PPL Corp., owner of Pennsylvania’s second-largest utility, is nearing an agreement to buy E.ON AG’s U.K. power grid for about $6 billion in cash after beating an offer from Li Ka-Shing’s Cheung Kong Infrastructure Holdings Ltd., said two people familiar with the matter.
A deal may be announced as soon as today, said the people, who declined to be identified because the talks are private. The grid had also drawn interest from Warren Buffett’s MidAmerican Energy Holdings Co. and U.K. network operator National Grid Plc, people familiar with the matter said last month.
The acquisition would mark PPL’s second purchase of assets from Dusseldorf-based E.ON in less than a year. The company, based in Allentown, Pennsylvania, agreed last April to buy two U.S. utilities from E.ON for $6.7 billion. E.ON, Germany’s largest utility, is selling assets as it seeks to raise 15 billion euros ($21 billion) by the end of 2013 to cut debt and fund international expansion.
PPL’s reported interest in E.ON’s grid may have weighed on its stock price because of uncertainty about how much the company would pay and how it might finance the deal, said Paul Patterson, a New York-based analyst at Glenrock Associates.
“Whenever you have a potential acquisition, people get concerned about the financial implications of that,” Patterson said.
Rebecca Middleton, a spokeswoman for E.ON, declined to comment. George Biechler, a spokesman for PPL, also declined to comment.
PPL’s U.K. Unit
PPL already owns a U.K. grid unit with 83,000 kilometers (50,000 miles) of power lines that serve 2.6 million customers in south Wales and southwest England, according to its website. The company bought a 25 percent stake in the unit in 1996 and acquired the rest in 2002 from Mirant Corp.
Chief Executive Officer James Miller has wanted to increase PPL’s earnings from regulated assets. The company said on Feb. 4 it expects reduced profits at its unregulated unit this year as slack demand and low natural gas prices squeeze power margins.
PPL fell 53 cents, or 2.1 percent, to $24.90 at 4:01 p.m. in New York Stock Exchange composite trading. PPL is the worst performer for the past year among the 13 members of Standard & Poor’s electric utilities index.
E.ON’s American depositary receipts, which are equal to one ordinary share, fell 75 cents, or 2.3 percent, to $32.10 at 3:59 p.m.
PPL has about 19,000 megawatts of generating capacity in the U.S. and distributes electricity and natural gas to about 5.2 million customers in the U.S. and U.K., according to the company’s website.
E.ON has said it plans to invest about half the proceeds from its asset sales in growth outside Europe, Russia, and the U.S. and the remainder in reducing debt after it snapped up power plants and clients from Spain to Siberia.
Exelon Corp. owns the largest utility in Pennsylvania.