The man keeping Britain's lights on

After long negotiations, utility British Energy has been sold to French giant EDF. Boss Vincent de Rivaz tells Tim Webb why we should stop whingeing and prepare to lead the nuclear field
Tim Webb
The Observer,
Sunday September 28 2008

Last Tuesday, at 6pm French time, Vincent de Rivaz gathered with his fellow executives at the striking, elliptical EDF Tower in La Défense, the business district west of Paris. The UK head of the French energy giant was attending his fifth board meeting to discuss the takeover of nuclear power generator British Energy. The deal would hand the keys of the British nuclear industry to EDF, allowing it to invest billions more into building new reactors. The mood in the boardroom was upbeat and one of relief. Adrian Montague, the chairman of British Energy, had given the nod. This time - finally - the deal was going ahead and nothing was going to stop it.
The next morning, de Rivaz was back in London to address his 80 senior employees personally at the Millennium Hotel near Victoria, a stone's throw from EDF's London headquarters. Congratulations were in order. The £12.4bn offer had been announced at 7am to the Stock Exchange. John Hutton, the Business Secretary, had thrown the weight of the government, owner of a 35 per cent stake in British Energy, behind the deal. More importantly, Neil Woodford - the rebel fund manager from Invesco with 15 per cent of the shares, who had scuppered a deal in August - was also on board.
By last Friday afternoon, when he met The Observer, de Rivaz had almost lost his voice and was nursing a heavy cold. You can't blame him. It's been a long slog. He cancelled his holidays in February, April and August, when he was also supposed to attend the Beijing Olympics, to get the deal done. He complains he has not taken a break this year. 'I'm not my normal sparkling self,' he grins.
But he hasn't lost his bite. To some, the deal to sell British Energy, whose power stations produce a fifth of the UK's electricity, represents a worrying dependence on a company backed by a foreign government to keep the lights on. Some consumer groups also worry that the disappearance of another independent British utility company will weaken competition and could result in higher bills. 'To be honest, you have to realistic and stop your whingeing about the UK,' he counters. 'Your country - I should say our country - has made a very clear decision to go for nuclear. The UK will take the lead. Stop whingeing.'
Ouch. No matter that in France, the government has resisted European Union laws to liberalise energy markets. EDF, which is 85 per cent owned by the French government, remains the dominant supplier in its home market and is protected from competition. The French government remains opposed to the type of foreign takeover just pulled off by EDF in the UK. Last year, Paris even engineered a merger between French utilities GDF and Suez, to scupper a planned foreign takeover of Suez.
De Rivaz admits that the UK's open-arms welcome to foreign energy firms is unique. 'But you should not complain about it,' he adds. When asked which is better, open energy markets such as in the UK, or closed markets as in France, there is a long pause. His answer requires diplomacy for his audiences in both Whitehall and Paris. 'In all the countries, what we are seeing is that energy is not something about which any government can say, "it's not my business". It's the business of any government to ensure that there is the framework to deliver security of supply and climate change objectives.'
But the big difference with the UK's more laissez-faire approach is that, rather than rely on our own government to keep the nation illuminated, we're counting on the French.
In fact, all this talk of Britishness and Frenchness seems to exasperate the irrepressible de Rivaz. What if there's an energy crisis with power cuts in the UK and France? Will power from British Energy's nukes be exported via the interconnector grid under the English Channel, to keep the lights on in France, at the expense of the UK?
'No, no,' grimaces de Rivaz, who at this question throws his head onto his outstretched arms on the boardroom table. 'The interconnector is very small. Do you think the French government is not supportive of a large company which is successful? It's not like a gas producer turning off the taps. It [electricity] is going to be produced in the UK for UK customers.' To underline the point, he says that the UK is EDF's 'second home market'.
Besides, he says, EDF isn't controlled by the French government, which is looking for a successor to take over from current group boss Pierre Gadonneix. 'Controlled is not the right word. It will be supported, boosted, enhanced, and will benefit from [the government's involvement].' He also thinks EDF's existing 16 million domestic customers don't care whether British Energy is foreign-owned or not.
Bankers and advisers involved on both sides say it has been one of the most tortuous and complex takeovers they have been involved in. One British Energy shareholder called the saga an 'unsightly quadrille', involving the four principals: EDF, British Energy, the government and Centrica, which hopes to take a stake in the UK company.
De Rivaz has long had British Energy in his sights. Soon after its current chief executive, the amiable American Bill Coley, took over British Energy in 2005, the Frenchman met him to discuss how the pair could revive the UK's flagging nuclear industry. So when British Energy began looking for potential joint-venture partners to help it build new reactors late last year, de Rivaz met Montague, the British Energy chairman, and told him he wanted to do a deal. A formal auction was launched soon afterwards.
Despite the best efforts of the UK company's adviser, Rothschild, to drum up interest, no other credible bidder materialised. EDF thought it had British Energy in the bag in early August, arranging a press conference to announce the deal. But Invesco, with 15 per cent of British Energy's shares, unexpectedly rejected the proposal the night before, leading to bitter recriminations from both sides. De Rivaz, heading up the bid team for the French giant, cancelled his August holiday to hammer out an improved offer. When Montague came back from his own holiday, de Rivaz phoned him with the news: 'We can do it.' With cabinet minister Hutton also leaning on British Energy, and Invesco won round, the deal was finally done.
Some analysts remain convinced that EDF has got British Energy on the cheap. Lakis Athanasiou, from Evolution Securities Research, reckons £10 a share, rather than the 774p agreed, represents a better price. But other observers also point out that EDF has the necessary financial firepower and technical expertise to build a new fleet of reactors, something which British Energy was not capable of doing on its own.
Yet the British government - and the taxpayer - remain on the hook for British Energy's £5.5bn decommissioning liabilities from its existing reactors. Under the terms of the offer outlined last week, EDF and its UK subsidiaries are also not liable for redundancy and employment costs for its 6,000 workers - or liabilities arising from any breach in its operational licences - if British Energy were to go bust.
Unions are harbouring concerns that the government, once it has sold its stake, will no longer guarantee workers' final salary pensions, despite assurances from the French company. They are meeting the UK company's management tomorrow.
Another concern is that the combined EDF and British Energy operation will generate a quarter of the UK's electricity. While the British company was an independent generator, selling its power onto the market, its new owners will retain much of it for its own customers.
De Rivaz seems to suggest that competition for its own sake is not the be-all and end-all. 'At the end of the day, we should not be idealistic about these things,' he says in his heavy French accent. 'Does it benefit the customer to have people investing massive amounts of money for security of supply? I like competition when it's for the benefit of customers.'
For a moment, de Rivaz looks anxious. 'Do I still need to convince you? Why are you worried?' he asks. 'I am the delivery man. You don't let down your own market, do you?'
Let's hope he's right.
The CV
Name Vincent de Rivaz
Born October 1953
Education Graduated as an engineer from the Ecole Nationale Supérieure d'Hydraulique de Grenoble
Career 1977, joined EDF as a hydro-electric engineer, working for various international divisions of the company; 2000, promoted to head of strategy and finance and given group-wide responsibility for financial strategy and operations for EDF Group; 2002 to date: chief executive of London Electricity Group (subsequently renamed EDF Energy)