French firm to take control of UK power company

International Power, which owns UK assets including the giant coal-fired station at Rugeley in Staffordshire, will be 70 per cent owned by GDF under the deal to create one of the world's biggest independent power generators.

The proposed tie-up comes after British Energy was bought by another French company, EDF, for 12.5bn in 2008. It leaves Britain owning just two independent energy producers in Centrica and Scottish & Southern Energy.

The new business, which will combine International Power's 45 power stations and the international assets of GDF, will continue to be listed on the London Stock Exchange with GDF as its majority shareholder.

GDF will pay a special dividend of about 90p a share, worth 1.4bn, to International Power's shareholders as part of the deal, which is structured as a reverse takeover.

As well as Rugeley, which powers the equivalent of half a million homes, International Power is the majority owner of the First Hydro hydroelectric plants at Dinorwig and Ffestiniog in North Wales and the gas-fired station at Saltend, near Hull.

The company also reported half-year profits today of 524m, a drop of 5 per cent on a year earlier after strong contributions from operations in Australia and the Middle East were offset by weaker profits in North America.

The Europe division, which includes its UK operations, saw underlying profits improve 10 per cent after a "significantly" improved performance at Rugeley.

An improved credit rating following today's deal will mean International Power pays less for its debt and will find it easier to fund expansion.

The enlarged company, which will continue to be led by chief executive Philip Cox, is expected to generate cost savings of around 165 million a year.

GDF is 35 per cent owned by the French government and is several times larger than International Power's current market capitalisation of around 5.7bn.

The French company said the tie-up will make it the world's largest power company by revenues and second largest by generation capacity.