Jun 1999

AES, THE WORLD'S largest independent power company, Electricité de France, the giant state-owned utility, and the Japanese trading company Marubeni, are the latest to join in the frenetic bidding to buy Drax, the 4 GW coal-fired power station in the north of England on sale by the UK's National Power. The asset is being sold in accordance with regulatory requirements concerning National Power's purchase of Midlands Electricity.

The Spanish government has been quick to impose electricity price cuts, citing lower interest rates, improved efficiency and higher demand as justification. Now, as the market moves to an accelerating timetable of liberalisation, there can be no doubt that Spain is leading efforts to open up the European market

The last six months have seen developments affecting the PRC power sector which will have a significant impact on the way projects will be financed in China. The 600 MW restriction, experiments with a market-based electricity pool and the separation of power generation from grid distribution present new challenges for attracting international investment and finance.

A warmer than expected winter can melt a utility's profits. Now, weather hedges can protect earnings from unanticipated drops in demand. Already popular in the US, weather derivatives have now reached the UK and continental Europe. They're proving to be the next best thing to Mother Nature herself.

There are a number of positive drivers behind the current boom of utility merger and acquisition activity, particularly in the electricity industry - but there are also pitfalls waiting for the unwary

After some early inertia, the expected liberalisation of Taiwan's electricity industry, and specifically the privatisation of Taipower, looks ready to roll.