EDF Group (“EDF”) and Centrica plc (“Centrica”)
Centrica will acquire a 20 per cent. interest in British Energy, the operator of eight existing nuclear power stations of which EDF acquired control in January 2009. EDF and Centrica will also form an 80/20 joint venture to pursue a planned programme to build four new nuclear power stations in the UK. Finally, the EDF Group will acquire Centrica’s 51 per cent. stake in Belgian generation and supply business SPE.
The key terms of the transaction are:
• Centrica will invest £2.3 billion (€2.5 billion) for a 20 per cent. stake in Lake Acquisitions, the vehicle through which EDF acquired British Energy. This investment represents a 6 per cent. discount as compared to the price of EDF’s offer for British Energy, consistent with Centrica’s position as a 20 per cent. partner
• Centrica will also assume 20 per cent. of the liability for contingent guarantees given by EDF in respect of the Contingent Value Rights (CVRs) issued by Lake Acquisitions as part of its acquisition consideration for British Energy
• EDF will operate British Energy, with Centrica having board representation and other appropriate governance rights
• EDF and Centrica will offtake the available power from the British Energy fleet on an 80/20 basis
• EDF will provide Centrica with an additional 18TWh of power at market prices over five years from 2011
• EDF and Centrica will form a separate 80/20 joint venture through which they will undertake the pre-development activities for a planned nuclear new build programme
• EDF and Centrica intend the new nuclear joint venture to construct, operate and decommission four European Pressurised Reactors (EPRs)
• EDF will acquire Centrica’s 51 per cent. stake in SPE for €1.3 billion (£1.2 billion)
• Centrica’s investment in British Energy and the acquisition of SPE by the EDF Group are inter-conditional and will be subject to relevant regulatory approvals in the UK and in Europe, and to approval by Centrica’s shareholders (for which an extraordinary general meeting is planned for June)
• With an effective asset swap of 20 per cent. of British Energy for 51 per cent. of SPE, the net cash consideration to be paid by Centrica to EDF for the transactions will be approximately £1.1 billion (€1.2 billion)
• Completion is expected to take place towards the end of the third quarter of 2009
Pierre Gadonneix, Chairman and Chief Executive of EDF, said:
“This transaction, part of the group's strategy of developing its positions in Europe, will enable leading British generator, Centrica, alongside EDF, to take part in the re-launch of nuclear energy in the United Kingdom through an industrial partnership in a form already pioneered by EDF in China and the US. ”
Roger Carr, Chairman of Centrica, said:
“We are delighted to have successfully concluded an agreement with EDF as a world leader in nuclear power. The deal represents good value for Centrica shareholders, improves the strategic balance of our business and further underpins our green energy credentials. The attractive price secured for the sale of SPE will help preserve our balance sheet firepower as we focus the group on growth opportunities in the UK and North America.”Strategic Rationale
Centrica will have the right to take up to a 20 per cent. interest in the NNB joint venture. Centrica will be responsible for its pro rata share of costs after it elects to participate in an NNB project and, once the NNB Project is operational, will be entitled to its pro rata share of power offtake.Sale of interest in SPE and continental European presence
Centrica believes that the price agreed with EDF for the sale of SPE in Belgium is an attractive valuation in the European marketplace. SPE comprises the majority of Centrica’s continental European assets and the remaining businesses are under strategic review. Centrica will continue to retain a presence in continental Europe, particularly given that the infrastructure for delivery of gas remains important to Centrica’s UK business and the benefits that come from maintaining knowledge of gas flows across Europe.
Financial Effects of the Transactions
Centrica will acquire a 20 per cent. interest in Lake Acquisitions in return for a cash payment of £2,289 million, representing a 6% discount to the price per share EDF paid to acquire British Energy. Centrica will receive consideration of €1,325 million (equivalent to approximately £1,180 million) for the SPE disposal.
Centrica will fund the net cash element of the consideration from existing cash resources, including the £2.2 billion rights issue proceeds raised in December 2008. Following the transactions, Centrica will maintain a strong balance sheet with the residual rights issue proceeds available for further value enhancing investment opportunities.
The financial impact on Centrica will depend on a number of variables, including power prices and the output from British Energy’s nuclear power stations. Based on current forward power prices, and Centrica’s estimates of output, synergies and other variables, Centrica estimates that:
The transactions are conditional upon Centrica shareholder approval which is to be sought at a general meeting in June. A circular will be available to shareholders and a Notice of General Meeting will be sent to shareholders in due course.
The transactions are also conditional upon regulatory approval which is expected to be received during the third quarter of 2009.
Closing of the sale of SPE is conditional upon closing of the UK transactions and vice versa.
Advisers
Goldman Sachs International and Linklaters LLP are advising Centrica on the acquisition of the interest in British Energy and the sale of Centrica’s interest in SPE. Allen & Overy are also advising Centrica on the sale of Centrica’s interest in SPE. Credit Suisse are also advising Centrica on the acquisition of the interest in British Energy.
Merrill Lynch acted as financial adviser to EDF. Herbert Smith LLP acted as legal adviser to EDF in relation to the British Energy transaction and Sullivan & Cromwell LLP acted as legal adviser to EDF in relation to the SPE transaction.Centrica Contacts
Centrica Investor Relations - 01753 494900
Centrica Media Relations - 0845 072 8001
Goldman Sachs Contacts - 020 7774 1000
Julian Metherell
Mark Sorrell
Phil Raper (Corporate Broking)
More information on Centrica and nuclear power
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Note To Editors
Centrica is the largest energy supplier to Britain's domestic market and at the end of 2008 had approximately 15.6 million gas and electricity customers, representing approximately 43 per cent. of Britain's domestic gas supply making it the largest gas supplier and approximately 22 per cent. of Britain's domestic electricity .. Centrica also supplies energy to over 1 million commercial supply points in Britain and provides additional services including boiler cover.
total, in the year ended 31 December 2008, Centrica delivered approximately 24 TWh of electricity and 5.3 billion therms of gas to its domestic customers and approximately 19 TWh of electricity and 1.6 billion therms of gas to its business customers in Britain.
These statements do not constitute a profit forecast and should not be interpreted to mean that the earnings per share in any financial period will necessarily match or be greater than those for the relevant preceding period. Appendix
Website: http://www.britishgas.co.uk
