E.ON sells UK power network

American utility PPL snapped up its second major UK electricity network today after striking a deal worth £3.5bn (€4.1bn) with Germany’s E.ON.

The acquisition of the Central Networks business adds an electrical supply system serving five million customers in the Midlands, including Birmingham and Nottingham, through about 83,000 miles of overhead and underground cables.

Pennsylvania-based PPL already owns Western Power Distribution, which provides regulated distribution through 52,000 miles of power lines to 2.6 million customers in south-west England and south Wales.

With Central Networks, PPL will own and operate what it says will be the largest network of electricity delivery companies in the UK in terms of regulated asset value, a combined £4.9bn (€5.7bn).

The deal, which is expected to complete next month, forms part of E.ON’s plan to sell €15bn (£12.7bn) of assets by the end of 2013 as it looks to cut debt and expand in regions such as Latin America.

E.ON UK chief executive Paul Golby said: “PPL is an excellent partner for Central Networks. They share our goal of providing a safe and reliable service for our customers and our communities.”

Central Networks was created following E.ON’s purchase of Powergen in 2002 and Midlands Electricity for £1.2bn (€1.4bn) two years later.

PPL, which will also assume £500m (€589m) of debt in today’s deal, said it expected to generate “significant synergies” from the combined UK operations.

Chief executive James Miller said: “Opportunities as compelling as this do not come along very often. The UK provides a progressive regulatory environment.”

Hong Kong billionaire Li Ka-shing, whose infrastructure fund recently acquired the electrical network covering London, the South East and eastern England, is thought to have lost out to PPL in the Central Networks auction.

Long-term investors such as pension funds are attracted to assets such as utilities and power distribution networks due to their reliable income stream. PPL controls or owns about 19,000 megawatts of generating capacity in the US.