Power prices to rise if EDF gets deal

Prices for electricity prices could go up if EDF, the French electricity group, succeeds in acquiring British Energy, the United Kingdom’s chief nuclear generator, in a nine billion pound deal. British Energy rose by seven per cent at the news.

There are worries that EDF, Europe’s biggest energy company, would exhaust all the eighteen per cent of total power produced from nuclear sources in the UK if the deal succeeds and this would leave other energy firms to pay higher prices in wholesale markets.

An analyst at Evolution stockbrokers, Lakis Athanasiou, said that Liquidity was an issue because British Energy and EDF would dominate power volumes, which would have an effect on the price and this might make the government prefer a consortium bid involving a UK company.

EDF is expected to put forward a non-binding offer for British Energy. It will be competing against German firms, RWE and E.ON and the Spanish giant, Iberdrola.

Centrica would be in the lead to take part in such a consortium even though it would rather get into a simple partnership for new nuclear development. Analysts are of the view that British Gas may find itself pushed to into a consortium bidding for British Energy’s existing assets so that it is not left out of the running in new nuclear projects.

Analysts at Evolution said the likelihood of a full bid for the company was rising and insinuated that the nuclear group could be sold at nine hundred pence a share, which would then put its value at nine billion pounds.

www.edfenergy.com

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