E.ON sells most of Italian business to Czech-based EPH
Germany's largest utility E.ON AG has agreed to sell its Italian gas- and coal-fired power plants to Czech energy company EPH, ridding itself of unwanted assets from an acquisition spree in 2007.
Privately-held EPH will take over 4,500 megawatts (MW) worth of thermal power capacity in the deal, expected to close in the second quarter of 2015.
Both parties agreed to keep the purchase price confidential, but a broker, who asked to remain anonymous, said it could be between 500 million euros ($591 million) and 600 million in terms of enterprise value, or including debt.
E.ON put its Italian businesses up for sale more than a year ago but Europe's depressed power market has prompted a series of delays. Sources have said the Italian business as a whole could fetch about 2 billion euros, with more than half from renewable energy assets as weak demand and depressed power prices deter investors from traditional generation.
"We continue to assess a possible divestment of our other businesses in Italy," E.ON chief Johannes Teyssen said.
The deal with EPH includes a 600 MW coal-fired plant in Sardinia and 3,900 MW worth of gas-fired capacity spread over six plants in mainland Italy and Sicily.
EPH Chairman Daniel Kretinsky had previously said the company was looking to diversify in Europe, saying its presence in core markets was "relatively extensive".
Sources with knowledge of the matter said Italian renewable energy company Erg was a front runner to buy a prized hydroelectric plant worth around 1 billion euros.
People close to the matter previously said French energy group EDF was interested in buying E.ON assets through its Italian unit Edison.
"At this point it's looking increasingly unlikely Edison's bid will go through, even though it might better safeguard jobs," a banker close to the matter said.
Erg and Edison declined to comment.
E.ON, whose stock market value has plunged by about three quarters since 2008 on the back of a sluggish European economy and weak power prices, is in the middle of splitting its business in two to focus on renewable energy.
The company last month said it had sold its Spanish business to Australian investor Macquarie for 2.5 billion euros.
A sale price of 500 to 600 million euros would value the assets at about five times core earnings. "It's a low multiple but it's still quite an achievement ... in an oversupplied market," the broker, who didn't want to be named, said.