* Tentative bids of 1.2-1.5 bln eur submitted - sources
* Binding bids to be submitted by end-May - sources
* Difficult market conditions could weigh on price-sources
* E.ON shares extended losses, down 2.1 percent
By Arno Schuetze and Christoph Steitz
FRANKFURT, April 12 E.ON's waste
burning unit could be a hard sell due to overcapacity in the
industry, according to banking and industry sources who revealed
early bids of 1.2-1.5 billion euros ($1.6-$2.0 billion) but
expect them to be revised lower.
U.S.-based Foster Wheeler, Singapore's Sembcorp
, Morgan Stanley Infrastructure, Swedish private
equity group EQT, German construction group Papenburg and German
utility MVV have all placed tentative bids within
that range for E.ON's Energy from Waste unit, investment banking
Germany-based water and environmental service company
Remondis is also in the running, one source said,
adding the company was teaming up with municipal utilities in
the bidding process.
But binding bids are expected to be lower, the sources said.
One of them said that some bidders will have placed high
initial bids to stay in the running and get access to the
company's books. The due diligence is currently ongoing.
"I expect final bids at around 1 billion euros," the source
E.ON Energy from Waste generated revenues of 544 million
euros in 2011 with its 18 waste incinerators in Europe - most of
them located in Germany - with an annual capacity of about 4.0
But the market is suffering from overcapacity, after Germany
encouraged the construction of incinerators in the 1990s to
slash the use of landfills.
These plants now compete for shrinking waste volumes as
recycling rates rise. Incineration companies therefore have to
pay more for the refuse they use as fuel while power prices are
falling. In Germany less than 1 percent of electricity comes
"Put two and two together and you can see that this is not a
lucrative business. This also gives you an idea about how
difficult it is to sell assets in this environment," an industry
E.ON - which has hired Barclays and Royal Bank of
Scotland to manage the sale process - is expecting
binding bids for the unit by the end of May, two sources said.
The sale of Energy from Waste is part of E.ON's wide-ranging
15 billion euros disposal programme to streamline its
activities, as the group is struggling with the impact of
Germany's decision to shut down all nuclear plants by 2022.
E.ON's Chief Executive Johannes Teyssen in March confirmed
that it has initiated the sales process for the unit. A company
source said that E.ON was also considering splitting up the unit
to sell it in parts.
Sources with knowledge of the deal said that EQT has hired
Deutsche Bank as an advisor, while Goldman Sachs is
advising MVV and Credit Suisse is advising Sembcorp.
"Sembcorp will have no problem financing this deal," one
source said, adding Singapore banks will be more than willing to
lend to the company.
"The project is still at a preliminary stage and no binding
agreement has been signed," Sembcorp said.
E.ON, Remondis, Credit Suisse, Morgan Stanley, EQT, Deutsche
Bank and Goldman Sachs, MVV declined to comment.
Papenburg and Foster Wheeler were not immediately available