SSE scales down its bid for EDF networks after share price fall

Published on Tuesday 1 June 2010 19:33

SCOTTISH & Southern Energy has opted not to splash out on a major stake in EDF's UK electricity distribution networks following a slump of 5 per cent in its share price during the past three months.

• SSE chief Ian Marchant is now looking at a stake of up to 10%. Picture: Robert Perry

The company, in partnership with Canadian pension fund investor Borealis, had been considering a 50-50 joint bid for the three English networks up for auction by France's EDF.

SSE said yesterday it would continue to work with Borealis on a deal that could result in the Scottish supplier owning a stake of no more than 10 per cent.

The decision to scale back its ambitions follows consultations with some of SSE's major institutional investors. Volatile markets have cut SSE's share price from more than 11 in March to yesterday's opening of 1,052p, although the stock gained throughout the day on the news that SSE would not issue new shares.

An SSE spokeswoman said: "Equity funding only makes sense if the cost of the equity isn't too high. At the current share price level, the cost of the equity would have been too much."

She added it was "too early to say" if Borealis would take up all of the equity position left by SSE, or if a third partner might be brought in. Analysts predict the sale will raise 4 billion for EDF, with firm offers expected at the end of this month.

SSE set out a new dividend policy last month which aims to raise its full-year payout by at least 2 per cent more than inflation for the next three years. The firm said it does not need to make any acquisitions nor issue equity to meet those targets.

Chief executive Ian Marchant said: "We would like the opportunity to apply SSE's management and operational capability to the EDF networks but only on a basis that represents good value for both partners."

Shares in SSE closed 2.6 per cent higher yesterday at 1,079p.