Sunday, August 03, 2008

Taxpayers Saved By Man From Pru


The man from the Pru has taken a lot of stick over the last several years. There was his ill-advised foray into estate agency, his misadventures in pensions mis-selling, his misadventures in endowment policy mis-selling, his dividend cut, his rights issue, his unfortunate CEO sacking, his spurning of marriage (at £1.50 above the current share price), etc etc.

But this weekend at least, taxpayers should be reaching out and shaking the man's hand.

Because along with fellow investment manager Invesco, he has stopped EDF's £12bn bid for British Energy - an offer which almost certainly undervalued a company in which taxpayers have a 35% stake.

As we blogged last week, taxpayers had looked doomed to take another nuking:
  • EDF was the only bidder, RWE and others having reportedly declined to bid
  • The government is desperate for cash
  • The government is also desperate to get the new nukes built, having faffed around for a decade
  • The Shopper has a dire record on asset sales (especially under the Brown Bottom)

In the circs, we could see that EDF had every incentive to play hardball. And despite soaring energy prices and the golden key offered by BE's nuke sites, EDF were sticking on a price that was way below what the BE Board reckoned it was worth. They offered precisely the same duff deal to taxpayers that we got during the first BE debacle back in 2002 - ie jam tomorrow: full payment sometime in the future, but conditional on future revenues.

Our wibbly wobbly "leaders" were biting EDF's hand off. They were quite prepared to sell out for whatever EDF felt like offering. As we've seen over and over again, value for taxpayers is something they just don't care about, especially when their backs are against the political wall. Why should they care? It's not their money, and they'll be gone long before the final core meltdown.

Fortunately for us, the private sector takes a longer-term view. It has to care about value. And in this case, two major shareholders from the private sector (holding 22% of BE between them) have stepped in protect us.

So let's hear it for the Man.

PS Some of the commissariat spin has suggested that by stymying the bid, Invesco/Pru have consigned Britain to a future of energy blackouts. Rubbish. Point one, it's this government's decade of faffing over new nukes that is responsible for any problems we do have. And point two, BE's nuke sites are worth a fortune. Centrica has already spent all weekend assembling a new bid/merger, and EDF themselves will be back soon enough. Just watch them.

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