April 20, 2018 / 3:13 PM / 3 months ago

German utility deal faces snag as Macquarie eyes Innogy assets: sources

FRANKFURT/DUESSELDORF (Reuters) - Investor Macquarie (MQG.AX) is interested in some assets of German energy firm Innogy (IGY.DE), two people familiar with the matter said, potentially disrupting plans by parent RWE (RWEG.DE) to break up the group with rival E.ON (EONGn.DE).

FILE PHOTO: The logos of RWE and E.ON are seen before a joint news conference of the two German utilities after unveiling plans for an asset swap deal which will break up RWE's Innogy unit in Essen, Germany March 13, 2018. REUTERS/Wolfgang Rattay/File Photo

The news comes about a month after RWE, which owns 76.8 percent in Innogy, unveiled plans to split up the unit and share its assets with E.ON in one of the sector’s most radical restructurings in recent history.

A rival bid for some of Innogy’s assets would give the group a stronger hand in negotiations with E.ON, the prospective future owner of its networks and retail units which has flagged as many as 5,000 job cuts as part of the deal.

Macquarie and Innogy both declined to comment.

RWE said it would continue with the proposed deal with E.ON, which it said offered shareholders and employees the best prospects. “Breaking up and selling Innogy in pieces is not an alternative for RWE,” it said in a statement.

A separate source said the assets Macquarie is eyeing are worth a low single-digit billion euro amount. It was not clear whether this includes offshore wind park project Triton Knoll, which sources say has also attracted Macquarie’s interest.

Innogy earlier said it had received a request from a suitor it did not name, adding it had granted due diligence for its Czech activities. It said the suitor also expressed interest in certain parts of Innogy’s renewables, retail and networks units.

“Discussions are at an early stage and at this point in time it is open whether and on what terms offers for individual business activities will be submitted,” Innogy said. Business paper Handelsblatt first reported Macquarie as the bidder.

Shares in RWE and E.ON fell following the news and were down 1.65 percent and 1.2 percent respectively at 1514 GMT. Innogy shares were 0.4 percent lower at 37.76 euros, below the 40 euros E.ON will offer minority owners as part of the deal with RWE.

With a regulated asset base of 1.7 billion euros ($2.1 billion), Innogy is the largest gas distribution networks operator in the Czech Republic and already shares ownership of that business with Macquarie, which holds just below 50 percent.

Innogy also has 1.63 million power and gas customers in the country, about 7 percent of the group’s total.

If Macquarie ends up buying some of Innogy’s assets it could mean the complex break-up plans by E.ON and RWE might have to be changed, said Thomas Hechtfischer, managing director of shareholder advisory group DSW.

“What happens if the Innogy pie gets smaller and smaller? Everything has been calculated and valued. It certainly wouldn’t get any easier.”

Additional reporting by Arno Schuetze; Editing by Maria Sheahan and Mark Potter

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