Acquisition and Disposal
06 Agosto 2001 - 2:56AM
UK Regulatory
RNS Number:0535I
Innogy Holdings PLC
6 August 2001
INNOGY HOLDINGS PLC
Innogy Press Release
PROPOSED ACQUISITION OF THE ENERGY SUPPLY BUSINESS
OF NORTHERN ELECTRIC AND SALE OF
YORKSHIRE ELECTRICITY DISTRIBUTION BUSINESS
Innogy Holdings plc ("Innogy") is pleased to announce an innovative
transaction with Northern Electric plc ("Northern Electric"), to swap its
interest in Yorkshire electricity distribution business and associated debt
for Northern Electric's energy supply business ("Northern Electric's Supply
Business"). This move simultaneously reinforces Innogy's position as a
leading energy supplier in the UK and enables it to release capital from its
regulated electricity distribution interest.
HIGHLIGHTS:
* Innogy to sell Yorkshire electricity distribution business for # 1,004 million
Innogy is selling its 94.75% interest in the Yorkshire electricity
distribution business to Northern Electric for the amount that was attributed
to that business in its recent acquisition of Yorkshire Power Group Limited
("Yorkshire"). The transaction places an enterprise value of #1,004 million on
that business. Northern Electric is also assuming #742 million in net debt.
* Innogy to acquire Northern Electric's Supply Business at #275 per customer
Northern Electric's Supply Business comprises approximately 1.57 million
customers and will take Innogy's total customer base to approximately seven
million, reinforcing Innogy's position as a leading player in the UK energy
supply markets. Innogy has agreed to pay #257 million for Northern Electric's
Supply Business including a power purchase agreement, implying a cost per
customer of approximately #275.
Commenting on the transaction Ross Sayers, Innogy's Executive Chairman, said
"This innovative transaction takes us to seven million customers. It
establishes Innogy as the number one electricity supplier to households and
businesses in the UK and the number two supplier in gas, by volume. We will
capitalise on the opportunities and economies of scale that this transaction
brings. Selling Yorkshire's regulated asset based distribution business and
reinvesting in supply is consistent with our strategy to become a leading
customer focused integrated energy company."
Brian Count, Innogy's CEO Designate said
"By combining the Northern Electric Supply Business with the existing supply
businesses of Innogy we expect to deliver synergy savings of at least #25
million per annum by 2004. This together with the targeted savings from the
integration of the Yorkshire supply business is expected to bring the total
operational savings of Innogy's supply operations to at least #60 million per
annum within four years. Our focus is now on delivery of the cost savings and
further development of the npower brand. Together we believe that these will
create real value for our shareholders."
TRANSACTION DETAILS:
Under the proposed terms of the transaction, Northern Electric has agreed to
acquire 94.75% of Yorkshire which consists of Yorkshire's regulated
electricity distribution operations and Yorkshire's external connections and
contracting business(1). This places an enterprise valuation for 100% of that
business at #1,004 million.
Northern Electric will also assume net debt of #742 million, comprising all of
Yorkshire's current debt securities with the exception of the $350 million
6.154% 2003 Yorkshire Power Finance Limited and the #150 million 8.625% 2005
Yorkshire Electricity Group plc securities which will be redeemed prior to
completion.
Innogy is acquiring the Northern Electric Supply Business for a consideration
of #257 million. Innogy will not be assuming any net debt. The Northern
Electric Supply Business includes:
* 1.11 million electricity and 0.46 million gas domestic and SME
customers;
* Northern Electric's industrial and commercial contracts and trading
operations; and
* Northern Electric's metering services business.
In addition, Innogy is to assume Northern Electric's power purchase agreement
with Teesside Power Limited ("Teesside") under which Teesside agreed to supply
power to Northern Electric until 2008.
The resultant net payment is #5 million in cash to Innogy. This will be
adjusted for net working capital at completion, together with an adjustment
for the presence of the minority interest in Yorkshire referred to below. The
parties to the transaction have agreed to an effective economic closing date
as at 30 June 2001.
Xcel Energy Inc. ("Xcel") holds a 5.25% interest in Yorkshire. Xcel has, for
a limited period, minority shareholder pre-emption rights.
The transaction is subject to a number of conditions, including European
Commission approval of Northern Electric's acquisition of Yorkshire, and is
expected to complete within 3 months. There is a break fee of up to #20
million.
