E.ON sells German power grid to TenneT for $ 1.65 bn

Germany's largest utility company E.ON has agreed to sell its extra high-voltage power transmission network to state-owned Dutch grid operator TenneT for approximately EUR 1.1 bn ($ 1.65 bn), moving a step forward in creating an integrated power transmission network in Europe.
Under the terms, TenneT will acquire all the shares in the E.ON subsidiary Transpower Stromuebertragungs GmbH (Transpower), which owns and operates E.ON's extra high-voltage transmission network.

Transpower was formed in 2009 by transferring E.ON's extra-high voltage transmission network of 220/330 kV with a total length of about 11,000 km, 115 sub-stations and 650 employees. The agreed enterprise value of Transpower is EUR 885 mm and the purchase price as of 31 December has been provisionally set at EUR 1.1 bn, which will be finally determined on the basis of the net financial position at that time.
Analysts value E.ON's high-voltage grid between EUR 1.5 bn to EUR 1.75 bn, higher than the tentative purchase price agreed.

E.ON CEO Wulf Bernotat said: ''We are convinced that TenneT will ensure necessary high investments needed in network expansion including ambitious task of connecting offshore windfarms.''
''Furthermore, the merger of the TenneT and Transpower networks gives rise to Europe's first cross-border power transmission network. This is another important step towards integration of the European electricity market.''

Duesseldorf-based utility major said the company has almost completely fulfilled its commitment to the European Commission by selling the transmission network and disposing of 4,800 MW of power generation capacity. E.ON's regional power distribution grids are not affected by the deal and will remain an essential part of its infrastructure business, managed by E.ON Energie in Munich.
The transaction is expected to close in early 2010, subject to approval by European competition authorities.

The Netherlands' minister of economic affairs Maria van der Hoeven said: ''This takeover willhelp to create a north-west European electricity market in which the Netherlands plays a leading role.''
Van der Hoeven further added that cross-border cooperation makes it possible to share spare capacity efficiently with other countries and jointly overcome crises.

TenneT believes that the acquisition will lead to accelerated equalisation of electricity prices in the Netherlands and Germany, apart from moving towards developing sustainable energy supply such as wind energy and transforming Netherlands into a "power hub" in the European energy grid.
The company said that the acquisition will be funded through loans from ING Bank and Royal Bank of Scotland.

Arnhem-based TenneT has expanded in recent years from a transmission operator in Netherlands to a regional player by acquiring high-voltage grids as well as construction of cross-border power cable connections with Norway and Britain.
Deutsche Bank acted as advisor to E.ON on the deal while TenneT was advised by Royal Bank of Scotland.