EDF, the French energy giant that recently bought nuclear generator British Energy, is looking at the possibility of selling its UK electricity distribution arm for up to £5 billion to cut a £22.3bn debt mountain.  It is understood that EDF, the world’s biggest producer of nuclear power, is examining the option as it spends heavily in France and abroad as part of the nuclear revival, and in the wake of a series of acquisitions. The group declined to comment. Industry sources said the French state-controlled group’s management was considering whether to focus purely on power generation. One Paris-based analyst said: “I am a little surprised. This is the first time I have heard about a possible sale of this. But this is not completely silly given EDF’s strategy to focus on nuclear production.”

EDF’s British distribution business, operated by its subsidiary EDF Energy, supplies power to nearly eight million homes and businesses in London and the south and east of England. The division generated 75 per cent of EDF Energy’s core earnings in 2008, or about 700m. City utility analysts believe the business is worth between £3bn and £5bn.

They said yesterday that a sale would help EDF meet a target of cutting debt by at least 5bn by end the end of 2010. EDF’s recent acquisitions of British Energy, whose plants include Torness and Hunterston, and half of Constellation Energy’s nuclear business, pushed its debt to 24.5bn at the end of last year.

One analyst said: “The British networks are a profitable business, and it would be far easier for EDF to sell its networks there than it would be to sell them in France.”

A sale of the company’s distribution businesses in France is seen as more likely to fuel greater political and union resistance.

It is also thought the worldwide recession will make any sale more problematic, either to another utility company or a private equity buyer.

One industry executive said: “This is not an easy sale at all. Look at other utilities like Vattenfall, which are struggling to sell (its networks].”

Swedish utility Vattenfall admitted last week that the sale of its German long-distance power grid had had to be put back.

The British power market was the first in Europe to be liberalised via widescale privatisation at the beginning of the 1990s.

Apart from its acquisitions, EDF is investing heavily in France, building a new-generation nuclear reactor and with plans for a second one. The group also wants to take a leading role in a nuclear revival in Britain, where it plans to build new plants on British Energy land.

RSS feed for comments on this post. TrackBack URI

You must be logged in to post a comment.