M&A

25 November, 2009

UPDATE 1-Utilities withdraw from UK offshore tender -sources

* RWE, ESB, Statkraft and StatoilHydro pull out -sources

* Ten bidders now left in the auction-sources

* Move deals blow to UK offshore wind plans

(Adds company statements, detail)

By Greg Roumeliotis, European Infrastructure Correspondent

AMSTERDAM, Nov 25 (Reuters) - Four energy firms have withdrawn from a 1.15 billion pounds ($1.9 billion) auction of UK offshore electricity grids that aims to attract private capital in connecting offshore wind farms, sources said.

RWE RWE.DE, ESB International, Statkraft and Statoilhydro have pulled out of the process either because they found the structure of the scheme unattractive or because they don't want to buck the European trend of separating generation from supply, two sources close to the process said.

"The regulations on this have proved to be more complicated than expected, and therefore we have terminated the process," a Statoilhydro spokesman said.

Regulator Ofgem has communicated to the remaining bidders that the four companies have pulled out of the tender ahead of Dec. 14, when a shortlist is due for each of the nine Offshore Transmission Owner (OFTO) projects on offer, the sources said.

Officials at ESB, Statkraft and Statoilhydro, now Statoil (STL.OL), confirmed their withdrawal, while an RWE Npower spokesperson did not respond to a request for comment.

"Companies withdrawing from tenders is a fact of commercial life. We are pleased with the strong competition we have seen in the process so far," an Ofgem spokesman said.

TENDER BLOW

The development deals a blow to the UK's efforts to attract private investment in connecting offshore wind farms to the mainland power network, an issue that generates major capital commitments for many grid operators across Europe.

The success of the tender will determine if more such auctions are held to help raise the 15 billion pounds required to link some 33 gigawatts of planned offshore wind capacity to the UK grid.

"Upon thoughtful consideration, we see no synergies between being a power generator and a grid operator," a Statkraft spokesman said in a statement.

Ofgem has tried to make the pilot tender favourable to investors by auctioning assets without construction risk as well as capping penalties to the OFTOs to 10 percent of their revenue.

But while the 20-year regulated cash flows involved have attracted the interest of several infrastructure funds, concerns linger among offshore wind farm operators, who are looking for assurances that their connections will be safe, sources say.

Ten bidders have so far stayed in the competition, sources say. They are DONG Energy, Equitix, Imera, Macquarie Capital, Balfour Beatty Capital, Frontier Power Consortium, National Grid, Scottish & Southern Energy, Transmission Capital Partners and ABN AMRO Infrastructure, now called EISER Infrastructure. ($1=.5979 pounds) (Editing by Mike Nesbit) ((greg.roumeliotis@thomsonreuters.com; +31 20 504 5005; Reuters Messaging: greg.roumeliotis.reuters.com@reuters.net))

Source: http://www.reuters.com