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Germany's E.ON agrees to sell US business: sources
FRANKFURT/NEW YORK |
FRANKFURT/NEW YORK (Reuters) - German utility E.ON (EONGn.DE) agreed to sell its U.S. business, two people with knowledge of the matter said, in a deal investors expect to yield billions of euros for the world's largest power company.
"That's right," one of the persons on Tuesday said when asked whether the power provider had reached an agreement.
The power provider aims to announce the agreement between Wednesday evening and Thursday morning, said the people who declined to be identified as the transaction is still confidential.
U.S. utilities Duke (DUK.N), PPL (PPL.N) and a consortium involving Canadian utility Fortis (FTS.TO) were the last remaining parties in the auction, people with knowledge of the matter said.
E.ON was not immediately available for comment.
Analysts such as Mario Kristl from DZ Bank estimates the division, based in Louisville, Kentucky, to be worth as much as 5 billion euros ($6.66 billion).
The sale, part of a slew of divestments by European utilities to cut debt after a takeover spree, is part of E.ON's efforts to shed more than 10 billion euros worth of assets by the end of the year.
A sale of the unit would be one of the largest utility deals in the United States this year next to Ohio's FirstEnergy Corp (FE.N) takeover of Pennsylvania's Allegheny Energy Inc AYE.N in a deal currently valued at about $4.4 billion in stock.
E.ON had bought the E.ON U.S. unit, formerly known as LG&E, in 2002 as part of its 9.6 billion pound ($14.85 billion) takeover of Britain's Powergen, but the overseas operation remained separate while it was integrating European operations such as energy trading.
Powergen had paid about $3.2 billion for LG&E in 2000.
The division, which E.ON calls "U.S. Midwest," generated earnings before interest, taxes, depreciation and amortization of 552 million euros in 2009 on sales of 1.8 billion euros.
Utility deals in the United States are drawn-out procedures which face tough scrutiny from states and regulators.
A planned merger of FPL Group FPL.N and Constellation Energy Group CEG.N fell apart due to such scrutiny.
Because E.ON is still 4 billion euros shy of its divestment target, selling the business would be a major step to execute its strategy.
The divestments are meant to reduce E.ON's economic net debt, which soared to 45 billion euros by the end of 2009, from 18 billion at the end of 2006.
Economic net debt includes the company's liabilities plus its pension liabilities and obligations for its nuclear power plants, minus its cash and other funds.
E.ON had to cancel the sale of its Italian gas grid earlier this week.
E.ON also operates U.S. wind farms as part of its renewables business and not the E.ON U.S. Midwest unit.
Goldman Sachs is advising E.ON on the sale.
(With reporting by Quentin Webb in London; Writing by Peter Dinkloh; Editing by Richard Chang)
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