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Verbund Rises on Cash-Flow Prospects After EON Power-Asset Swap

Verbund AG, Austria’s biggest utility, rose to a four-week high in Vienna trading after saying an asset swap with Germany’s EON SE will boost cash flow and lower investment costs.

Verbund climbed as much as 3.1 percent to 18.175 euros, the highest intraday price since Nov. 5, and sold for 17.895 euros at 11:45 a.m. local time. The stock has dropped 14 percent this year, valuing the company at 6.22 billion euros ($8.1 billion).

EON agreed to take Verbund’s 50 percent stake in Turkish power producer Enerjisa Enerji AS in exchange for its interest in eight hydropower plants in Germany, according to a statement today. Verbund, which bought into Enerjisa for 326 million euros in 2007, will focus on its businesses in Austria and Germany.

“The deal is positive for Verbund because it gives the company positive cash flow in coming years rather than additional investment costs,” said Christoph Schultes, a Vienna-based analyst at Erste Group Bank who recommends buying Verbund shares. “Their risk profile has really been reduced.”

The transaction, valued at about 1.5 billion euros, has a 300 million-euro cash element, Verbund Chief Executive Officer Wolfgang Anzengruber told reporters in Vienna. It will result in positive cash flow of about 400 million euros next year, the company said in an analyst presentation on its website.

“It allows us to realize asset appreciation in Turkey while strengthening our core market,” according to the CEO, who said Verbund had invested about 950 million euros in its Turkish business. The utility will narrow the scope of future investments to focus on European hydropower, he said.

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