UPDATE 4-RWE to sell oil and gas exploration unit to cut debt

Tue Mar 5, 2013 10:46am EST

Related Topics

* DEA valuation differs widely from 4.5-8 billion euros-analysts

* 2012 EBITDA 9.31 bln euros vs average forecast 8.69 bln

* Keeps 2013 EBITDA outlook of about 9 bln euros

* Says won't reach asset sale volume target of 7 bln euros

* Shares rise 1.6 percent (Adds details on DEA valuation, investments, updates shares)

By Christoph Steitz and Tom Käckenhoff

ESSEN, Germany, March 5 (Reuters) - RWE, Germany's second-biggest utility, has put its oil and gas exploration unit up for sale in a move that could rake in billions of euros for its drive to cut debt.

RWE had previously said it only wanted to sell parts of the unit, called DEA, which accounted for 23 percent of the group's operating profit in 2012.

"We are not talking about a small asset. DEA is a big company," Chief Executive Peter Terium told Reuters on the sidelines of its annual news conference on Tuesday, adding that selling the unit in one go was now the preferred option.

Estimates for valuing the DEA unit differ widely, ranging between 4.5 and 8 billion euros ($5.9-10.4 billion), according to analysts. RWE declined to comment on DEA's book value.

Terium said RWE expected several interested parties to bid for DEA, helping the group to cut its 33 billion euro debt. DEA swallowed investments of about 700 million euros in both 2011 and 2012.

DEA, which is active in Egypt, Norway, Libya and Britain among others, produced 5.1 million cubic metres in oil equivalents in 2011.

Analysts said big European groups like Total, GDF Suez, ENI and Repsol were likely to be interested in assets in Egypt, Libya and Algeria, as they boost upstream operations after the Arab Spring.

A source familiar with the matter previously told Reuters the group hired Deutsche Bank to manage the sale of parts of DEA.

German utilities RWE, E.ON and EnBW have embarked on asset sale programmes in their recovery from the country's decision to exit nuclear energy by 2022, a move prompted by the nuclear disaster at Japan's Fukushima plant.

RWE initially planned to sell assets worth up to 7 billion euros by the end of this year, but the group on Tuesday scrapped that target, saying it would not put itself under pressure in a difficult environment for utility assets.

RWE also posted a stronger-than-expected rise in 2012 core profit, boosted by a profitable fleet of lignite plants that give it a key advantage over main peer E.ON.

Shares rose 1.6 percent to 29.15 euros by 1514 GMT.

The group's earnings before interest, tax, depreciation and amortisation (EBITDA) reached 9.31 billion euros, beating the 8.69 billion average forecast in a Reuters poll.

Lignite, or brown coal, plants accounted for more than a third of RWE's 2012 power generation, benefiting from a drop in the price of emission permits, increasing their profitability.

RWE also kept its outlook for 2013 EBITDA of about 9 billion euros, above analysts' consensus for 8.84 billion euros.

The group is valued at 7.1 times 12-month forward earnings, cheaper than the 10.3 average of Europe's largest utilities, according to Thomson Reuters StarMine.

($1 = 0.7687 euros) (Editing by Mark Potter and Helen Massy-Beresford)

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