Germany's largest utility, E.ON AG, has agreed to sell its Italian gas- and coal-fired power plants to Czech energy company EPH, ridding itself of unwanted assets from an acquisition spree in 2007.
Privately-held EPH will take over 4500 MW worth of thermal power capacity in the deal, expected to close in the 2Q15.
Both parties agreed to keep the purchase price confidential, but a broker, who asked to remain anonymous, said it could be between €500 million (US$591 million) and €600 million in terms of enterprise value, or including debt.
E.ON has been looking for a potential buyer for its Italian businesses for more than a year. The utility has announced it will embark on a new corporate strategy focused on renewables, distribution networks and customer solutions. However, Europe's depressed power market has prompted a series of delays. Sources have said the Italian business, as a whole, could fetch about €2 billion, with more than half from renewable energy assets as weak demand and depressed power prices deter investors from traditional generation.
E.ON previously said it would combine its power generation, global energy trading and exploration and production businesses into a new, independent company, but the spinoff is not expected to occur until the 2H16.
"We continue to assess a possible divestment of our other businesses in Italy," E.ON chief Johannes Teyssen said.
E.ON has been struggling for a while amid what it sees as a difficult economic and regulatory environment. Last March, the company announced it would shutter almost 13 GW of capacity – more than a quarter of its conventional fleet in Europe.
Of the state of the company, Teyssen said: “The ramifications of policy decisions in Germany and the related insufficient market prices for conventional energy continue to have an adverse impact on our generation portfolio.”
E.ON has since been looking to divest assets it no longer wants. These include its Portuguese and Spanish businesses, the latter of which was sold to Australian investor Macquarie for €2.5 billion.
The Italian job
The deal with EPH includes the 600 MW Fiume Santo coal-fired plant in Sardinia and 3900 MW worth of gas-fired capacity spread over six plants in mainland Italy and Sicily.
EPH Chairman, Daniel Kretinsky, had previously said the company was looking to diversify in Europe, saying its presence in core markets was "relatively extensive".
Prague-based EPH currently owns and operates energy assets in the Czech Republic, Slovakia, Germany, and Poland. In addition to its electricity business, it provides gas transport, storage, and distribution, has coal mining operations, and is the largest heat supplier in the Czech Republic.
Sources with knowledge of the matter said Italian renewable energy company Erg was a front-runner to buy a prized hydroelectric plant worth around €1 billion.
People close to the matter previously said French energy group EDF was interested in buying E.ON assets through its Italian unit Edison.
"At this point it's looking increasingly unlikely Edison's bid will go through, even though it might better safeguard jobs," a banker close to the matter said.
Erg and Edison declined to comment.
According to Reuters, sale price of €500 – €600 million would value the assets at about five times core earnings. "It's a low multiple but it's still quite an achievement ... in an oversupplied market," the anonymous broker told Reuters.
Kretinsky said EPH was “proud to have the opportunity to continue E.ON’s tradition in the conventional power generation [business] in Italy. Our strategy is long term and development focused. We look forward [to] working on this goal together with employees, trade unions, and other stakeholders.”
The transaction is subject to EU competition authority approval.
Edited from various sources by Sam Dodson
Read the article online at: https://www.worldcoal.com/power/13012015/eon-sells-italian-power-plants-1737/