FRANKFURT (Reuters) - German utility RWE (RWEG.DE) is asking potential buyers of its oil and gas unit DEA RWEDE.UL to submit offers by late December, in a deal that could fetch up to 5 billion euros ($6.8 billion), three people familiar with the matter told Reuters.
RWE, suffering from loss-making power plants, a boom in renewable power and 35 billion euros in net debt, said in March it planned to sell DEA to save billions of euros of investment in the exploration and production business.
“Bids are due around Christmas,” one source said. RWE has previously said it expects to complete the sale next year.
With operations in 14 countries including Germany, Britain, Norway and Egypt, DEA employs nearly 1,400 and accounted for about 11 percent of RWE’s operating profit in 2012.
It has stakes in about 190 oil and gas licenses or concessions in Europe, the Middle East and north Africa, some of which are non-producing and in need of large investments.
Wintershall, the oil and gas arm of German chemicals company BASF <BASFn.
Utility sector bankers also said they expect British energy supplier Centrica (CNA.L) to show interest in DEA.
RWE, KKR, Blackstone and Centrica declined to comment.
A senior Sinopec official told Reuters the group was unlikely to be interested in more European oil assets after recently buying assets in the North Sea and Egypt.
Meanwhile, the interest of Qatar Petroleum International (QPI) in DEA is likely to have cooled because of the latter’s presence in Egypt, where Qatar had backed overthrown President Mohamed Mursi.
QPI was not immediately available for comment.
Egyptian assets make up about 10 percent of DEA’s likely value of between 4 and 5 billion euros including debt in any transaction, while the northern European assets account for three fourths, the sources said.
Based on a low-end 4 billion euros valuation, DEA would be priced at an EV/EBITDA multiple of 3.8 times, a discount to the 4.1 times average for European oil and gas exploration and production (E&P) companies, according to StarMine.
Illustrating RWE’s need for a disposal, the company has had negative free cash flow through the past four years, according to Thomson Reuters data. In 2012 the figure was a negative 686 million euros.
Additional reporting by Alexander Huebner in Frankfurt, Aizhu Chen in Beijing, Dinesh Nair in Dubai and Sarah Young in London; Editing by Jonathan Gould and David Holmes