May 16, 2012 / 10:05 PM / 6 years ago

E.ON sells gas grid to Macquarie consortium for $4 billion

FRANKFURT (Reuters) - E.ON (EONGn.DE), Germany’s largest utility, said it has sold its Open Grid Europe gas distribution network to a consortium led by Australian bank Macquarie (MQG.AX) for 3.2 billion euros ($4 billion), raising cash to pay down debt and fund expansion.

The deal announced on Wednesday brings E.ON’s tally of divestments to more than 12 billion euros, well on its way toward its goal of selling assets worth 15 billion euros by the end of 2013 to help offset the impact of Germany’s nuclear exit.

“With this deal E.ON is able to deleverage further without the loss of high earnings,” DZ Bank analyst Hasim Senguel said, adding the price was almost a third above expectations.

E.ON said it expects the transaction, flagged by sources on Tuesday, to close in the third quarter.

The consortium that won the bid comprises Macquarie’s European Infrastructure Fund 4, Infinity Investments, British Columbia Investment Management Corporation (bcIMC) and Munich Re’s (MUVGn.DE) asset management unit MEAG.

It beat out three other groups led by France’s GDF Suez GSZ.PA, Germany’s Allianz (ALVG.DE) and Belgium’s Fluxys DIST.BR.

Macquarie, a major force in European infrastructure M&A, has already bought RWE’s (RWEG.DE) 4,100 kilometre gas network Thyssengas GmbH for an estimated 500 million euros in a deal announced in late 2010.

“OGE is an extraordinary and very well run company in a stable and regulated environment,” Edward Beckley, head of Macquarie Infrastructure and Real Assets in Europe, said in a statement.

Macquarie was advised on the deal by Macquarie Capital and the Royal Bank of Canada. According to sources, E.ON was advised by Goldman Sachs.


OGE, which operates a 12,000 kilometre gas distribution network in Germany and employs about 1,600 staff, was unbundled from its parent company in 2010 to comply with EU requirements.

Analysts expect the sale of OGE to be approved by regulators, as the EU commission has urged large utilities for years to divest their networks, leading E.ON to sell its high-voltage grid to Dutch network operator TenneT TNETH.UL for 1.1 billion euros in 2009.

    E.ON will use proceeds of the sale mainly to reduce its debt pile, which stood at 37.6 billion euros at the end of March, and to fund its expansion in growth markets, including Turkey and India, where E.ON is talking to potential partners.

    Just like its peers RWE (RWEG.DE) and EnBW (EBKG.DE), E.ON was dealt a massive blow when Germany last year decided to phase out nuclear power following Japan’s Fukushima disaster and has been seeking new sources of growth.

    In January, the group announced it would buy a 10 percent stake in Brazil’s MPX Energia MPXE3.SA for $471 million as it bets on emerging markets amid stagnant growth in Europe.

    Hurt by Germany’s decision to exit nuclear power for good by 2022, E.ON has also warned that power demand in all of Europe will remain weak in the foreseeable future due to the economic crisis.

    “Our industry is in a phase of fundamental transformation,” Chief Executive Johannes Teyssen said earlier this month.

    ($1=0.7828 euros)

    Editing by Greg Mahlich and Jon Loades-Carter

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