E.ON is selling its UK electricity power distribution business, Central Networks, to PPL Corporation of the US for £4 billion. 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.
The deal is expected to close in early April. The purchase price of £4 billion includes the assumption of £500 million of existing debt.
Johannes Teyssen, chief executive of E.ON, says: “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 Eur15 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 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. 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 £2.3 billion 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 US Midwest business to PPL Corporation for $7.6 billion US-Dollars (Eur5.7 billion). The transaction was closed in November 2010.