The proposed sale of Midlands Electricity’s distribution business to Scottish & Southern Energy Prepared by Utility Consultants Ltd www. utilityconsultants. co. nz © Utility Consultants Ltd 2003
Disclaimer
This research report is of a general nature, and is not intended as specific professional advice. Accordingly, neither Utility Consultants, nor its’ directors and shareholders, shall be liable for any loss or damage arising from action or inaction based on this research report.
Contents
Disclaimer History of the MEB Deal structure Contents Structure of Midlands Electricity Regulatory implications Introduction Interested bidders Feedback & Contact us
Introduction
Midlands Electricity serves 2. 4 m customers in Birmingham and the West Midlands Operates 60, 000 km of lines and cables, and has a regulatory asset value of about ₤ 981 m Annual revenue of about ₤ 310 m, and NOPAT of ₤ 115 m Acquired by Scottish & Southern Energy plc in May 2003 subject to bond-holder approval which did not eventuate
Proposed industry structure Color Company Market share LE Group (Ed. F) 28% Scottish & Southern Energy 21% Northern Electric 13% Scottish. Power 12% Powergen (E. On) 9% Western Power Distribution 9% United Utilities 8%
History of the MEB
Vested as Midlands Electricity plc Floated on the LSE 50% owned by Cinergy and 50% owned by GPU Acquired by Avon Energy Partners Supply business sold to National Power (since re-named Innogy and sold to RWE) March 1990 December 1990 June 1996 June 1999
GPU buys out Cinergy’s 50% stake July 1999 Midlands Electricity renamed GPU Power UK Utilicorp offer to buy out GPU’s interest in Avon Energy Partners GPU merges with First. Energy Corp in November 2001 Utilicorp changes name to Aquila in March 2002 March 2000 October 2000
Aquila buys 79. 9% stake in Avon Energy Partners from First. Energy and renames business Aquila Networks Scottish & Southern Energy acquire Aquila Sterling for ₤ 1, 112 m subject to bond-holder approval in early July May 2002 May 2003
Structure of Midlands Electricity
Aquila (79. 9%) First Energy (20. 1%) Aquila Sterling Avon Energy Partners Holdings Midlands Electricity plc Bonds (ring-fenced from any repatriation to the US)
₤ 360 m variable bonds due in 2006 Bonds US$250 m senior notes due in 2007 US$250 m senior notes due in 2008
Interested bidders
Scottish & Southern Energy plc YTL Corporation Initially interested bidders Macquarie Bank in association with United Utilities plc PPL (owners of Western Power) indicated no interest in increasing their UK investment E. On via Powergen
Obvious geographical fit with former Southern Electric business Scottish & Southern Energy plc Would incur the ₤ 32 m penalty for reducing inter company comparison
Geographical fit with Wessex Water business YTL Corporation Would avoid the ₤ 32 m penalty for reducing inter company comparison Would seem to ignore the difficulties of 2 other multi-utility ventures
Would have alleviated OFGEM concerns about operating expertise Macquarie Bank in association with United Utilities plc Good source of unregulated revenue for United Would avoid the ₤ 32 m penalty for reducing inter company comparison
Obvious geographical fit with former East Midlands business E. On via Powergen Would incur the ₤ 32 m penalty for reducing inter company comparison
Scottish & Southern Energy plc Short-listed bidders YTL Corporation Macquarie Bank in association with United Utilities plc
Deal structure
Scottish & Southern Energy to assume ₤ 502 m in debt Scottish & Southern Energy to pay ₤ 43 m cash to Aquila & First Energy Deal structured as follows… Scottish & Southern Energy to pay ₤ 567 m to AEPH bond-holders Represents about 86% of the face value of the bonds that were recently trading at 78% to 80% Aquila has an obligation to pay First Energy US$95 m
Regulatory implications
Assessment under The Fair Trading Act 1973 for reduction of competition Key regulatory issues Penalty of ₤ 32 m over 5 years to compensate for reduced inter company comparison
The eventual sale to E. On (Powergen)
Scottish & Southern Energy were unable to obtain bond-holder approval, hence the acquisition bid failed Aquila Sterling was eventually sold to E. On via the UK subsidiary Powergen A description of this bid can be downloaded by picking here
Feedback
Hi … I’m Phil Caffyn from Utility Consultants. I’d really like your feedback on this report, so please pick one of the buttons below to email me… Excellent Very good Good Average Poor
Contact us
Phone us on +64 -7 -8546541 Pick here to email a question Pick here to receive our free industry newsletter Pipes & Wires Pick here to visit our website (and see our other research reports)
Скачать презентацию The proposed sale of Midlands Electricity s distribution business
f106e1c4c4d103697460f1f436fa646b.ppt