Centrica to raise 2.2 bln pounds in rights issue

Source: Reuters

Date :31/10/2008 15:51:09

British Gas-owner Centrica said on Friday it was raising 2.2 billion pounds in a rights issue to fund its acquisition of a 25 percent stake in nuclear operator British Energy .

By John Bowker

The company said in a statement it would issue three new shares for every eight held at 160 pence each, a 40 percent discount to the closing price of 306.25 pence on Thursday, and that all major shareholders would take up the offer.

Centrica shares fell as much as 9.6 percent and were 6 percent lower at 288 pence by 0912 GMT, valuing the business at over 10.5 billion pounds.

"The rights issue is to fund the acquisition of the 25 percent stake in British Energy, while we will also add debt and possibly asset sales," Finance director Nick Luff told reporters, although he would not specify which parts of the business would be up for grabs.

He said the funds could also be used to buy further upstream or producing assets off the UK coast.

"There is value in gas assets in the UK -- the North Sea is one possibility," Luff said.

French energy giant EDF agreed to sell 25 percent of British Energy to Centrica following its 12.5 billion pound takeover of the UK company in September.

The deal was agreed partly to appease the government, which was uneasy about selling the country's entire nuclear industry to an overseas player.

NO JOY FOR CUSTOMERS

Luff said the British Energy deal and the rights issue were part of a wider strategy to reduce Centrica's exposure to the wholesale gas price, which has led to soaring bills for domestic customers this year.

But he said the company had no plans to use the capital to cut household gas and electricity prices despite falling wholesale costs and the onset of winter.

"The gas price has not come down in the same way as the oil price has. We buy all our gas on a forward basis so we'd have to see a sustained long-term fall (to cut prices)," he said.

Centrica raised gas prices for its 16 million customers by 35 percent in July. In a separate statement, it said it had lost customers as a result of the move although was still trading in line with expectations.

The rights issue is fully underwritten by Goldman Sachs, Credit Suisse and UBS as joint bookrunners.

(Reporting by John Bowker; Editing by Will Waterman and Quentin Bryar)

LONDON (Reuters)