Dutch nuclear plant part of RWE deal
13 January 2009
RWE's offer for Dutch utility Essent will see the formation of the fourth largest energy supplier in Europe and will also include Essent's half-ownership of the Netherlands' only operating nuclear power plant.
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| Plenty to smile about: RWE and Essent CEOs Grossman and Boersma (Image: RWE) |
The two companies have 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), which the Dutch utility says reflects the value of the shares before the international credit crisis. Essent is recommending that its shareholders accept the offer as being in the best interests of shareholders and other stakeholders.
Essent's power plant portfolio includes gas, renewables, coal and its 50%-ownership of the Borssele nuclear power plant. Borssele generates only about 4% of the Netherlands' electricity. 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 boiling water reactor is expected to operate until 2034. Delta, owner of the other 50% of Borssele, has mooted plans to build a second nuclear power station nearby.
The deal with RWE only concerns Essent's commercial energy activities and will not include its electricity and gas distribution networks and waste management operations. Essent will become an independent business unit of RWE, serving as the group's platform for growth in the Dutch and Belgian markets. Its trading activities will be merged with those of RWE, while RWE's current Belgian and Dutch businesses will be integrated into those of Essent.
Essent describes itself as the largest energy company in the Netherlands, but also has a "significant" market share in Germany and is increasingly active in Belgium. RWE, already one of Europe's largest utilities, is currently running what it describes as the biggest investment program in its history, running to over €32 billion ($42.3 billion) by 2012 and making it one of the largest investors in Europe. On the nuclear front, RWE was recently selected as the preferred partner in Bulgaria's Belene nuclear power project, giving it a foothold in nuclear generation in eastern Europe, and is also a possible builder of a new nuclear power plant in the UK with a recent grid connection agreement for a possible plant at Wylfa.
Win-win
Both partners have lauded the deal as full of benefits for all concerned. "Jointly, we will strengthen our position as one of the leading energy companies in Europe," said Jurgen Grossman, CEO of RWE. "Together, we are well positioned to increase security of supply in North-Western Europe and to contribute to making sustainable and affordable energy available in the Netherlands", he added. According to RWE, Essent's strong renewables business will complement its own efforts to increase its renewables capacity to 4500 MWe by 2012, while the companies' efforts in the carbon capture and storage field will also complement each other.
Essent has described a partnership with RWE as a logical next step for the company. Shareholders had earlier decided to seek an alliance with an international partner in order to achieve sufficient scale to ensure the continuity of the company in the consolidating international energy market. Essent CEO Michiel Boersma said the pairing would open a "wide range of possibilities for our company, our employees and our customers," creating a "strong foundation for the future."
The transaction, subject to various pre-completion conditions, is expected to close in the third quarter of 2009. Essent's Executive and Supervisory Boards have committed not to recommend or support any alternative offer, and RWE is entitled to what it describes as a "considerable" fee should Essent strike any alternative deal.