E.ON completes takeover of Endesa assets early

Analysis

Germany’s E.ON, the world’s largest utility, on Thursday completed the takeover of energy assets from Spanish peer Endesa and Italy’s Enel, slightly earlier than expected.

The takeover, which E.ON previously had predicted for the Q3, ends an at times arduous bidding contest for all of Endesa, in which Enel and Spanish builder Acciona outbid competing offers from E.ON and Gas Natural. In a compromise to avoid drawn-out law suits over the respective bids, Enel and Acciona agreed to sell power assets in France, Italy and Spain to E.ON, which in return allowed the two competitors to buy all of Endesa.

E.ON’s 2008 earnings are set to benefit from the timeliness of the takeover as the company said profits will be higher the earlier it completes the takeover. The earlier it will be able to book profits from the assets, the closer adjusted earnings before interest and taxes will come to the upper end of its forecast range of an increase between 5 and 10%, E.ON has said.

The company on Thursday did not give more details about its expected 2008 earnings, but its shares outperformed German blue chips and its European peers. The stock was unchanged at 126.26 at 5:15 a.m. EDT, while the German benchmark index DAX .GDAXI dropped 1.1% and the DJ Stoxx utilities index slid 0.7%.

As part of the €11.5 billion transaction -- which also includes Enel’s Spanish unit Viesgo -- E.ON is taking on €300 million less debt than stated in March, when it reached a preliminary agreement. Overall debt of the acquired assets stands at €2.6 billion and the German utility is paying €8.9 billion for the assets, which have a total 12.2 gigawatt generation capacity, it said on Thursday. E.ON is still negotiating with Italian utility A2A to take over A2A’s 20% stake in Endesa Italia in return for generation assets in Italy, a spokesman said. (Reuters)

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