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Berkshire Hathaway, PPL want UK assets' full value if utilities are nationalized

Two U.S. power companies with British operations said they would seek compensation if the Labour Party's proposal to nationalize U.K. utilities goes into effect.

Berkshire Hathaway Energy, which owns Northern Powergrid UK Holdings, and PPL Corp. the parent company of Western Power Distribution plc, have joined the chorus of electricity and gas grid operators opposed to transferring the assets back into state ownership.

"Should Labour form a government in the future and be able to move forward with its proposal, we strongly believe that we are entitled to full compensation from the U.K. government," Pennsylvania-based PPL said in a May 17 news release, describing Labour's plan as "an ill-conceived idea."

With U.K. Prime Minister Theresa May announcing she would step down as the Conservative party leader June 7, the Labour Party could form a government if a new prime minister calls for a general election for members of Parliament and the party gains enough seats for a majority.

Under the nationalization proposal, utilities' shareholders would be compensated through a bond issuance, but ultimately Parliament would decide how much stockholders would get back, factoring in several deductions such as pension fund deficits and the state of the companies' infrastructure. If the Labour Party comes into power and moves forward with the measure, PPL and Berkshire Hathaway said they are prepared to fight it, or demand payments for their assets at full market value.

Northern Powergrid said in a May 23 email it is "unknowable at the moment" what financial impacts nationalization would have, but the company would "seek to protect the interests of our investors."

"Much more importantly, such a move would undermine the U.K.'s economy, the ability of the U.K. government to borrow money and the U.K. international standing," said Patrick Erwin, Northern Powergrid's policy and markets director.

PPL said privatization has enabled WPD's costs to customer to be 17% lower than pre-privatization on a like-for-like basis, while Northern Powergrid said it has had double-digit percentage reductions in network-related costs. The companies have also said becoming state-owned would thwart their capital-intensive investment plans for decarbonizing the grid.

Under the current eight-year regulatory period, WPD is investing £7.1 billion in its network, and has so far deployed 9.9 GW of distributed generation, including more than 5.3 GW of solar and wind generation. Meanwhile, Northern Powergrid is investing £3 billion in its network and is working on various projects including studying pairing storage with solar.

"[Nationalizing U.K. utilities] will also distract us from our work to create future energy systems that meet customers' needs, including the most vulnerable in society, and enable more smarter, low-carbon technologies," Erwin said.

Berkshire Hathaway Energy is a subsidiary of Berkshire Hathaway Inc.