ONCE, it seemed that a volt was just a volt, wherever you were in the world. But, after this week's agreed takeover of Midlands Electricity by General Public Utilities and Cinergy, both of the US, many must be wondering what is so special about British electricity that makes Americans so determined to acquire it.
The latest deal is the third involving a takeover of a British electricity distributor by a US utility. Last year Southern Company bought Sweb, and earlier this year Central & South West completed its acquisition of Seeboard.
There are plenty of reasons why US electricity companies want to get involved in Britain. Some of them have to do with what is going on in the US, where - somewhat later than in Britain - the electricity market is being deregulated.
This new era will make life much tougher for US utilities, leading to price competition and a squeeze on profits.
One reaction has been a wave of utility mergers as companies seek to cut costs by combining operations; but the other reaction has been to look for growth opportunities outside the US.
"Most US utilities preparing for deregulation are looking for ways to become less dependent on their core business", says Mr Robert Anclien, global managing partner of Anderson Consulting's utilities industry practice.
"Acquiring utilities outside the US is a way to diversify while still staying pretty close to your core competence."
As Mr Anclien points out, many of the larger US utilities have the cash to do this because the uncertainty over deregulation means they have almost stopped investing in new generating plant.
US utilities have recently participated in the privatisation of several Australian electricity distributors, and have also undertaken power generation projects in Asia and Latin America.
Britain has some particular attractions, however. And the regulatory regime is a big one. In the US, state regulators effectively dictate electricity companies' profits by controlling their return on equity. In Britain, the government regulates electricity prices, not profits: so US utilities see big opportunities for increasing profits by cutting costs.
Mr Edward Tirello, a utilities analyst at the Wall Street offices of NatWest Securities, says another obvious attraction of Britain is the common language: "You actually understand what the hell they are saying. That helps."
More importantly, US companies also want to learn from Britain's experience with deregulation.
"England now looks like America will look in the next five to 10 years, with generating companies, a grid company and distribution companies," Mr Tirello says.
Mr Steven Fleishman, an analyst at the Wall Street firm of Dean Witter Reynolds, adds that, in many ways, the recent deals have been financial plays as much as anything else. "You can come in and leverage these deals pretty substantially because the British distributors are very financially strong companies with good cash flows and strong balance sheets."
For all these reasons, this week's deal may not be the last US electricity acquisition in Britain. Although the British government has ruled out a bid for the generators, another five distributors remain independent: Northern, Yorkshire, London, East Midlands and Southern.
The list of potential bidders goes well beyond Southern and Central & South West. Houston Industries, for example, is one company that has made no secret of its interest in the British market. PacifiCorp is another that has been frustrated in its attempts to enter Britain. Last year it entered bid talks with Manweb, only to be beaten bye Scottish Power.
Other US companies watching developments are Pacific Gas & Electric, which already has a toehold in Britain through its participation in a £250 million sterling power generation project in Cheshire, and Edison International's Mission Energy subsidiary, which last year bought the National Grid's First Hydro pumped storage division for £652.5 million.
Also on the list of possible bidders are Texas Utilities, Utilicorp and Energy, which participated in last year's Australian privatisations, and Dominion Resources, which unsuccessfully competed with Mission Energy to buy First Hydro. Companies such as Duke Power and FPL Group (Florida Power & Light) are easily big and rich enough to bite off a chunk of the British electricity industry.
However, any US companies which have not yet entered the running are unlikely to do so at this late stage, says Mr Tirello: "The other people who haven't done it are not going to do it."
