EDF sets UK sale timetable - sources

Infrastructure funds from Macquarie , 3i <3IN.L> and IFM Infrastructure have also expressed interest, sources close to the funds said. National Grid is also preparing a bid, two sources close to the company said.

National Grid, SSE, Macquarie and 3i declined to comment while CPP, Borealis and IFM were not available for comment.

More or new combinations could emerge ahead of the sale's launch as other major players, such as infrastructure funds from RREEF, Alinda, GIP and Blackstone , decide on whether they will participate, a number of industry sources said.

A challenge for any buyer will be bringing EDF's DNOs to the efficiency levels achieved by other grids and sourcing the financing for what has to be a huge equity check, people familiar with the assets said.

EDF has undertaken what bankers described as a pre-leveraging of the UK operating companies it plans to sell. It is doing this via a 950 million pound bond issue in three tranches with 7, 22 and 27-year maturities.

This is cheaper than acquisition or staple financing in the current market conditions, bankers said.

Acquisition finance for BAA's sale of Gatwick airport, for example, starts at 350 basis points (bps) over Libor with the margin rising over time, according to Reuters Loan Pricing Corp data.

EDF's UK bond priced on Friday at between 165 bps and 175 bps over midswaps depending on the tranche.

The bond deal's covenants provide investors with some protection if future owners were to hike the companies' debt.

Investors will get an additional 25 basis points if the credit rating on the operating companies is cut to BBB+ by Fitch and Standard & Poor's and Baa3 by Moody's Investors Service. They get a further 25 basis points if the ratings fall further.