Slough: SEGRO sells Slough Heat & Power

SEGRO plc, the leading provider of flexible business space in Europe, has announced that its interests in the power generation operation in Slough (Slough Heat & Power – SH&P) are to be acquired by Scottish and Southern Energy plc (SSE), one of the largest energy companies in the UK.

Contracts have been exchanged under which SEGRO will sell its shares in Slough Heat & Power Limited to Scottish and Southern Energy (“SSE”) and will simultaneously grant SSE a 45-year lease of the site which the plant occupies. SSE is also contracting to an “Energy Availability Agreement” under which it will commit to ensuring that SH&P continues to offer a high level of utility services to SEGRO customers.

The gross consideration for the assets being transferred to SSE is £49.2m which compares to a book value as at 30 June 2007 of £38.6m. Completion of the transaction is expected to take place around the end of December 2007 once remaining contractual conditions have been satisfied.

SH&P is situated on the Slough Trading Estate and provides a valuable and environmentally friendly energy resource for SEGRO’s customers on the Estate. It is a leading generator of renewable energy. SEGRO believes that the services SH&P provides for its customers can be enhanced through the ownership and capabilities of a major national utility company. The Slough Trading Estate – the largest business centre of its kind under single ownership in Europe – provides facilities for more than 400 companies and their 17,000 employees.

Like SH&P, SSE is fully committed to increasing levels of renewable energy generation and is a major investor in and developer of renewable energy technology.

Ian Coull, SEGRO chief executive, said: “This transaction is good news for our customers and our shareholders. Our customers on the Slough Trading Estate will benefit from Scottish & Southern Energy’s dedicated expertise as a national utility operator and from its much greater capacity and scale. Our employees also will benefit, both from the specialist utility expertise and support which SSE will be able to provide and from the wider choice of opportunities associated with being part of a leading energy company. And our shareholders will benefit from the divestment of a non-core activity which will enable our management team to concentrate fully on its own area of expertise – the provision of Flexible Business Space across Europe.”

Ian Marchant, chief executive of SSE, said: “I am delighted that Slough Heat & Power is to become part of SSE. It is an important business, situated right in the heart of one of our traditional operating areas. With its mix of assets and customers, it is a ready-made fit for SSE’s business model, and over time we expect to secure efficiencies and synergies which will create further value. Its sustainable energy credentials are particularly appealing, and we are also looking forward to working with the team at Slough.”

The transaction will result in the ending of the current monopoly supply of electricity services, allowing Slough Trading Estate customers to consider alternative suppliers – an option which occupiers have requested. For example, occupiers may seek to integrate the supply of their utility services on the Slough Trading Estate with other UK wide national contracts.

Following completion of this agreement (anticipated around the end of December and subject to final clearance processes) SH&P employees will join SSE.

In addition to the commercial and business occupiers, residential occupiers on the trading estate are also supplied by SH&P and they will similarly soon be able to benefit from being supplied by SSE.

SEGRO was advised on the transaction by KPMG Corporate Finance and by Nabarro.