RWE Said to Work With Goldman on Possible Sale of U.K. Business

RWE AG (RWE) is working with Goldman Sachs Group Inc. as Germany’s second-largest utility considers a sale of its Npower unit in the U.K., according to a person familiar with the matter.

The examination of the business, valued by analysts at about 3.6 billion euros ($5.2 billion), is preliminary and the company may not pursue a sale, said the person, who declined to be identified because the discussions are private. A person familiar with the matter said in February that RWE was considering a sale of U.K. assets.

RWE, based in Essen, is seeking to raise as much as 8 billion euros through asset sales by 2013 to cut debt. The company also faces a tax on its German nuclear plants and a government decision to phase out atomic power.

The Npower division is worth about 3.6 billion euros, Scott Phillips, an analyst at Unicredit, wrote in a note to investors. RWE will struggle to get a higher price as regulatory risks may hinder foreign interest, while U.K. buyers may face a competition inquiry, he said.

Npower has 6.5 million U.K. customers and generates 10 percent of the country’s power, according to RWE’s website. RWE’s renewable-energy unit, called Innogy, operates about 550 megawatts of wind turbines and hydropower facilities in the U.K.

Core Market

“The U.K. continues to be a core market of RWE,” Peter Hoscheidt, a spokesman for the company, said in an e-mailed statement yesterday. “Beyond that, we don’t have any further comment on market speculation, which this is.”

RWE climbed 1.2 percent to 39.29 euros as of 11:01 a.m in Frankfurt. The stock has fallen 21 percent this year for the worst performance in Europe’s benchmark utility index.

RWE may sell Npower, one of the U.K.’s six largest energy suppliers, for 5 billion pounds ($8 billion), the London-based Sunday Times reported yesterday, citing unidentified people familiar with the matter. That would make it the U.K.’s largest utility deal since Electricite de France SA sold its British power network to a group led by Hong Kong’s Cheung Kong Infrastructure Ltd. last year for 5.78 billion pounds, according to Bloomberg data.

U.K. power companies must invest record amounts to meet targets for reducing carbon dioxide emissions. The government has pledged to get 15 percent of its energy from renewable sources by the end of the decade. The cost of replacing existing plants and building renewable projects will be about 200 billion pounds, according to Ernst and Young.

Attract Capital

Power generators will need to attract capital from banks and other financial institutions, Npower’s Chief Executive Officer Volcker Beckers said in an interview last month.

The industry needs “50 to 80 percent of funding coming from the banking sector and pension funds,” Beckers said. “Where we find partners that understand our model, it is something we should look at.”

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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