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Li Ka-Shing, Asia's richest man, buys EDF's UK power grids for £5.8bn

LI Ka-Shing, Asia's richest man, has bought EDF's British electricity network business for £5.8bn in a deal that will see its £500m pension deficit for UK workers reduced by a quarter.

By Rowena Mason, Energy Correspondent
Published: 7:08PM BST 30 Jul 2010



Electricity pylons - Li Ka-Shing, Asia's richest man, buys EDF's UK power grids for £5.8bn Photo: GETTY

Advisers to Li Ka-Shing said the investor was "delighted" by the deal and could now look to buy more regulated assets in the UK. They said he had been attracted by sterling's stability and the regular returns of the UK power market.

However, the market was surprised by the £5.8bn price tag – 45pc over the mooted value – after the Hong Kong investor entered a bidding war with a consortium led by Australia's Macquarie Bank. Scottish and Southern Energy, a potential third bidder, withdrew earlier in the process saying the asking price was too high considering the assets' deteriorated state.

The high price boosted other UK utilities, with water group United Utilities rising 4pc to 585p, plus Severn Trent, Northumbrian Water and Pennon all climbing. The lengthy deal process – which has dragged on for more than a year – will also have raked in huge fees for advisers of up to $100m (£64m). Li Ka-Shing was advised by RBS, while EDF worked with Deutsche Bank and Barclays.

The deal took so long to close because of problems negotiating an injection into the UK pension fund and time taken to get approval from its private partners, such as London Underground, Heathrow airport and the Channel Tunnel. EDF's electricity distribution network is Britain's biggest, supplying power to 20m people in London, the east and southeast of England.

Rebecca Seabury, an energy analyst at Inenco, said: "We would expect that as a new entrant in the electricity distribution industry, it will shake the market up, which may lead to increased competition in private networks." Mr Ka-Shing, who has a $21bn (£13.3bn) fortune, owns regulated businesses across Asia, Australia and Europe through his Cheung Kong Infrastructure Holdings. EDF said the money will be used to pay down debt taken on when it bought British Energy for £12.5bn in October 2008.

The French state-owned company on Friday saw its profits fall by 47pc for the half year to €1.7bn (£1.4bn), after it took a €1.1bn charge on its nuclear build in the US. It also confirmed its new nuclear reactor at Flamanville, near Cherbourg, is delayed by two years amid soaring costs, potentially harming confidence in its ability to deliver Britain's first plant by 2017.