The transaction will not be subject to Innogy shareholder approval.
FINANCIAL INFORMATION:
Northern Electric's supply business recorded sales of #1,135 million for the
12 month financial period ended 31 December 2000. Profits before tax,
non-recurring items and discontinued activities were #16 million. As at 31
December 2000, Northern Electric's supply business had net assets of #192
million.
Yorkshire's electricity distribution business recorded turnover of #287
million for the 12 month financial period ended 31 December 2000. Profits
before tax, non-recurring items and discontinued activities were #28 million.
As at 31 December 2000, Yorkshire's distribution business had net assets of
# 504 million.
The integration of the Northern Electric Supply Business into the existing
supply businesses of Innogy is expected to deliver synergy savings of at least
#25 million per annum by 2004. This combined with the targeted savings from
the integration of the Yorkshire supply business is expected to bring the
total operational savings of Innogy's supply operations to at least #60
million per annum over four years.
Innogy's pro forma consolidated net debt will be reduced by circa #700 million
as a result of the transaction.
ANALYSTS' AND PRESS BRIEFINGS:
There will be a presentation to analysts at 9.30 a.m. and a press conference
at 11.30 a.m. today at the City Presentation Centre, 4 Chiswell Street,
Finsbury Square, London EC1Y 4UP.
Should you be unable to attend the analyst presentation in person, there will
be a webcast on-line at (www.innogy.com) with the presentation at 9.30 a.m.
The webcast will consist of streaming audio and a synchronized slide
presentation. This will be available for replay following the event. There
will also be a dial in facility as follows:
Dial in = +44 (0) 20 8515 2310
From the US Dial in = 001 416 646 3096
Quote the Company name and Chairperson's name - Innogy, Brian Count
To accompany the dial in facility, a copy of the presentation slides will
be available on Innogy's website (www.innogy.com) and there will be a replay
facility for the briefing, available until close of business on 14 August
2001, which can be accessed as follows:
From the UK / US Dial in = +44 (0) 20 8797 2499, Access code = 117824#
All other enquires should be made to the following:
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Innogy
Steve Cronin Investor Relations +44 20 7406 1910
Alison Cole Media +44 1793 89 3852
Rollo Head +44 20 7251 3801
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CSFB
Mark Seligman +44 20 7888 6061
Alisdair Gayne +44 20 7888 0893
Matthew Wallace +44 20 7888 5231
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If you require a hard copy of the presentation, please e-mail Wai-yee Choy on
wai-yee.choy@innogy.com
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This announcement contains certain statements that are neither reported
financial results nor other historic information. These statements are
forward looking statements within the meaning of the safe-harbour provisions
of the U.S. federal securities laws. Because these forward-looking
statements are subject to risks and uncertainties, actual future results may
differ materially from those expressed in or implied by the statements. Many
of these risks and uncertainties relate to factors that are beyond the
companies' ability to control or estimate precisely, such as future market
conditions, currency fluctuations, the behaviour of other market participants,
the actions of governmental regulators and other risk factors detailed in
Innogy's and Yorkshire's reports filed with the SEC. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date of this document. The companies do not undertake any
obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this
announcement.
Nothing in this press release should be construed as a profit forecast or be
interpreted to mean that the earnings of Innogy for the current or future
years will necessarily match or exceed the historical or published earnings of
Innogy or Northern Electric's Supply Business.
Credit Suisse First Boston (Europe) Limited ("CSFB"), which is regulated by
The Securities and Futures Authority Limited, has approved the contents of
this document solely for the purposes of Section 57 of the Financial Services
Act 1986.
CSFB is acting for Innogy and no-one else in connection with this transaction
and will not be responsible to anyone other than Innogy for providing the
protections afforded to customers of CSFB nor for giving advice in relation to
this transaction.
This announcement does not constitute an offer to purchase shares or
securities.
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- ENDS -
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(1) The Utilities Act, which is anticipated to come into force on 1 October
2001, will fully separate electricity supply and distribution businesses.
Certain transitional agency arrangements have been put in place by Yorkshire,
Innogy and Northern Electric in relation to the Yorkshire and Northern
Electric supply businesses to effect the transaction. These arrangements will
cease upon the Utilities Act coming into force.
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