EDF could raise British Energy bid

Published: Friday June 13th, 2008.

EDF, France’s electricity monopoly, could be prepared to nudge up its £11bn (€14bn) bid for British Energy, but only if the board of the UK nuclear group moves quickly to recommend the offer.

The French nuclear power operator has signalled that it intends to walk away from the process if a deal cannot be reached by the end of the month. “Either it happens quickly or there will be no deal,� said a source familiar with the situation.

EDF tabled a bid of just over 680p a share in May and could go above 700p if it was confident the offer would be approved by British Energy’s board.

However, the French company has been unsettled by the UK group’s announcement this week that it considered the offers it had received as too low, given they were less than the prevailing share price of 735p.

EDF has taken the view this is too high, given the investment and operational risks involved in renovating British Energy’s fleet of nuclear power stations.

The French group’s ultimatum comes as both sides play a game of brinkmanship that could have consequences for the rapid relaunch of nuclear power in Britain. British Energy, as operator of most of the UK’s working nuclear power stations and owner of the most attractive sites for new reactors, will be the starting point for any UK nuclear revival.

If EDF walks away it is unclear whether another bidder will emerge.

Until now EDF, which operates France’s 58 nuclear reactors, appeared the favourite to buy the UK government’s 35 per cent stake and launch a full bid.

But the auction process has sparked controversy in the UK, particularly as EDF appeared the only serious contender. Iberdrola on Thursday publicly ruled itself out of the race, while EDF’s French rival Suez did the same last month. Germany’s RWE remains as the only other possible bidder, though it has not decided whether to make an offer.

EDF also has nuclear ambitions in the US, where opportunities with its local partner, Constellation Energy, are opening up more quickly than anticipated. At a cost of up to €3bn-€4bn per reactor, this will take considerable financing, according to industry insiders, and could constrain EDF’s flexibility on the British Energy offer.

Nonetheless, the group is keen to expand in the UK, seen as one of Europe’s most promising nuclear markets. The acquisition of British Energy would give it a leading market position and help to secure electricity supplies at a time of volatile energy prices for its UK subsidiary. EDF Energy is already one of the UK’s biggest utilities, supplying 7.9m customers and incorporating the old London Electricity, SWEB and SEEboard regional groups.

Sourced by Frank Boampong