E.ON has agreed to sell its UK electricity power distribution business, Central Networks, to PPL Corporation, Allentown, Pennsylvania (PPL) for £4 billion GBP (US$6.5 billion). In PPL, E.ON has found an experienced and professional partner which is committed to the long-term future of Central Networks.
E.ON AG’s supervisory board approved the deal which is expected to close in early April. The purchase price of £4 billion GBP for 100 percent of the enterprise value includes an assumption of £500 million of existing debt. Central Networks is the UK’s second largest electricity distributor and operates the regional grid that covers the UK’s Midlands. Through its network of 133,000 km of overhead and underground cables, the business delivers power to over five million customers.
E.ON CEO, Johannes Teyssen said: “Central Networks is a consistently high performing distribution business. However after nine years of full ownership, the business offers E.ON limited value enhancement opportunities and, due to the strict regulation, there is no possibility to leverage synergies with other E.ON businesses in the UK. The purchase price represents excellent value for E.ON and the proceeds will be a key contribution towards our €15 billion divestment target by the end of 2013. The proceeds of the sale will increase E.ON’s financial flexibility and strengthen our balance sheet.”
E.ON UK, CEO, Paul Golby commented: “PPL is an excellent partner for Central Networks. They share our goal of providing a safe and reliable service for our customers and our communities. I want to take this opportunity to thank everyone at Central Networks for the excellent work they have done as part of E.ON and as we look to finalize the transaction, we will work closely with PPL, our trades unions and representatives to set a successful course for the future of the combined company and its employees.”
E.ON purchased Central Networks East as part of its takeover of UK based Powergen in 2002. In 2004, E.ON purchased Midlands Electricity for £1.2 billion GBP (€ 1.6 billion**). After a successful integration, the business was re-branded Central Networks and continues to provide a reliable electricity supply to millions of customers today. At the start of this year, the UK regulator, OFGEM, allowed E.ON to invest £2.3billion in its networks in the five years from 2010 to help improve the network and service. The investment is part of the regulator’s Distribution Price Control Review 5.
Last year, E.ON AG sold its E.ON U.S. Midwest business to PPL Corporation for 7.6 billion US-Dollars (€5.7 billion **). The transaction was closed in November 2010.
*€/£ assumed at 1.17
**exchange rate at time of transaction
E.ON sells UK power distribution business to PPL Corporation