Scottish & Southern and TXU shortlisted in Norweb deal

Scottish & Southern Energy and TXU have been shortlisted as potential buyers of the Norweb Energy gas and electricity supply business from debt-laden United Utilities. The price is expected to be around £450m. A spokesman for United said the company’s financial adviser, Goldman Sachs, was still evaluating the shortlisted bids but would not confirm names. […]

Scottish & Southern Energy and TXU have been shortlisted as potential buyers of the Norweb Energy gas and electricity supply business from debt-laden United Utilities. The price is expected to be around £450m.

A spokesman for United said the company’s financial adviser, Goldman Sachs, was still evaluating the shortlisted bids but would not confirm names.

He said once evaluation was complete, detailed negotiations would start with the parties. A final choice would not be made `for a few weeks yet’.

Perth-based Scottish & Southern, which is keen to increase its customer base in England, has been considered the favourite for some time. But a spokesman for Scottish & Southern implied it was unlikely to improve its offer in any secondary auction. `We have a price in mind and that will be it really,’ he said.

He added that the Scottish & Southern was mindful of the example of previous investors in English power companies – mostly Americans – which were subsequently deemed to have overpaid for the assets.

Another factor that could be in TXU’s favour is that it is considered more likely to offer United’s information technology systems subsidiary Vertex a long-term contract to manage an enlarged customer base.

United plans to float part of Vertex in the next two to three years as part of its strategy to reduce its £2.8bn debt burden. During that period it hopes to build up the subsidiary’s external contract portfolio.

It recently secured a £140m deal from Cable & Wireless to provide billing and other customer services for the next 10 years.

The other parties that were interested in Norweb Energy, which was initially expected to raise just £250m, were ScottishPower, National Power and British Energy.

They are now expected to pursue other UK supply businesses. Seeboard, Northern Electric and Yorshire Electricity – all of which are owned by US parents – have been identified as likely targets.

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