Petroleum isn't the only industry undergoing a series of merger announcements (see Watching the World, this page).
Electric power producers and distributors also have announced plans to join forces in rapid succession in recent months. And other industry participants have formed strategic alliances that will enable them to better compete in a deregulated market.
"Electric utility mergers are a natural by-product of the growing competition in the industry and reflect the experience of every industry that has gone through the process of deregulation," said a report by the Progress & Freedom Foundation, Washington, D.C. "They are driven by the anticipation of cost savings, the perceived need on the part of utilities to increase the scope of their service, and differing perceptions over asset values and managerial capabilities.
"The current flurry of merger activity is changing the structure of the utility industry, which has remained essentially unchanged since the 1950s."
Key transactionsA number of large mergers have been anounced recently in the power industry. These include:
- Glasgow's Scottish Power plc agreed to buy Portland, Ore.-based PacifiCorp in a deal valued at $7.8 billion. PacifiCorp shareholders will own 36% of the new firm, ScottishPower. It will be based in Glasgow and will have about 7 million customers worldwide, mostly in the U.K., U.S., and Australia.
- American Electric Power Co., Columbus, Ohio, and Central & South West Corp., Dallas, agreed to form a $6.6 billion company. Upon completion of the transaction, CSW shareholders will own 40% of AEP. The new firm will serve 4.6 million customers in 11 U.S. states and 4 million outside the U.S., mostly in the U.K.
- National Grid Group plc, Coventry, U.K., and New England Electric System (NEES), Westborough, Mass., signed a $3.2 billion merger agreement. National Grid, owner of a high-voltage transmission network in England and Wales, is the world's largest privately owned transmission company, NEES said. NEES will become a wholly owned subsidiary of National Grid and will serve as its U.S. base of operations.
- Boston's BEC Energy and Cambridge, Mass.-based Commonwealth Energy System agreed to form a company worth an estimated $4.4 billion. The new firm will serve about 1.3 million customers in Massachusetts.
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