EDF Plans British Energy Takeover Offer, People Say

EDF Plans British Energy Takeover Offer, People Say

May 9 (Bloomberg) -- Electricite de France SA, Europe's biggest power producer, plans an offer for British Energy Group Plc that will be at least 5 percent below the company's share price, said three people with knowledge of the bid.

Electricite de France may submit the proposal today, said the people, who declined to be identified because the bid is confidential. British Energy fell 2.6 percent yesterday to 715 pence, valuing the company at 11.5 billion pounds ($22 billion). The stock, which closed at a record 785 pence on April 25, was down 1.6 percent at 703.5 pence as of 8:30 a.m. in London today.

Power producers want to buy British Energy because Prime Minister Gordon Brown backs building nuclear reactors to meet energy demand and to replace aging units. The East Kilbride, Scotland-based generator, which is 35.8 percent state owned, said March 17 that it was in talks that could lead to a merger or takeover. The U.K. government would sell its stake in a deal.

``The bidding companies have talked the price down quite successfully,'' said Simon Edrich, an analyst at ING Bank NV in London.

Francois Molho, a spokesman for Electricite de France in Paris, declined to comment, as did Andrew Dowler, a spokesman for British Energy in London.

The U.K. government, which is seeking at least two groups of companies to build reactors, won't prevent foreign utilities from buying the company, Energy Minister Malcolm Wicks said in April.

Held Meetings

British Energy, which said it has met with more than 10 companies to discuss potential partnerships, would give a buyer eight atomic stations and adjacent land where new generators may be built.

RWE AG, Germany's second-biggest utility, ruled out a full takeover of British Energy after Vattenfall AB, its partner of choice for a joint bid, pulled out, Handelsblatt reported today, citing unidentified people familiar with the matter. RWE spokeswoman Julia Scharlemann in Essen declined to comment when reached by telephone today.

Electricite de France, 84.8 percent owned by the French state, operates 58 nuclear reactors at home. The shares rose 0.9 percent to 67.30 euros today, valuing the Paris-based company at 123 billion euros ($190 billion).

Nuclear Revival

Utilities and governments from the U.S. to Taiwan are building or planning atomic plants to meet increasing power demand and reduce carbon dioxide emissions, which scientists say cause global warming. Power producers may build as many as 107 reactors by 2020, according to the World Nuclear Association. Some 42 units may be shut in the period.

British Energy shares dropped 8.9 percent since reaching a record high. Andrew Moulder, an analyst at Creditsights Inc., said April 10 in an investor note that the company may be overvalued because most of its reactors are aging and its sites may not be needed for the construction of nuclear units. The U.K.'s Nuclear Decommissioning Authority is seeking offers for use of its land to build reactors, providing an alternative to the company's sites.

British Energy's earnings have been hurt the past two years by unscheduled shutdowns at its atomic power stations. Chief Executive Officer Bill Coley vowed to improve the reliability of the nuclear plants as a way to reduce reliance on imported fuels.

The company plans to run its nuclear reactors beyond their scheduled decommissioning dates, boosting the appeal to a potential buyer.

U.K. safety regulators are assessing reactor plans by Areva SA, GE-Hitachi Nuclear Energy and Toshiba Corp.'s Westinghouse Electric Co., for approval of generic models that may be built in Britain.

The U.K. has hired UBS AG to advise it on the program for new nuclear stations and on options for its stake.

BLOOMBERG