Elia Buys German Grid, Beating Allianz, Deutsche Bank (Update3)
March 12, 2010, 12:11 PM EST(Adds closing share price in seventh paragraph, Industry Funds comment in eighth.)
By Nicholas Comfort
March 12 (Bloomberg) -- Elia System Operator NV, Belgium’s high-voltage power grid operator, and Industry Funds Management Ltd. beat out Allianz SE, Goldman Sachs Group Inc. and Deutsche Bank AG to buy Vattenfall AB’s electricity network in Germany.
Elia and Industry Funds expect to complete the 810 million- euro ($1.1 billion) purchase of the 9,700 kilometers (6,000 miles) of power lines next quarter, the Brussels-based company said today in a statement. Earlier talks between Vattenfall and units of Allianz, Goldman and Deutsche Bank failed over price.
“Grids are an attractive asset, even if the growth prospects aren’t huge,” said Bernhard Jeggle, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart. “It’ll pay off for Elia if the regulator loosens up a bit.”
Buying the grid bordering the Czech Republic and Poland will help establish a European power market, Elia said. Germany may make running electricity networks more attractive to spur development of offshore wind parks to meet renewable-energy targets, Jeggle said. The Bonn-based Federal Network Agency sets returns on power grids based on the level of investment.
Elia will own 60 percent and have operational control of the grid company 50Hertz Transmission GmbH, while money manager IFM will hold the rest. The Belgian grid operator will finance the purchase, which includes about 320 million euros of debt, by selling shares in the second quarter, subject to market conditions and shareholder approval.
Increasing Debt
“The amount of money we will put on the stock exchange is dedicated to what we need now and the investments we will have to do in the next five to six years,” Daniel Dobbeni, Elia’s chief executive officer, said in an interview in Berlin. “That includes investments within Elia. Investment in 50Hertz can be financed by increasing debt on 50Hertz.”
Elia fell 38 cents, or 1.4 percent, to 27.62 euros in Brussels trading. The company first sold shares in June 2005 for 26.50 euros apiece.
Industry Funds said it will finance the transaction through equity contributions from investors. The wealth manager plans a “long-term” partnership with Elia, Christian Seymour, the Melbourne-based company’s head of infrastructure for Europe, said in an e-mailed statement.
The German grid needs 3 billion euros in spending by 2016 according to Vattenfall estimates, said Tuomo Hatakka, who heads the utility’s German unit. Some 600 million euros of that capital investment is for projects that have “special priority,” Hatakka told reporters in Berlin.
Allianz Approach
Allianz, together with Goldman and Deutsche Bank’s RREEF investment fund, were considering raising their bid from about 515 million euros, a person familiar with the matter said in December. Allianz, Europe’s biggest insurer, has put more money into energy investments as it cuts stock holdings in a search for more predictable returns.
Stockholm-based Vattenfall held talks with more than one bidder after determining a previous offer was too low, spokesman Steffen Herrmann said Dec. 8. The state-owned company is selling the asset to reduce debt after buying Nuon NV’s production and supply unit for 8.5 billion euros last year to become Europe’s biggest offshore wind operator.
E.ON AG, Germany’s largest utility, agreed to sell its German grid to Tennet BV, the Dutch transmission system operator, in November for about 1.1 billion euros.
Vattenfall was advised by Citigroup Inc. and law firm White & Case LLP, while Elia and IFM had legal counsel from Freshfields Bruckhaus Deringer. The Belgian company was advised by UBS AG.
--With assistance from Brian Parkin in Berlin, Cornelius Rahn in Frankfurt, John Martens in Brussels and Jacqueline Simmons in Paris. Editors: Amanda Jordan, Jonas Bergman
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
