DUESSELDORF, Germany (Reuters) - Some of RWE’s (RWEG.DE) cash-strapped municipal shareholders will not take part in the initial public offering of Innogy, the German utility’s healthy assets that will be listed next week.
Innogy, which consists of RWE’s networks, renewables and retail business, will be listed on Oct. 7 in Germany’s largest IPO since 2000, potentially valuing the unit at up to 20 billion euros ($22.41 billion), more than twice the market valuation of RWE.
Since it was founded in 1898, RWE has been deeply rooted in Germany’s Ruhr industrial heartland, relying on local support for its power and gas supply business.
As a provider of jobs in the region, local municipalities, which hold about 24 percent of the company, have an interest in its survival, making a decision to sell RWE shares to buy Innogy stock difficult.
“We will not take a stake in Innogy initially,” said a spokesman for Dortmund’s local utility DSW21, where the city holds its 23.6 million shares in RWE, currently worth about 343 million euros.
“It’s key for us that jobs will be preserved,” the DSW21 spokesman added.
RWE, which will still own at least 75 percent in Innogy following the listing, is keeping struggling coal- and gas-fired power generation assets and volatile energy trading operations.
Municipalities are also heavily indebted and could struggle to take part in the offering of shares worth up to 5 billion euros, having been dealt a blow earlier this year when RWE suspended its dividend for the first time in at least six decades.
The Dortmund spokesman did not rule out that DSW21, which holds 4.1 percent of RWE, could take a stake in Innogy at a later date by selling existing RWE stock.
Shareholder Essen, where Germany’s second-largest utility is based, also has no plans to buy shares in Innogy, a spokeswoman for the city said, adding she could not rule out a purchase of Innogy shares or a sale of RWE stock in the future.
Essen holds more than 3 percent in RWE.
Other local shareholders, including the city of Bochum, are considering sharply reducing their holdings in RWE, as they no longer can rely on a stable payout in their budgets.
Bochum, which also has no plans to buy Innogy shares, could sell a third of its 6.6 million RWE shares at a price of more than 15 euros, its treasurer Manfred Busch said. They currently trade at 14.65 euros.
Writing by Christoph Steitz; editing by Susan Thomas