Borssele excluded from Essent takeover

04 September 2009

Germany's RWE looks set to acquire Dutch utility Essent, but the takeover will now not include the company's 50% stake in the Borssele nuclear power plant. The transaction price has been dropped by 950 million ($1.35 billion) to reflect this 


Borssele (EPZ)
The Borssele plant (Image: EPZ)

In January, RWE and Essent announced an agreement on the terms and conditions for a binding, all cash offer for the German power company to buy all the issued and outstanding shares of Essent for €9.3 billion ($12.3 billion). Essent's power plant portfolio includes gas, renewables, coal and its 50%-ownership of the Borssele nuclear power plant. RWE's offer for Essent will see the formation of the fourth largest energy supplier in Europe and was to include Essent's half-ownership of the Netherlands' only operating nuclear power plant.


RWE and Essent formally signed the offer agreement in February. RWE received approval from the European Commission (EC) for the acquisition on 23 June.


However, Delta, owner of the other 50% of the Borssele plant, said in April that it was taking legal steps to prevent RWE taking over Essent's share of the plant. Delta said that the majority of its shareholders had demanded that EPZ - the joint venture between Delta and Essent for the Borssele plant - should remain in public ownership, in line with EPZ's articles of association and the shareholders' agreement. Delta shareholders claimed that Essent must offer its shares in EPZ to Delta, which would ensure that public interests are protected.


Delta said that Essent had proposed that the legal ownership of its 50% stake in EPZ should be assigned to the current shareholders of Essent. The economic ownership would then be transferred to RWE. This, Delta claimed, would still give RWE control over the shares by a "back-door route."


In May, Delta announced that it was taking Essent, RWE and Essent's 136 public shareholders to court, claiming that they had acted unlawfully through the way in which the transaction structure of the deal had been specified.


A court in Arnhem ruled in Delta's favour in July, saying that Essent's shares in EPZ must remain in public hands, as EPZ's statutes stipulate.


In a move to enable the sale of Essent to RWE to progress, Essent's stake in the Borssele plant will now be owned by its current shareholders - local and provincial governments. In a statement, Essent said that it now expects the transaction to be completed by the end of September.


Essent spokesman Jeroen Brouwers told the Wall Street Journal, "The deal with RWE remains the same, although for the time being EPZ won't be part of it."


RWE spokesman Jan-Peter Schwartz told the paper that RWE will set aside the €950 million ($1.35 billion) as it continues to seek to buy the stake in the Borssele plant. He added that RWE and Essent are appealing the provisional injunction, but legal proceedings into the matter could take up to six years.


The Borssele plant generates about 4% of the Netherlands' electricity on its own. A 1994 decision by the Dutch parliament to phase out the plant by 2003 was subsequently put back and eventually overturned, and the 485 MWe pressurized water reactor is expected to operate until 2034. Delta has mooted plans to build a second nuclear power station nearby.