Centrica asks shareholders for £2bn to buy British Energy stake

Mark Milner, industrial editor
The Guardian,
Saturday November 1 2008

Centrica, the parent company of Britain's biggest energy supplier British Gas, said yesterday it was asking shareholders for £2.2bn to help fund its purchase of a 25% stake in British Energy.
Centrica said it would raise the bulk of the expected £3.1bn purchase price through a three-for-eight rights issue priced at 160p a share.
The company said the issue was pitched at a 39.9% discount to the theoretical ex-rights price based on Thursday's market price of 306.25p.
The issue has been fully underwritten by a consortium of banks including Goldman Sachs, Credit Suisse, and UBS. Centrica said the balance of the purchase price for the British Energy stake would be raised through additional debt and, possibly, asset sales.
Centrica considered a bid for British Energy before opting to partner EdF, which made an agreed £12bn bid for Britain's nuclear power generator in September. Centrica will acquire 25% of BE once the takeover has been completed.
Centrica wants to increase its generating capacity as a way of reducing its exposure to short term movements in wholesale gas prices.
EdF has already said it plans to build four new nuclear reactors in Britain, with Centrica taking its share in the nuclear new build programme.
Chairman Roger Carr said: "Following this rights issue Centrica will be well capitalised to fund the potential acquisition of a 25% interest in British Energy."
Carr said the company continued to trade in line with expectations. In its interim management statement Centrica said full-year earnings would benefit from a one-off deferred tax credit.
The company said that customer churn rates at British Gas had risen in the wake of the price increase in July. "Churn has now fallen to levels experienced before the price increase and in recent weeks the level of account sales has been ahead of customer withdrawal notifications."
The company said British Gas Residential now had 15.6 million customer accounts and expected second half operation margins within the business to be "ahead of those achieved in the first half of the year".
British Gas and other big energy suppliers are under pressure to reduce prices following the slump in the oil price.