UK nuclear line-up
24 Sep 08 |  Business
British Energy sees profits fall
13 Aug 08 |  Business
Centrica weighs up nuclear move
04 Aug 08 |  Business
UK nuclear energy deal collapses
01 Aug 08 |  Business
Q&A: Future of British Energy
01 Aug 08 |  Business
New nuclear stations planned
11 Jul 08 |  England

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