Deals

SSE, Borealis set sights lower in EDF auction

Scottish and Southern Energy and Borealis Infrastructure, the infrastructure investment arm of Canadian pension OMERS, have scaled down their joint bid for EDF Energy Networks, the UK electricity network of French energy group EDF. The two firms will not now seek an ownership interest ‘that would need to be funded by issuing new shares’.

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Scottish and Southern Energy (SSE), the listed UK energy company, has revealed that its joint bid with Borealis Infrastructure for EDF Energy Networks is now less ambitious in scope. In a statement on its website, SSE said it “will not seek to acquire an ownership interest in the electricity distribution networks currently owned by EDF Energy Networks on a scale that would need to be funded by issuing new shares”.

However, the firm added that it will continue to work with Borealis Infrastructure [the infrastructure investment arm of the Ontario Municipal Employees’ Retirement System] in the sale process “which could, potentially result in SSE having a small ownership interest in the networks”.

Media reports indicate SSE and Borealis are now planning to acquire a stake of no more than 10 percent.

Two parties are thought to remain in contention to take over the network: one is a consortium comprising Macquarie, Canada Pension Plan Investment Board and Abu Dhabi Investment Authority; and the other is Cheung Kong Infrastructure Holdings, a fund owned by Asia’s wealthiest man, Li Ka-shing. A source recently told InfrastructureInvestor.com that Cheung Kong may bring in subsidiary Hong Kong Electric, one of Hong Kong’s main electricity suppliers, to help run the asset – if it isn’t already working with it during the bid process.

The original final deadline for bids was the end of May, but there had been speculation that this timetable would be pushed back slightly.

EDF’s UK network distributes power to almost eight million homes in the south-east and east of England and was put up for sale in October 2008 to help cut the group’s debt. The company’s UK assets have a regulated asset base (RAB) of close to £4 billion (€4.4 billion; $6.4 billion) with a potential buyer expected to have to write an equity cheque of between £1 billion and £1.5 billion.

Barclays Capital, BNP Paribas and Deutsche Bank are running the sale for EDF and are said to be preparing a securitisation package covering 80 percent to 85 percent of the deal’s RAB.