Electricite de France gets $9 billion Hong Kong bid for UK networks, but profits dive

EdF gets $9B bid for UK unit as profits dive

PARIS — Electricite de France announced a plunge in profits Friday but was boosted by a surprisingly high €6.9 billion ($9.02 billion) bid by East Asia’s richest businessman for the utility’s British electricity grid.

EDF, the world’s largest nuclear plant operator, said it was in exclusive talks with a Hong Kong group including billionaire Li Ka-Shing for the U.K. distribution networks. Analysts say EDF has been considering a selloff to help finance its debt.

EDF made the announcement in the midst of a less-than-stellar earnings report Friday. It said first half profits fell 47 percent to €1.66 billion, from €3.1 billion in the same period of 2009. The Paris-based company did not release quarterly figures.

EDF took a €1.1 billion hit over risks related to planned nuclear reactor construction in the United States, a key part of its global strategy amid hopes of a resurgence of nuclear energy.

The company’s shares rose slightly, however, on news of the bid for EDF’s distribution networks in Britain. A consortium of Cheung Kong Infrastructure Holdings Ltd, Hongkong Electric Holdings Ltd and the Li Ka-Shing Foundation offered to buy the networks for a total of €6.9 billion, including debt, according to EDF.

Analysts called it a generous sum, given lingering doubts about investment in infrastructure following the financial crisis.

“I think we are all a bit surprised about the price, it’s quite high,” said analyst Per Lekander of banking group UBS. He said analysts had been expecting an offer closer to €5.1 billion.

EDF said it will work on an industrial project with the consortium and present a plan to its European works council in September. The offer would still need approval by EU regulators and shareholders, but analysts expect no major hurdles for the deal.

Li Ka-Shing, 81, is East Asia’s richest businessman, with a fortune estimated by Forbes magazine this year at $21 billion. He oversees two Hong Kong conglomerates, Cheung Kong Group and Hutchison Whampoa Ltd., with stakes in Hong Kong real estate and power generation, Russian aluminum producer Rusal and Canada’s Husky Energy. Hutchison operates ports around Europe.

Analysts said the Hong Kong group’s bid could shake up the British energy market and free up EdF funds to build new-generation nuclear reactors.

However, new-generation reactors have faced repeated hurdles.

EDF announced Friday a new two-year delay in construction of an EPR reactor in western France. The reactor at Flamanville, one of two EPR reactors the company is building after years of development, is now expected to go online in 2014 instead of 2012 and to cost about €5 billion overall instead of the €3.3 billion earlier estimated.

EDF Chairman and CEO Henri Proglio noted challenges for his state-controlled utility in the first half of this year, including an “uncertain economic and regulatory environment” and reorganization in its home market in France.

Amid a moderate recovery in demand for electricity and natural gas in Europe, EDF’s revenues were up 7.7 percent to €37.5 billion from €34.8 billion a year ago.

A large chunk of the profits decline was due to a €1.1 billion provision “for risks related to the group’s activities in the U.S.,” it said in a statement.

EdF said it is continuing to push for approval to build a third nuclear reactor at Calvert Cliffs in southern Maryland, though it has yet to receive approval for a federal loan guarantee.

EDF bought 49.99 percent of Baltimore-based Constellation Energy Group’s U.S. nuclear assets amid hopes of a resurgence in U.S. interest in nuclear power.

Constellation CEO Mayo Shattuck said this week the Calvert Cliffs project could be put on hold if the guarantee doesn’t come by summer’s end. Constellation and EDF have spent $600 million on the proposed reactor.

EDF confirmed its overall 2010 forecast for growth of between 3 percent and 5 percent in earnings before interest, taxes, debt and amortization.

Its shares climbed when Paris markets opened Friday, and were trading up 1 percent at €32.77 at midday. Trading in shares of companies in the Hong Kong consortium was suspended on the Hong Kong stock exchange for the five hours after the announcement Friday.