Flood of utility asset sales expected in Europe
(From Acquisitions Monthly)
A round of disposals is set to follow the recent spate of consolidation in Europe’s utility industry, which analysts say could turn into a flood. They reckon the value of assets to be put up for sale could reach more than €30bn. Reasons for selling range from deleveraging, focusing on core activities or regulatory rulings following acquisitions.
France’s EDF has said it intends to sell €5bn worth of assets, with the sale of a minority stake in French high-voltage power grid RTE a possibility as well as its stake in outsourcing firm Dalkia.
Germany’s E.ON could raise €10bn from asset disposals, which include its German high-voltage power networks and its municipal utilities holding company Thuega.
Others, such as RWE of Germany, Italy’s Enel and Gas Natural of Spain, are all likely to make significant disposals. And the UK’s Centrica could sell its Oxxio Dutch business as it focuses on the UK following the purchase of 20 percent of British Energy from EDF.
With private equity investors largely absent and big borrowings hard to obtain, this strongly suggests a buyer’s market. However, not all analysts are convinced this will be the case. They point to sovereign wealth funds and pension funds as potential takers of minority stakes and even the possibility that some of these assets will be floated – stock markets permitting.
Another factor is that utility groups themselves have raised €55bn from issuing bonds since October 2008. Many will take the opportunity to fill gaps in their power portfolios.
A possible bidder for high voltage networks – if nationalism doesn’t get in the way – is the UK’s National Grid, perhaps in concert with financial buyers, as it is already heavily indebted. It has hinted at interest in Europe, but is not likely to offer high prices.
One possibility is that these disposals could open the way for some interesting new players to come into Europe’s utility markets.
Reporting by Justin Pugsley, Acquisitions Monthly
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