Biggest swoop yet on Europe by Chinese as billionaire buys EDF UK

The deal to buy the UK distribution network of EDF for 5.8 billion overshadowed a sharp drop in profits at the French energy giant.

Net profits at the partly government-owned group tumbled by nearly half during the first six months of this year to €1.6bn (1.3bn), compared with a year earlier. Most of the decline was linked to provisions against the risks of building new nuclear power plants in the US.

However, EDF will receive almost 6bn for its distribution networks covering the east and south of England. The price is some 45 per cent higher than that mooted when a sale was initially proposed last year, and more than covers the €5bn target EDF has set to raise from disposals by the end of 2011.

The buyer is a consortium led by Hong Kong entrepreneur Li Ka-shing, one of the world's richest men. He has numerous business interests around the world, including UK utility assets Cambridge Water, Southern Water and the Northern Gas Networks distribution business.

EDF noted that the price achieved was 27 per cent higher than its regulated asset value. Analysts said this suggested that the market for European energy assets could be improving, sparking speculation that other deals could be in the offing.

European utilities are selling assets to plug their debts and bolster their accounts ahead of a new wave of investment in power plants. EDF, which owns the network through its UK subsidiary EDF Energy, bought British Energy for more than 12bn last year and wants the sale to cut some €5bn from its debts.

The Hong Kong group successfully outbid a consortium including Australia's Macquarie, Canada Pension Plan and sovereign wealth fund, the Abu Dhabi Investment Authority.

The high price offered could persuade owners of other UK distribution networks to raise the "for sale" sign.

Martin Young, an analyst at Nomura in London, said EDF had achieved "a very good price indeed".

The deal caps a process that has dragged on for more than a year, delayed by a change in EDF management, British regulatory rulings and difficulties with pension trustees.

EDF's distribution network is Britain's biggest, supplying power to some 20 million people via networks in London and England's east and south-east.

Deutsche Bank, Barclays Capital and BNP Paribas advised EDF, while Royal Bank of Scotland advised Li's investment vehicles, Cheung Kong Infrastructure and Hongkong Electric.

The man with the midas touch

HIS name is synonymous with the hard-driving business style in his adopted city of Hong Kong, and now Li Ka-shing will also become a force in Britain after offering to buy EDF's sprawling electricity network.

At a spry 82, Li is one of Hong Kong's most colourful and outspoken figures, with an estimated net worth of $21 billion (13.5bn) that makes him Asia's richest man, according to Forbes.

Li is a complex figure, known for his plain spokenness, humble origins and philanthropy. But he is perhaps best known for a no-nonsense, hard-driving style that helped make him the world's 14th richest man.

Arriving in the former British colony as a refugee after the Japanese occupied his home city of Chaozhou, Li went on to build a plastic flower business into a global empire with 240,000 employees in 54 countries.

His two flagships, Hutchison Whampoa and Cheung Kong, are heavyweights not only at home but also globally, owning the world's largest operator of container ports, the biggest health and beauty retailer, and British mobile phone network 3, among others.

His Hongkong Electric business is one of the city's two main power utilities, while Cheung Kong is one of its top residential developers. His group's eight listed companies, with a market capitalisation of $77bn or so, account for about 3.5 per cent of the Hong Kong stock market's value.