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RPG announces sale of Pannonpower shares

RPG, a private equity group with interests in coal mining, energy, transport and real estate assets in Central and Eastern Europe sold its 85% shareholding in Pannonpower Holding Zrt.

It is owned by a group of international institutional and individual investors led by Zdenek Bakala, a Czech-born financier and businessman, and Crossroads Capital, an international private equity house. RPG, the private equity group that focuses on CEE region, has announced that it has sold for an undisclosed consideration an 85% shareholding in Pannonpower Holding Zrt, a 190 megawatt biomass- and gas-fired power plant based in the southern Hungarian town of Pécs, to Dalkia Energia Zrt, the Hungarian subsidiary of the French energy services company Dalkia that is jointly owned by Veolia Environment and Electricite de France.

As part of the deal Dalkia also acquired an additional 14.9% shareholding in Pannonpower from minority shareholders. The exit of RPG from Pannonpower concludes a highly successful restructuring process during which the business was turned from a loss-making and inefficient power plant, originally known as Pécs Power Plant, into an efficient and profitable combined heat and power producer that runs on clean and renewable energy sources. In 2006 Pannonpower generated sales revenue of $85 million (€65.3 million).

Daniel Hallgarten, a Director of RPG said: “This transaction marks the natural conclusion to our successful restructuring program at Pannonpower, begun nearly a decade ago when the plant was acquired from the Hungarian State Privatization Agency. We invested significant sums in the business and worked closely with management to turn the operation around and transform it into one of Central Europe’s biggest renewable energy power plants. We’ve created significant value for all the stakeholders in Pannonpower, and leave the company in the experienced hands of Dalkia.”

In the autumn of 2004, Pannonpower underwent major modernization and was converted from coal-fired to biomass- and gas-fired operations. It provides heat and power to industrial and residential customers, including 30,000 households, in the city of Pécs and the surrounding region. The company also co-manages the city’s district heating company. It employs approximately 350 people. RPG’s in-house corporate finance team executed the transaction. Baker & McKenzie were legal advisers to RPG.