Bloomberg News

RWE Drops Most in Three Years on $2.8 Billion Share Sale

December 13, 2011

(Updates with offer price in second paragraph.)

Dec. 6 (Bloomberg) -- RWE AG fell the most in more than three years in Frankfurt trading after Germany’s second-largest utility said it will raise about 2.1 billion euros ($2.8 billion) in a share sale to cut debt.

RWE slumped as much as 12 percent, the steepest intraday decline since October 2008, and traded 11 percent lower at 27 euros as of 11:15 a.m. local time. The shares are down 46 percent this year. The utility is selling 80.4 million shares at a price of 26 euros apiece, according to a statement today.

“Talks about a looming rating downgrade and the capital increase are over now and the stock has a great chance to perform very well over the coming weeks and months,” Peter Wirtz, an analyst at WestLB AG, said by phone from Duesseldorf.

RWE, based in Essen, is raising as much as 11 billion euros to reduce debt and help finance energy projects as Germany cuts its reliance on nuclear power. The company is also selling assets such as gas fields in Egypt as well as its Czech NET4GAS gas-grid unit.

RWE had previously lowered the price range of the share sale to 26 euros to 26.5 euros a share from 26 euros to 27.5 euros, according to a sales document obtained by Bloomberg News. About 28.1 million of the shares being offered were treasury shares, sold with subscription rights to existing shareholders, while the rest are primary shares, RWE said.

Earnings Slump

The German utility saw third-quarter earnings slump 73 percent as it worked to phase out nuclear production, after earlier slashing full-year profit targets.

The German government’s decision to close the country’s nuclear power plants by 2022 was a “substantial” risk to RWE’s earning power, the company has said. Germany decided to make utilities pull out of atomic energy after Japan’s disaster in March.

The capital increase will make an “important contribution” in strengthening RWE’s balance sheet, said Bernhard Jeggle, an analyst at Landesbank Baden-Wuerttemberg.

Deutsche Bank AG and Goldman Sachs Group Inc. are managing the sale, according to the terms.

--With assistance from Julie Cruz in Frankfurt and Francesca Cinelli in Milan. Editors: Stephen Cunningham, Tony Barrett.

To contact the reporter on this story: Zijing Wu in London at zwu17@bloomberg.net

To contact the editor responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net


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