Telecom Plus Surges to Record in London on RWE Npower Agreement

Telecom Plus Plc surged to a record in London trading after agreeing to buy two energy companies from RWE AG’s Npower unit for 218 million pounds ($352 million).

Telecom Plus rose as much as 17 percent after announcing the agreement on the Electricity Plus Supply Ltd. and Gas Plus Supply Ltd. units. The deal includes a 20-year energy-supply accord with RWE Npower Plc that will boost Telecom Plus energy margins and make its tariffs more competitive, it said.

Telecom Plus was up 16 percent at 1,747 pence by 1:14 p.m. in London, giving it a market value of 1.2 billion pounds.

The acquisition comes at a time of political debate in Britain over how to combat rising energy bills. Regulator Ofgem and the government have come under fire from lawmakers and consumer groups for not doing enough to boost competition in a market dominated by six energy suppliers with more than 90 percent of U.K. customers. Five of those have announced inflation-topping tariff increases in the past two months.

“Today’s announcement shows that Britain is well on the way to having a Big 7 rather than a Big 6,” said Paul Massara, chief executive officer of RWE Npower. “In one move we have helped to create the biggest independent competitor in Britain’s household energy supply market.” Telecom Plus now has more than 770,000 customer accounts, he said.

The company, which operates the Utility Warehouse brand, will fund the deal through share placings and about 100 million pounds of debt from new facilities with Barclays Plc. The company plans to raise 130 million pounds in stock sales at 1,475 pence a piece underwritten by Peel Hunt LLP, it said.

The deal will increase margins that Telecom Plus earns from supplying energy to customers by 4.25 percent, it said.

The acquisition, subject to shareholder approvals, is expected to be completed by late December.

Telecom Plus had sold the energy companies to Npower in March 2006. With proposals by Ofgem that limit tariffs on offer to domestic customers to four, Npower and Telecom Plus would have been restricted. This prompted the sale accord, according to the statement.

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