SSE has decided not to go ahead with a full acquisition of EDF’s electricity networks. There is a small possibility that they may fund an acquisition of approximately 10% but no decisions have been made.
“We have always maintained a highly disciplined approach to acquisitions, investment and to financial management generally, and that will continue,” said Gregor Alexander, finance director of SSE.
The key issue was the £4bn price which seemed too high for the state of the assets. Mr Alexander warned, “It should make the financial buyers think again. We believe we have the expertise to solve the problems with the network, but in our view the price will come down.”
Likely buyers will now come from two foreign bidders.
Cheung Kong Infrastructure (CKI) – the infrastructure investor controlled by Li Ka-shing, Asia’s richest man – has stated that it intends to bid.
A consortium including Australian infrastructure group Macquarie, the Canadian Pension Plan and Abu Dhabi’s sovereign wealth fund ADIA, has also been working on a separate offer.
EDF the company selling the networks is facing large debt and rising investment costs. It had hoped for offers in excess of £3.6bn, even reaching £5bn but it remains to be seen with only two bidders remaining.
EDF plans to retain its power generation and supply activities in Britain. It distributes power to 7.9m homes in the UK.