Energy & Utilities Financial Deal Insights: Q3 2009

Introduction

As part of the Financial Deals series, Datamonitor presents its quarterly analysis of merger and acquisition activity in European energy markets. This presents an examination and commentary on deals, alliances and takeovers amongst European gas and power utilities The brief considers the financial, strategic and political implications of individual agreements, in the context of wider trends.

Scope

*Details, analysis and opinion of critical mergers and acquisitions in Europe's energy sector.

*The setting and backdrop to all the deals, explaining their historical context and the current climate in which the utilities operate.

*An assessment of the implications recent mergers and acquisitions will have on the national and regional markets.

Highlights

Following months of speculation, German energy giant E.ON has agreed on a sale price of EUR2.9 billion for Thüga, a holding company with minority stakes in 90 municipal energy suppliers across Germany. The deal will see Germany's fifth largest energy supplier go to Integra and Kom9, both consortia of almost 50 communally-owned energy companies.

European energy giants are looking to reduce shares of generating capacities at home in exchange for slice of each other's foreign markets In a chain of deals that will ultimately enhance the competitive landscape of European power markets, several national energy champions have entered into multiple asset swaps.

Swedish utility Vattenfall is understood to be in talks with EDF with a view to acquiring a stake in UK nuclear generator British Energy. Vattenfall, Europe's fourth largest power group by generation was one of several major European utilities to show an interest in bidding for BE in Q1 last year, but in the end did not mount a bid.

Reasons to Purchase

*Keep track of Merger & Acquisition activity in Europe's energy sector.

*Compare the strategies of major utility players and how M&A feeds into these policies.

*Position yourself for potential future deals and market opportunities.


Report Highlights

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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
E.ON seeks to kill two birds with one stone through sale of Thüga 2
Utility giant hopes to ease antitrust pressure from EC while paying down its mounting debt pile 2
Although Thüga remains small relative to Germany's big four, it is seeking to expand its operation 2
Driven by the overriding theme of antitrust pressures, incumbents have agreed to multi-pronged asset swaps 3
European energy giants are looking to reduce their share of domestic generating capacity in exchange for a slice of each other's markets 3
EDF agrees to swap with E.ON, prompted by pressures from the French state to sell more nuclear energy to rivals 4
Following its purchase of Essent, RWE has sold KOM-STROM to Dong for €27m 4
The acquisition provides the Danish utility with a useful outlet for surplus wholesale output 4
Increased upstream production presents challenges 5
Rumors suggest Vattenfall may yet acquire a stake in British Energy from EDF 6
Swedish giant which showed initial interest in BE in 2008 may help alleviate EDF's debt challenge 6
Vattenfall would seek to exact a discount on what EDF paid for BE-perhaps more than the 6% that Centrica secured in Q1 2009-on account of currently low wholesale power prices 6
On-going problems in developing the EPR could potentially undermine the value of BE further, providing Vattenfall with another bargaining chip 6
Joint venture may pave the way for an Italian nuclear comeback 7
After a two decade long ban on nuclear power generation, EDF and Enel lay the groundwork for a revival 7
Sviluppo Nucleare Italia will help all stakeholders to meet crucial end goals while further enhancing the competitive landscape for European utilities 8
French and German wholesale electricity markets merge to form single platform 8
The creation of EPEX from EEX and Powernext will improve wholesale liquidity 8
A step in the right direction 9
The merger will not directly affect utilities' M&A strategies but could encourage independent generation 9
APPENDIX 10
Ask the analyst 10
Datamonitor consulting 10
Disclaimer 10

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