Direct Energie Buys Verbund’s Poweo Stake for $52 Million

Direct Energie, a closely held French power supplier, will buy 46 percent of domestic rival Poweo SA from Verbund AG to compete in Europe’s second-biggest electricity market.

Direct Energie will pay 36 million euros ($52 million), or 4.77 euros a share, it said today in an e-mailed statement. The combined entity will have 1 million residential and business power and gas customers in France and become the third-biggest power supplier after Electricite de France SA and GDF Suez SA.

Poweo and Direct Energie have fought since 2007 to take clients from former monopoly holders EDF and GDF Suez. They have made few inroads and complained that their chances of competing profitably for electricity customers have been hindered by low government-set tariffs and EDF’s ability to supply relatively cheap nuclear power. Poweo has reported net losses since 2007.

Poweo fell as much as 10.3 percent in Paris trading, the biggest decline in more than two weeks, to 4.95 euros at the close of trading.

“The price is lower than where Poweo was trading so the market is adjusting,” Louis Boujard, a Paris-based analyst at Aurel-BGC, said by telephone. Direct Energie and Poweo may now have the “minimum” clientele needed to compete effectively in France, he said.

Biggest Gainer

Verbund rose 0.7 percent to 29.42 euros in Vienna, the highest price in almost three weeks. The stock was the biggest gainer in the 28-member Bloomberg European Utilities Index.

EDF lost its monopoly in the French power market four years ago, and legislation aimed at further opening the market took effect this month. Verbund blamed the law for its decision to sell out of Poweo, citing a “disadvantageous rate structure” that forces EDF to sell nuclear output to rivals at a government-set price.

Competitors to EDF, including Poweo, Direct Energie and GDF Suez, have said the new law may not result in fair competition because the wholesale price was set too high compared with regulated rates for household customers.

Poweo shares peaked at 46.35 euros on July 2, 2007, when France’s household electricity and gas markets were first opened to competition. They have since slumped 89 percent.

Entry to France

Verbund, Austria’s biggest utility, entered France by acquiring a stake in Paris-based Poweo in 2006, betting that the liberalization of the French power market would help it gain customers and boost profit. Laws to open up the industry have been implemented more slowly than the company anticipated.

The Vienna-based utility said July 1 it was in talks with potential buyers for its Poweo stake. Since the French utility is listed on the NYSE-Alternext exchange, a sale of less than 50 percent doesn’t trigger a mandatory offer, Poweo said at the time. Direct Energie doesn’t intend to acquire additional shares in Poweo, according to today’s statement.

“The entry into the capital of Poweo marks a successful development strategy in an opening market,” Montrouge-based Direct Energie said, adding that its shareholders want to “build a leading player in the energy sector.”

Direct Energie’s biggest shareholders are Francois 1er Energie, majority-owned by Stephane Courbit, and Impala SAS, formerly Louis Dreyfus SAS, according to information on its website.

Renewable Asset Sales

Verbund still owns Poweo’s power production and wholesale distribution unit, which it agreed to take over in December. It sold its French renewable-energy assets earlier this month and a stake in hydropower plants in Germany in June.

As part of today’s deal, Direct Energie and Poweo will hold an option for 100 percent of Poweo’s production sites in Toul, Pont-sur Sambre and Blaringhem, according to Direct Energie and Verbund. Direct Energie, which was formed in 2003, is developing an 800-megawatt gas-fired power plant at Hambach, France.

France, Europe’s biggest power market after Germany, used 443 terawatt-hours of electricity last year, according to the industry regulator. EDF’s 58 French nuclear reactors generated 407.9 terawatt-hours. At the end of March, the country’s alternative power suppliers -- those that aren’t EDF or GDF Suez -- had captured a share of just 5 percent of the household market and about 16 percent of business-customer volumes.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE