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United Kingdom

Billion euro sale of wind developer -- Airtricity goes to Scottish utility

Britain's Scottish and Southern Energy (SSE) is to become the largest wind farm operator in the UK and Ireland with its acquisition of independent wind energy generator and retailer Airtricity. The EUR 1.08 billion deal more than doubles SSE's operating wind farm capacity to 480 MW and brings the company a global portfolio of over 10 GW of projects under development -- including a substantial foothold in mainland Europe and China.

The deal will net windfall profits of millions of euros for Airtricity's shareholders, NTR of Ireland, which owns a majority 51% stake, Ecofin, which holds 16%, and other investors including the board of Dublin-based Airtricity.

SSE is paying EUR 1080 million for the equity and assuming EUR 375 million in net debt for an enterprise value of EUR 1455 million. Airtricity also gets EUR 746.5 million for the proceeds of the sale in October of its North American business to German utility E.ON for $1373 million.

SSE emerged victorious from the competition to buy the Irish company after Airtricity put itself on the market following the profitable sale of its American business. In addition to the generating and development assets, SSE says it will benefit from the expertise of the 300 strong Airtricity team -- including key members of its management who will join the SSE group. It also acquires the Airtricity brand, saying it is well-established in Ireland. Airtricity will operate from Dublin as a distinctive business within the SSE group.

Policy driven

According to SSE chief executive Ian Marchant, the decision to acquire Airtricity follows major policy developments in 2007. These include the EU's adoption of a 20% renewables target by 2020, the Irish government's stated aim of 33% of electricity from renewables by 2020, the Scottish government's new target of 50% renewables-generated electricity by 2020 and the UK government's plans for a major expansion of offshore wind.

Most of Airtricity's assets are sited in Ireland, Scotland and Northern Ireland. They comprise 308 MW of onshore wind farms, a 187 MW portfolio of projects under construction, 104 MW of consented capacity and 1917 MW of other wind projects at various stages of development. It is also involved in 587 MW of early stage development projects in Portugal and has a 6675 MW portfolio of wind projects in China. Its offshore assets comprise a 50% stake in a consented 500 MW offshore wind project in England, a consented 288 MW offshore wind farm in Germany, an option to take part in a 350 MW offshore wind project in Ireland and a 635 MW early stage project in the Netherlands. It also has an electricity supply business providing green electricity to some 35,000 commercial customers in Ireland.

"In one step this acquisition moves SSE forward in onshore wind, offshore wind, Ireland, Europe and China and gives added momentum to the increasing scale and broadening scope of SSE's activities," says Marchant.

downgraded

Ratings agencies are cautious over the acquisition. Standard & Poor's and Moody's both warned that SSE's credit rating could be downgraded as a result of the transaction. "The acquisition will be debt financed and Airtricity generates only modest operating cash flows given its early stage of development," say Standard & Poor's credit analyst Mark Davidson. "Furthermore, significant additional investment will be required to develop Airtricity's generation portfolio, which will result in negative free operating cash flows over the medium term." But he added that SSE's ratings would be unlikely to be lowered by more than one notch.

The view from London's financial district appears more positive. One industry insider comments: "Most, if not all, of the equity analysts I've seen like the deal." SSE says it expects the acquisition to bring the group's total renewables capacity, including hydro and biomass, to over 3500 MW by 2013.

The acquisition remains to be rubber stamped by the Irish competition authority and Irish and Northern Ireland energy regulators. SSE expects the deal to be completed before the end of March 2008.

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