French power giant EDF walked away from a £12 billion deal to buy British Energy early on Friday in a dramatic U-turn that could delay Britain’s plans to relaunch its nuclear program.
The surprise announcement came hours before a Paris news conference ostensibly timed to coincide with EDF’s half-yearly results, but which was widely expected to kickstart the state-controlled company’s biggest foreign expansion. “After in-depth discussions, EDF considers that the conditions for a major development in Great Britain are not met to date,” EDF said in a statement, adding it would hold the news conference as planned at 8:00 a.m. British time. The announcement came after months of negotiations. Late on Thursday, sources familiar with the matter had said EDF agreed at a board meeting that evening to bid for the British nuclear operator.
The collapse of talks came too late for French newspapers, several of which had been briefed on the deal and splashed it prominently on their front pages, calling it a bold expansion. “French nuclear industry conquers Europe,” said Le Figaro newspaper in its main headline, while squeezing in a line saying that the board of British Energy had blocked the deal.
British Energy said in a statement it had held advanced discussions with an unidentified suitor and added there was no certainty an offer would be made. British Energy, 35% owned by the government, supplies around a fifth of the UK’s electricity. It is seen as key to building a new fleet of nuclear power stations -- given the green light by the British government in January.
British Energy owns eight power plants, all of which have surrounding land suitable for new building, but cash-rich EDF was seen as offering financing and technology know-how. It provides 80% of France’s electricity from its 58 reactors and is the world’s biggest single producer of nuclear energy. The deal would have been structured as a full cash offer valued at around 770 to 775 pence a share, with future payments to be made if electricity prices remained high, according to one source familiar with the matter, who asked not to be named.
British Energy has proved hard to value due to the volatile price of electricity, which has both soared and eased off during the months of negotiations. Analysts had said that although the price was significantly higher than an EDF proposal of below 700 pence, which industry sources said was rejected earlier this year, it was still low compared to many ways of valuing the company. They also pointed at separate talks between EDF and Centrica, whose involvement was seen as crucial to winning over the support of the British government, reluctant to see British Energy falling entirely into overseas hands.
EDF separately reported a bigger-than-expected 2% rise in H1 core profit to €9.041 billion. The change of plans on British Energy is EDF’s latest international setback after it showed interest, then failed in attempts to buy an interest in Spanish utility Iberdrola and Belgian gas and power companies Distrigas and SPE. (Reuters)