E-On reaches asset agreement with Enel/Acciona over Endesa bid

German energy utility E.On has withdrawn its bid for Spanish utility Endesa. The decision was taken after E.On reached agreement with rival joint-bidders Enel, an Italian utility, and Acciona, a Spanish construction and services company, to acquire some of Endesa’s assets should the Enel/Acciona bid succeed.

If Enel and Acciona gain control of Endesa, E.On will receive an extensive portfolio of equity holdings including operations in Spain, Italy and France as well as additional activities in Poland and Turkey. The total value of theses assets is around €10 billion.

In Spain, E.On will acquire the power utility Viesgo from Enel. Viesgo currently has an installed generation capacity of some 2,400 megawatts (Mw), which will have increased by about 50 percent by 2010, as a result of ongoing construction projects. Furthermore, E.On will receive additional Spanish generation capacity from Endesa. In total, by 2010 E.On’s Spanish power plant capacity will be approximately 6,400Mw. E.On will then become the No. 4 player on the Spanish market, with a market share exceeding 10%.

In Italy, E.On will acquire E.On Endesa Italia, with about 5,000Mw in generation capacity. This will make E.On the fourth largest power producer in Italy.

E.On will become the No. 3 player in the electricity generation sector in France through the acquisition of Endesa France/SNET, which has a power plant capacity of some 2,500Mw.

Commenting on the agreement, E.On’s chief executive, Wulf Bernotat says: “Acciona’s and Enel’s involvement in Endesa has made our original goal of acquiring a majority stake in Endesa impossible. Obtaining a minority interest in Endesa would have led to a stalemate between the shareholders and triggered unpredictable lawsuits. The agreement we have reached with Enel and Acciona will rapidly establish clarity for everyone involved. At the same time, in one step, E.On will establish attractive market positions in Spain, Italy and France, which we look forward to further developing. ”

“This agreement lays the foundations for our strategy of becoming a major European energy company with a strong presence both in Europe and globally,” says Enel CEO Fulvio Conti. “The agreement provides a platform for Enel's growth in the European electricity market, for the company's further consolidation in the Spanish market as well as in high growth markets such as Latin America.”

The Spanish government had backed a lower, unsuccessful bid for Endesa by Spanish company Gas Natural, as this would have kept Endesa in Spanish hands. The European Commission is now taking legal action against the Spanish government for impeding E.On’s bid. Though new agreement between the bidders will secure the future of Endesa’s Spanish operations, the rest of the company will be broken up and E.On will become an important player in the Spanish market. Acciona’s president José Manuel Entrecanales confirmed that one of Acciona’s main reasons for the deal was “securing the independence of Endesa as a Spanish company.”

In February 2007, Enel started to accumulate a direct 10% stake in Endesa while Acciona owns 21% of Endesa's capital. In April Enel and Acciona announced a €41.3 per share conditional all-cash bid for the remaining capital of Endesa that they do not own.