French flex their muscle by buying power station

Feb 26 2008 by Peter McCusker, The Journal

THE purchase of a Teesside power station by two French companies maintains the grip of foreign-owned firms on UK electricity generation.

And French energy merger partners Gaz de France (GdF) and Suez may now be on the lookout for further targets in the deregulated UK energy sector.

The Teesside Power Station, at Wilton, near Middlesbrough, is Europe’s largest combined cycle gas turbine plant – generating 1875 megawatts through both gas and steam turbines. It provides up to 3% of the UK’s electricity.

GdF and Suez will each take a 50% share in the 23-acre plant, which opened in 1993 and employs about 200 people. The price of the purchase from a US conglomerate and a US bank has not been disclosed, although reports suggest the Teesside plant could be valued at between £200m and £300m.

Armelle Dillar, a spokeswoman for Gaz de France, told The Journal that the acquisition reinforced its position in the UK where it currently has a 215MW plant in Flintshire in Wales.

She said: “We already have a presence in the UK. It is not news that we are interested in a long-term strategy in the UK.”

Ms Dillar said that the company was committed to developing a long-term future for the Wilton site and the jobs of its existing workers were safe.

The UK electricity production sector is currently dominated by overseas companies, with around 60% of plant owners being based abroad.

One electricity analyst believes it is the deregulated nature of the UK market which makes it particularly attractive to foreign companies.

“These two companies know they can make money. The UK is the most liberalised of all European energy markets. The French market is far more regulated and there is far more Government interference in determining prices.”

Suez and GdF agreed a merger last year to create one of the world’s biggest energy firms, worth £68bn. It followed months of wrangling about a tie-up that sparked controversy in France over the sell-off of GdF, one of Europe’s largest natural gas suppliers.

Both companies are trying to push through the deal by June this year, but it has hit regulatory obstacles in France.

Fatima Satouki of specialist energy publication Heren said. “This is the first acquisition by this joint company and it is very interesting to see. GdF have been eyeing potential power plants in the UK for some time. The new company will be in a very strong position going forward.”

The Wilton plant was formerly owned by US energy giant Enron and was taken over by US food and agriculture services group Cargill and investment bank Goldman Sachs after Enron collapsed in 2001.

FACTFILE

• There are currently around 160 electricity production plants in the UK, including Hartlepool nuclear power station, Lynemouth and Wilton.

• There are around two dozen companies involved in energy production, with 60% of these foreign-owned.

• Coal-powered plants account for 38% of UK electricity production, gas 36%, nuclear power 18%, hydro 1%, oil 1%, imports 2% and others (including wind) 4%.

• In 2002 the cost of a megawatt hour of electricity was between £10 and £20. In 2008 the price can vary between £30 and £100.