EON Loosens Ties to Old Energy as Uniper Starts Trading

  • EON keeps 47 percent minority share in its fossil-fuel spinoff
  • Uniper valued at 3.8 billion euros on first day of listing

EON SE cut most of the grip on the utility’s legacy fossil-fuel fired power stations as its Uniper SE unit was listed on Monday.

Dusseldorf, Germany-based Uniper began trading at 10.015 euros ($11.28) a share and closed at 10.30 euros on the Frankfurt Stock Exchange, valuing the company at about 3.8 billion euros. The spinoff was a member of the nation’s benchmark DAX index for Monday only before dropping out.

Klaus Schaefer on Sept. 12.
Klaus Schaefer on Sept. 12.
Photographer: Alex Kraus/Bloomberg

Uniper sees “very broad interest in terms of funds and investors looking” at the company, “from long-only funds all the way to hedge funds,” Chief Executive Officer Klaus Schaefer told Bloomberg Television in an interview. “We’ve seen enough demand over the last week that we know that we’ll have our investor base on a stable basis going forward.”

EON’s split and decision to list the majority of Uniper is a response to Germany’s shift from nuclear and fossil fuel to solar and wind, a policy that’s undermined power prices and hurt profitability at utilities. The Essen, Germany-based company now focuses on renewables, networks and retail consumers.

RWE AG, EON’s main competitor in Germany, followed last December with its own plan to separate its renewables, retail and grid business. It will sell about 10 percent of the new company in an initial public offering this year. While more stakes will be sold, RWE intends to keep a majority.

Click here for Bloomberg New Energy Finance’s Take on Uniper

“Uniper is significantly undervalued,” analysts at Macquarie Group Ltd. wrote Monday in a note to clients, setting a price target of 16 euros a share. They see the dividend for 2018 doubling from the 55 euro cents a share Uniper forecast for 2016.

“We see a strong buying opportunity over the first few days of trading for Uniper as forced index selling and related investor rotation could result in an abnormally low Uniper share price, which is not justified by fundamentals,” the Macquarie analysts wrote.

Power Producer

Uniper is one of Europe’s biggest electricity producers, providing enough power for about 75 million homes from gas and coal-fired plants in Germany, the Netherlands and Russia to nuclear reactors in Sweden. The utility also owns gas storage sites in Germany and the U.K., a stake in a Siberian gas field as well as long-term supply contracts with the world’s biggest gas exporter. Its trading arm buys and sells commodities such as power, gas and coal.

EON, formed in 2000 from a merger of utilities Veba AG and Viag AG, distributed 53 percent of Uniper’s stock to existing investors, handing out one share for every 10 of EON. It intends to sell the remaining stake in 2018 at the earliest.

EON ex-Uniper fell 3.2 percent to 6.95 euros in Frankfurt.

Having two shares to trade instead of one gives investors more freedom to make decisions for their portfolio, EON Chief Executive Officer Johannes Teyssen has said.

Uniper’s market valuation is about a third of the book value EON applied to the business as of June 30, indicating it may have to make more writedowns after recording almost 4 billion euros of impairments on Uniper’s assets last month.

“A further writedown is inevitable and will take place in the fourth quarter,” Thomas Deser, a fund manager at Union Investment, one of EON’s 15 biggest holders, told Bloomberg Television Monday in an interview. “We don’t yet have a real market value for the grid business enclosed in the future EON” that may ease the impact, he said.

There’s a “significant level of new interest” from investors for what remains of EON, CEO Teyssen told Bloomberg Television in an interview on Monday. The Essen-based utility needs to reflect Uniper’s market value in its balance sheet, and the spinoff’s initial “price is a starting point. I think there’s always upside potential,’’ he said. 

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