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News update from Eddie Proffitt 31/7/10


Eddie Proffitt

News update from Eddie Proffitt 31/7/10

1. A group led by Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd. has offered to buy EDF’s U.K. power distribution networks unit for 5.8 billion pounds ($9.1 billion).

Cheung Kong Infrastructure, subsidiary Hongkong Electric Holdings Ltd. and the Li Ka-shing Foundation have jointly bid to buy the assets, according to a filing to the Hong Kong stock exchange today. The offer is subject to formal approval by the seller and the Commission of the European Union, it said.

“The company is looking for sizeable assets overseas with good returns,” said Gary Chiu, an analyst at HSBC Securities Asia Ltd. in Hong Kong. “The U.K. has a good regulatory environment and stable earnings.”

Li, 82, is Hong Kong’s richest man and was estimated to be worth $16.2 billion by a Forbes magazine survey in March 2009.

In addition to the above bid, Paris-based EDF are said to have received a further bid from a group led by Australia’s Macquarie Group partnered by Abu Dhabi Investment Authority and the Canadian Pension Plan.

EDF Chief Executive Officer Henri Proglio wanted to sell the network to help reduce debt after the nuclear power utility expanded into the U.K. with the purchase of British Energy Group Plc in 2008. The company needs to invest billions of euros at home to maintain France’s 58 atomic reactors.

EDF’s U.K. network serves about 7.8 million people in London and southeast England. EDF valued the regulated part of the network at about 4 billion euros ($5.1 billion) at the end of 2008.

Cheung Kong Infrastructure’s assets overseas include a stake in the U.K. energy company Northern Gas Networks Ltd. In April, the company agreed to pay 211.7 million pounds for a stake in the U.K. electricity producer Seabank Power Ltd. From BG Group Plc.


2. Tests are being carried out in Lancashire by a firm exploring a new way of extracting natural gas from underground rocks. A well is being drilled on land near Kirkham close to Blackpool, to determine the scale of shale gas reserves there.

Cuadrilla Resources believes Lancashire could potentially provide up to 10% of the UK's gas supply. Extracting shale gas involves drilling deep into rocks and breaking them up with water and chemicals. Pockets of gas are then released.

The gas being targeted by Cuadrilla is 8,000 to 10,000 ft (2,500 to 3,000m) below the surface, in rock which runs from Pendle Hill near Preston to the Irish Sea. Although the tests are the first of their kind in the UK, shale gas is widely used in the United States, accounting for 45% of the country's gas supply.

Shale gas has previously been considered too expensive and problematic to retrieve, but new hydraulic fracturing technology has made the process more viable.

There are some environmental concerns, however, as it is thought the drilling could pollute ground water supplies.

Cuadrilla said it is working with the Health and Safety Executive and the Environment Agency to ensure there are no problems with the work it carries out this week.


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