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EDF Sells EnBW Stake to German State for $6.2 Billion

Electricity pylons carry high voltage power lines from Energie Baden-Wuerttemberg AG's nuclear power plant in Philippsburg, Germany. Photographer: Hannelore Foerster/Bloomberg
Electricity pylons carry high voltage power lines from Energie Baden-Wuerttemberg AG's nuclear power plant in Philippsburg, Germany. Photographer: Hannelore Foerster/Bloomberg

Dec. 6 (Bloomberg) -- Electricite de France SA, Europe’s biggest power generator, said it agreed to sell its stake in German utility EnBW Energie Baden-Wuerttemberg AG for 4.7 billion euros ($6.2 billion) because of “political” considerations.

The state of Baden-Wurttemberg offered 41.50 euros a share, representing a 19 percent premium on its last closing price, the Paris-based company said in a statement today.

“The prospects of EDF’s development in Germany were not very promising,” Chief Executive Officer Henri Proglio told a conference call. “This was a political decision which would have cost EDF a lot to fight.”

The French state-controlled utility announced in the past four months the sale of its U.K. grid and a deal to take control of a joint venture to develop atomic reactors in the U.S. Today’s sale doesn’t mean EDF wants to focus on fewer markets, Proglio said.

“The strategic development of EDF in Europe and the world is not called into question,” Proglio said, before explaining that a decision by the state of Baden-Wurttemberg to concentrate EnBW’s activities locally and give it a “strong” local shareholding was behind the deal.


An oversupply of power in Germany, which is expected to increase with the development of thermal plants, as well as taxes on nuclear and thermal electricity, amounted to a “difficult regulatory and legislative” environment, he said.

EDF had already reached its target for asset sales with the U.K. grid deal, Chief Financial Officer Thomas Piquemal said in September. That agreement lowered EDF’s debt by 6.8 billion euros. The German deal will allow EDF to reduce debt by about 7 billion euros, resulting in “increased financial flexibility,” the company said today.

“EDF has a stable outlook at all ratings agencies but its credit ratings are stretched,” said Christian Kleindienst, an analyst at Unicredit SpA in Munich.

The utility also has a minority stake in Edison SpA, Italy’s second-largest power producer. EDF is now “concentrating” on Edison and the Italian market, Kleindienst said.

Put Option

EDF owns a 45 percent stake in EnBW while OEW, the other major shareholder made up of local authorities, won’t sell its stake to the German land or exercise a put option against EDF for part of its holding, the French utility said. EnBW, which has nuclear, hydroelectric and thermal power plants, said the German state plans to place the shares back in the capital market.

The deal price is at a multiple of around six times EnBW’s 2011 estimated earnings before interest, taxes, depreciation and amortization, EDF said.

Following the deal to sell the stake in EnBW, EDF said its net debt-to-Ebitda ratio will be around 2.2 for the full year.

EnBW rose 17 percent to 41.10 euros as of the 4:30 p.m. close in Frankfurt. EDF increased 0.6 percent to 31.81 euros in Paris.

OEW “has decided not to sell its subordinated shares to the land and not to exercise its preemption rights” on EDF’s stake, according to EDF.

OEW had a put option against EDF for the portion of its 45 percent stake subject to a July 2000 shareholders’ agreement. That accord meant OEW could sell a 25 percent stake to EDF at any time through the end of 2011 at a price of 37.14 euros, according to EDF’s 2009 annual report. This resulted in a 2.3 billion off-balance commitment last year.

The renegotiation of the shareholders’ pact “would not have left any possibility of gaining control of the company and would have put in difficulty our role as an industrial company,” Proglio said.

To contact the reporter on this story: Tara Patel in Paris at

To contact the editor responsible for this story: Will Kennedy at

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