U.K. electricity companies could be the next business sector to embrace securitization, according to the latest market speculation. It is believed that Bayerische Landesbank, Bank of Tokyo-Mitsubishi, Royal Bank of Scotland and Citibank are in discussions with several companies over possible deals as the power industry looks at new means of raising finance.
Over the last year or so the electricity business has been deemed a likely source of deals following the opening of the market to full competition last year. Since then, a degree of consolidation has taken place with a high number of takeovers as companies sought to win customers from outside their base regions.
Securitization is considered an attractive option for raising finance to fund acquisitions. In addition, the companies have suitable collateral for transactions from their large and stable customer revenues.
Bayerische Landesbank has already been mandated to arrange a EURO2 billion ($1.75 million) deal backed by corporate revenues for French giant Electricite de France, and has confirmed that it is talking to at least two U.K. companies. "We are in discussions, but those are at a relatively early stage," said Neville Scully, head of securitization at the bank's London office. "At this stage though, it's still just preliminary talks so I wouldn't hang your hat on a deal just yet."
Another company thought to be thinking of a deal is TXU Europe. The company recently bought Norweb Energi for GBP310 million ($450 million) and maybe looking at securitizing future flow revenues from Norweb's customers. TXU was unavailable for comment at press time.