Telecom Plus to buy back two energy units from Npower for $351 mln

(Adds analyst comment, details, background)

By Richa Naidu

Nov 20 (Reuters) - Multi-utility provider Telecom Plus Plc (LSE: TEP.L - news) said it signed a 218 million pound ($351 million) deal to buy back two units from Npower, nearly eight years after selling them to the British arm of Germany's RWE AG (LSE: 0FUZ.L - news) .

Shares in Telecom Plus jumped more than 15 percent to a life-high of 1735.45 pence on Wednesday morning, making the stock the second biggest percentage gainer on the London Stock Exchange.

The deal will improve energy margins by 4.25 percent and allow the company to offer more competitive tariffs, Telecom Plus said.

It also ensures a 20-year supply contract with Npower, said Telecom Plus, which provides gas, electricity, fixed-line telephone and broadband internet services.

The owner of the Utility Warehouse brand said it would raise about 130 million pounds via two share issues, underwritten by Peel Hunt, to partially fund the deal.

Telecom Plus said it would also use about 100 million pounds from its loan facilities for the deal.

The acquisition is a major strategic move for Telecom Plus, Edison Investment Research analyst Neil Shah said in a note.

"With some reinvestment in price, the company is now even better placed to take advantage of consumer discontent around the big six."

Britain's big six utilities, who together control 99 percent of the retail market, are under fire from politicians for increasting prices. Lawmakers have accused them of colluding to produce above-inflation price rises that they unveiled just as a winter approached.

Telecom Plus sold the two businesses, Electricity Plus Supply and Gas Plus Supply, to Npower in February 2006 for a "nominal" amount. (http://link.reuters.com/naz74v)

The transaction is expected to materially increase earnings in the first financial year after completion, which is expected by late December, the company said.

Telecom Plus also posted a 10 percent rise in first-half adjusted pretax profit and raised its interim dividend by 23 percent.

Shares in Telecom Plus were up 15.2 percent at 1735.45 pence at 1014 GMT. ($1 = 0.6210 British pounds) (Reporting by Richa Naidu in Bangalore; Editing by Gopakumar Warrier)