November 9, 2009 / 6:06 PM / in 8 years

E.ON sells German grid to TenneT: sources

FRANKFURT/DUSSELDORF (Reuters) - E.ON, the world’s largest utility, has sold its German long-distance power grid to Dutch TenneT for 1 billion euros, sources said, as it moves away from regulated markets in search of bigger but riskier profits.

The company agreed to sell 10,700 kilometers of high-voltage power lines to Dutch state-owned grid operator TenneT with effect from January 1, two people familiar with the situation said on Monday.

E.ON declined to comment.

TenneT, which runs 3,500 kms of high-voltage grid in the Netherlands, also declined to comment specifically on any deal, but said it wanted to create a northwest European power market and was working with power exchanges and other grid operators to that end.

E.ON will be giving up large parts of its regulated business, which has its profits overseen by a state agency and does not rely on volatile energy markets.

It will be the first time that anything other than a local utility will operate a high-voltage grid in Europe’s largest power market.

The deal would make sense for TenneT, helping it to expand its core business of running grids, and allowing it to benefit from economies of scale, said a Dutch utilities banker who did not wish to be named.

E.ON had always said the grid was a vital part of its business until it decided last year to sell it in the face of ever-stricter regulation, declining profit margins and pressure from the European Commission.

    Utilities throughout Europe, including RWE (RWEG.DE) and EDF (EDF.PA) are selling power and gas grids to shed assets burdened by strict regulatory regimes and to invest money in more profitable ventures.

    EDF (EDF.PA) has set an indicative timetable in its sale of Britain’s biggest electricity distribution network as industry and financial parties begin to form consortiums, sources said on Monday.

    E.ON still has power and gas distribution grids in Germany and Britain -- used to ship energy to consumers -- and the German long-distance gas grid of its gas unit Ruhrgas.

    E.ON shares rose after the news, closing down 3.2 percent at 27.05 euros, while the DJ Stoxx utilities index .SX6P was up 1.7 percent and the German benchmark index 2.4 percent.

    (Writing by Peter Dinkloh; Additional reporting by Catherine Hornby and Greg Roumeliotis in Amsterdam; Editing by Will Waterman and Dan Lalor)

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