The drama surrounding Centrica's £2.3bn acquisition of 20 per cent of British Energy from French utility giant EDF this week was a power struggle in every sense. Since the deal was tabled last autumn, the collapsing oil price has pushed UK forward power prices down by 37 per cent, putting pressure on Centrica to negotiate a discount.
Which it has. By reducing the size of its stake from 25 to 20 per cent, and cleverly saving cash by offering its (generously valued) 51 per cent stake in Belgian energy provider SPE to part-fund the deal, Centrica has effectively bought into BE for 622p per share - much less than the 774p EDF itself paid.
This leaves Centrica with cash to fund further acquisitions of upstream assets, as well as the option to participate in four new build nuclear projects in the future. The most obvious acquisition target is the remainder (it already owns 23 per cent) of North Sea oil and gas producer Venture Production, although it might face competition from Gerany's RWE.
Citi analyst Peter Atherton believes Venture should have been a priority all along. Measured on an implied cost-per-barrel-of-oil basis, he estimates the Venture deal would work out at $9.43 a barrel compared to $17.14 for BE.
"We estimate that the oil price will need to be $80 plus throughout 2010-2020 and BE will need to match its best ever output levels on a regular basis for this deal to work for Centrica's shareholders," he gloomily predicts. British Energy's output has, of course, been anything but consistent in the recent past.
On the plus side, Centrica will receive a dividend from its stake in BE, which should rise in line with power prices. And the cost of introducing 'smart metering' for UK households, as the government is proposing, is likely to be revenue-neutral for utilities.
