EDF deal heralds more Asian investments - analysts
LONDON (Reuters) - Hong Kong billionaire Li Ka-shing's offer for French utility EDF's (EDF.PA) UK power grids suggests more Asian cash is in the pipeline for similar assets, analysts said on Friday.
Cheung Kong Infrastructure (1038.HK) (CKI) and Hongkong Electric (0006.HK) (HKE) made a 5.8 billion pound offer for three power distribution grids and private power networks, paying big money for assets that need investment but have opportunities to turn smart.
"The price that's being paid suggests the Chinese see the UK as an attractive and stable market to be in. It suggests how much capital is available to be deployed from Asia to the UK marketplace," said Andy Cox, energy partner at consultancy KPMG.
"I think it's bound to encourage other network owners to look across their portfolio and the returns they're getting versus selling the assets and moving that investment elsewhere."
European utilities are selling assets to plug huge debts stemming from takeovers and to invest in new power plants.
Regulators are keen to see the assets owned outside the rest of the power sector, and some of the networks no longer provide the returns expected.
The big price offered by CKI could speed up sales as other network owners look to cash in on hot Asian demand.
"I can't think there could be any owner of distribution network assets in the UK that wouldn't seek to sell their assets at this level," Evolution Securities utilities analyst Lakis Athanasiou said.
"Maybe this is start of trend. We've seen it in oil and gas in Europe. This is the first one of real significance in the UK in recent times," KPMG's Cox said.
Britain's other distribution networks holders include E.ON (EONGn.DE), Scottish and Southern Energy (SSE.L), Iberdrola's (IBE.MC) Scottish Power, CE Electric UK, Electricity North West, Western Power Distribution and NIE Energy, according to the UK energy network operator National Grid.
CKI is expected to look at improving the efficiency of the EDF network and the development of "smart grid" -- which supplies real-time power usage data to consumers and demand information to network operators that can increase returns.
But analysts still see the price as steep.
"I think the offer is high value and I see CKI finding it very difficult to get value out of this," Evolution Securities' Athanasiou said.
Through the EDF network, CKI would gain 7.8 million British customers, adding to its UK Northern Gas Networks business which has around 2.6 million customers. CKI also owns the 1,140 megawatt Seabank Power station.
(Additional reporting by Victoria Bryan; editing by Michael Shields)
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