EDFof France is to sell its UK electricity networks business to Cheung Kong Infrastructure (CKI) of Hong Kong for £5.8 billion.
EDF's UK unit, EDF Energy Networks, distributes electricity to 7.8 million customers and generates around a fifth of Britain's electricity.
In acquiring EDF Networks, CKI has obtained low-voltage electricity distribution networks in the east and south of England, and ongoing contracts with businesses including the London Underground, Heathrow and Gatwick airports, and the Channel Tunnel.
CKI will jointly run EDF Networks with electricity supplier Hongkong Electric (HKE), in which it owns a 39 per cent stake. The two companies have run other UK energy assets this way, including Northern Gas Networks, a gas distribution business that was acquired in 2004.
CKI, which is controlled by Hong Kong billionaire Li Ka-shing, beat a consortium of Australia’s Macquarie, the Abu Dhabi Investment Authority and Canada Pension Plan to the deal.
CKI and HKE will each hold 40 per cent of the entity buying the UK assets, with the rest held by two foundations controlled by Li.
The deal will double CKI's presence in the UK as it seeks to expand globally. CKI has already made investments in the UK’s gas and water industries, as well as owning utility businesses in Australia, Canada and New Zealand.
Today’s deal immediately reaches the €5 billion target that state-controlled EDF set itself for disposals by the end of 2011.
The transaction is expected to be completed in the fourth quarter of this year.
In a clear sign that the market for European energy companies is improving, the price achieved for EDF Networks represents a 27 per cent premium to its asset value. It is thought this may encourage other companies with UK network assets, such as E. ON of Germany and Spain’s Iberdrola, to put these up for sale.
Utilities throughout Europe are currently shedding assets to pay for takeovers and to raise funds for investment in new power plants.
