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SCOTTISH AND SOUTHERN

ENERGY PLC and AIRTRICITY

HOLDINGS LTDManagement Mergers and Acquisitions

FallFall 20102010

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Deal summary

� Acquirer: SSE

� Target company: Airtricity

�� ValueValue of the transactionof the transaction: 1,826m: 1,826m¼¼

� Agreement: 4th January 2008

� Completion: 15th February 2008

� Strategic motivations for SSE, financialadvantages for Aitricity

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Outline

1. Internal and external strategic analysis

2. Integration challenges

3. Financial analysis

4. Price valuation

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Analysis of the cleantech

market

Cleantechmarket

Major Publicpolicies

Continued

growth in

energydemand

Depletion of oil and gas=> Increaseof the prices

Technologicalprogress =>reduction of 

the initial cost

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SWOT analysis of the deal

Strengths

� Reinforce its UK¶s leadinggenerator of electricity fromrenewable energy

� Increase of its operating portfolioof renewable energy

� Strong expertise of Airtricity

Weaknesses

Acquisitionof Airtricity

by SSEOpportunities

� Growing demand of renewableenergies = > investment

opportunities

�Expansion of its activities in

Europe and Asia

Threats

� Many competitors

�Others companies interested in

Airtricity: E.ON , EDF, ENI

� Renewable energy is more

expensive than fossil energy

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Differences between the

companiesSSE Airtricity

Currency GBP Euro

Localisation Perth, UK Dublin, Ireland

Market(s) Diverse Renewable energy

generator 

Vertical acquisition

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Integration challenges

� Management issues:

± Mix both management teams

� Geographical issue

� Diversification and brand issues:± Airtricity vs. SSE Renewables

An integration crossing knowledge and

motivations

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Forcasts before theForcasts before the

acquisitionacquisition� SSE¶s financial profil weakened after Airtricity¶s

acquisiton(Moody µs and Fitch)

� downdraded share (natation AA-)

� downgraded borrowing status

strain of SSE future interest payments

� Reasons: -weakened CF of Airtricity

- Debt financed deal

- Expensive purchase price? (SSE pays 700 timesearnings for Airtricity which made just 150,000£ for 2007)

Because of the lack of Airticity¶s CF and excessive purchase price

creditrating agencies doubt in SSE¶s financial profil and downgraded share¶s

notation.

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FACTSFACTS

�2008 2009 2010

SALES 15256 25424 21550

Dividend/

action(GBP)

60,50 66,00 70,00

JANUARY

2008

FEBRUARY

2008

MARCH

2008

Stock price 4,383 4,348 3,472

M GBP

Finally after the acquisition stock price dropped

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SSE's stock price

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TREND : Price/MW is increasing over years in wind sector 

First approach: multiple of MW

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� 2nd approach: multiple of EBITDA

� Average in the wind industry:

± EV/EBITD

A in 2007= 18.7x� Source: Analyse des prix d¶acquisitions dans le secteur � éolien en Europe. Matthieu Guillard. Avril 2008.

� EBITDA Airtricity in 2007: 85.2 m¼

� Fair price: 18.7 * 85.2 ¼=1 590 m¼

� Paid : 1 455 ¼

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Sources

� Websites:

± Scottish & Southern to buy Irish windfarm firm, Jan 4, 2008

http://www.reuters.com/article/idUSL043559520080104

± Crisis or not, renewable energy is hot, March 2009

http://www.pwc.com/gx/en/energy-utilities-mining/pdf/renewable-energy-report.pdf 

± Completion of acquisition of Airtricity Holdings Ltd, January 2008

www.scottish-southern.co.uk

± http://thescotsman.scotsman.com/business/SSE-buys-windfarm-giant-.3643377.jpg

± http://www.thefreelibrary.com/SSE's+%5Bpounds+sterling%5D1bn+Airtricity+buy+puts+the+

wind+up+Moody's.-a0173212042

± http://uk.reuters.com/article/idUKWNA286820080107TEXT-Moody's may cut Scottish

and Southern Energy plc

± http://thescotsman.scotsman.com/business/SSE-buys-windfarm-giant-.3643377.jpg

± Airtricity launches SSE Renewables,

http://www.businessandleadership.com/leadership/item/18743-airtricity-launches-sse-ren

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Appendixes

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