PowerGen buys East Midlands in growth drive

PowerGen has taken another bold step towards dominating the newly deregulated British power market, with a GBP1.9 billion (about HK$24.47 billion) agreed offer for Britain's third-largest regional electricity firm, East Midlands Electricity.

The purchase, from United States group Dominion Resources, will give PowerGen access to East Midlands' estimated 2.3 million customers, spanning an area of about 16,000 square kilometres.

'It will position PowerGen as a leading UK integrated electricity and gas company and provide a platform to become a national domestic supply business,' the company said.

PowerGen has long sought exposure in the electricity retailing end of the British market, and an earlier offer to buy Midlands Electricity, which is jointly owned by US groups GPU and Cinergy, was blocked by the previous British Government, on fears PowerGen might unfairly dominate the market.

Yesterday, the company said competition concerns could be allayed this time through plant disposals, which it believed should prove sufficient for the government not to refer its offer to the Monopolies and Mergers Commission.

'This transaction represents a significant step forward for PowerGen providing it with distribution expertise and a broader customer base,' PowerGen chairman Ed Wallis said.

'Structurally, the move creates a stronger growth platform in the converging electricity and gas markets.' PowerGen said it was paying GBP851 million in cash, and would also take on GBP1.04 billion of debt.