By Christopher Bjork in Madrid and Shayndi Raice in London
German power utility E.ON SE has agreed to sell its Spanish
assets to Australia's Macquarie Group and Kuwait's sovereign-wealth
fund in a deal worth EUR2.5 billion ($3.1 billion), according to
people familiar with the matter.
E.ON's supervisory board is set to meet Friday to approve the
deal, the people said.
The sale is part of an orderly but costly retreat by the German
utility giant from Southern Europe's electricity market, hard hit
by a six-year economic downturn and sweeping regulatory changes
that lowered the profitability of energy firms in Spain. E.ON is
also in the final stage of selling its assets in Italy.
Under terms of the deal, Macquarie will provide 60% of the
equity and Wren House Infrastructure Management, a unit of the
Kuwait Investment Authority, will put up the remaining 40%, the
people said.
Once acquired, Macquarie plans to split the assets into two
companies, one comprising its regulated assets and the other its
unregulated assets. Each will have independent financing, the
people said.
The agreement followed exclusive talks between Macquarie and
Wren House. The winning bid was several hundred million euros above
a rival offer by private-equity firm CVC Capital Partners and a
joint bit by Gas Natural SDG SA and a unit of Morgan Stanley, one
of the people said.
Germany's biggest power company could use the proceeds from the
sale to reduce its EUR31 billion debt. It is also shifting
resources to markets such as Russia, Turkey and Brazil, in a bet
that electricity demand will grow faster there than in Europe.
Utilities in Europe have been squeezed by a surge in renewable
energy generation, which governments have heavily subsidized in the
hope of curbing carbon-dioxide emissions. The resulting oversupply
of electricity depressed wholesale prices, rendering power
generation from conventional plants unprofitable.
In 2007, E.ON paid EUR11.5 billion for power plants and energy
distribution assets in Spain, Italy and France, and has since
written down the value of these assets by EUR1.5 billion. At the
price paid by Macquarie and Wren House, which includes debt, E.ON
would likely have to assume an additional charge.
Hendrik Varnholt in Frankfurt contributed to this article.
Write to Christopher Bjork at christopher.bjork@wsj.com and
Shayndi Raice at shayndi.raice@wsj.com
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