EON AG (EOAN), Germany’s largest utility, is proceeding with the sale of energy assets in its home market valued at as much as 4.5 billion euros ($5.9 billion) as it seeks to cut debt and raise cash for growth elsewhere, according to three people with knowledge of the matter.
The sale of the Dusseldorf-based utility’s Open Grid Europe natural gas network has drawn interest from four groups of energy and financial bidders and may be concluded in May, said two of the people, who declined to be identified as the plans are private. EON is also working with Barclays Plc (BARC) on the sale of its Energy From Waste unit which generates power by burning refuse, and it may attract strategic bidders, the people said.
Over the last decade, EON accumulated debt snapping up power plants and customers from Spain to Siberia as energy markets began to open to competition. Then Germany’s decision last year to exit nuclear power reduced earnings for the country’s largest four utilities, prompting EON to cut jobs. The company is now turning to markets such as Brazil where energy demand is projected to grow faster than in Europe.
GDF Suez SA (GSZ), Belgium’s Fluxys, Dutch grid operator Nederlandse Gasunie NV and Macquarie Group Ltd. (MQG) are leading competing sets of bidders for the German gas network, said two of the people. The business may fetch more than its so-called regulatory asset base, a common gauge of a grid’s value, of about 3 billion euros ($4 billion), one of the people said.
Each of the four groups own pipelines in Germany or its neighbors. Funds managed by Macquarie Infrastructure and Real Assets completed the purchase of RWE AG (RWE)’s German gas grid unit about a year ago. Gasunie agreed to buy a German gas transport network in 2007.
Fluxys G SA, the majority owner of the Belgian grid operator, completed the purchase of Eni SpA’s minority stakes in German and Swiss pipelines in November. GDF Suez of France operates Europe’s largest gas network.
Open Grid Europe operates about 12,000 kilometers (7,450 miles) of gas transmission pipes in Germany, according to its website.
Rules guaranteeing inflation-linked rates for energy transmission have lured pension plans, insurers and infrastructure investment funds to seek grid assets in the region. The German insurer Allianz SE agreed to acquire stakes in the Norwegian Gassled pipeline network last year.
European regulators have sought to split energy generators from their transmission assets in a bid to increase competition in the gas and power markets.
“Fluxys (FLUX) is interested and is in a bidding consortium” for Open Grid Europe, Berenice Crabs, a spokeswoman for the Belgian company, said by phone from Brussels yesterday.
Spokesmen for EON, Macquarie and Gasunie declined to comment on the possible asset sales.
Gerard Mestrallet, GDF’s chief executive officer, told reporters in Berlin last month that GDF Suez has set up a group to look into buying EON’s pipelines. GDF Suez spokesman Paul- Alexis Bouquet cited Mestrallet’s comments, and declined to comment further.
EON Energy From Waste’s sales rose to 544 million euros last year from 539 million euros a year earlier as the company received more refuse for incineration, according to its website. The majority of the division’s facilities are located in Germany, the website shows. The company is scheduled to report 2011 earnings March 14.
The waste division may be worth between 800 million euros and 1.5 billion euros, two of the people said. EON will probably receive information from interested parties next month, one said.
French utility Veolia Environnement SA (VIE) and environmental services company Remondis AG are among the parties that may seek to buy the business, two people with knowledge of the matter said. Asian buyers may also be interested, one said.
A Veolia spokeswoman didn’t immediately return a call and e-mail seeking comment. Remondis spokesman Michael Schneider declined to comment.
To contact the editor responsible for this story: Will Kennedy at email@example.com