"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Tuesday, February 24, 2009

State owned Swedish Vatenfall to take over Dutch state owned Nuon,RWE take over Essent - Europe consolidates energy producers

Vattenfall [VATN.UL] the Swedish state-owned energy company operates not only in but also in Germany and Poland Last year the turnover was 164.5 billion SW krona (€14.8 Bn) and they employ 32,396 employees. The Swedish Government has stated that it has no intention to privatise the company.

Nuon is a Dutch based energy company formed in 1994 as the result of a merger of a number of privatised regional energy providers with a joint market share of up to 40 % = a total of 2.5 Mn domestic and business customers .The present owners of Nuon are the provincial authorities of Gelderland, Friesland, North Holland, and the city of Amsterdam.

Nuon, no 2 Dutch energy company (Nuon is an unlisted Dutch NV (Plc) subject to the statutory 2 tier rules under article 2: 158 – 164 of the Netherlands Civil Code.) employed 10,000 people in 2008 in the Netherlands, Belgium and Germany with a turnover of € 6.15 Bn.

Both companies announced in a joint statement that Vattenfall is buying a minority share of 49 % of Nuon within the next few months, and the remaining 51% of the shares in the next 6 years.

The initial financing will be with a €5 Bn. bridge loan 150 basis points (bps) over EURIBOR for the first six months, stepping up by 75 bps for the next six months. The loan has been arranged by a group of Vattenfall's major core relationship banks including Barclays, BNP Paribas, Citigroup, Deutsche Bank, JP Morgan, Nordea, Royal Bank of Scotland, SEB and Societe Generale.

Vatenfall are prepared to spend €8.5 Bn. euros on the acquisition of Nuon in a quest to form a joint company that they claim will by 2050 to be "climate neutral".They also want to be the No. 1 company for seaborne / coastal wind energy generation and claim that the combined group's ambition is to generate 15 terawatt hours of wind power by 2015, compared to 2.5 terawatt hours in 2009. To put this in perspective The Norwegian energy agency Enova set up a fund in 2006 of 20 billion Norwegian kroner or €2.5 billion to promoting renewable and energy efficiency. Based on a transmission tariff for electricity. The aim was to increase the production of new renewable energy and energy efficiency to 30 terawatt hours in 2016. Hydropowein Noway accounts for 119 T Wh annually.

Essent another Dutch energy company had been in Nuon's sights as a partner but the recent acquisition by German competitor RWE for €9.3 Bn helped to crystallise the Vattenfall / Nuon deal. The company is non -listed and was formed in 1999 by the merger of PNEM/MEGA Groep and EDON Groep (Only yesterday did Essent Central Works Council, a requirement under Dutch law approve the deal)

The RWE offer includes Essent’s 50% stake in the only Dutch nuclear power station, at Borssele jointly owned with Delta. RWE has an investment budget of €80bn up to 2020 and that although part of this has already been allocated, there is enough over for new projects such as nuclear power plants. RWE is also investing €2.4bn in a new coal and biomass power plant at Eemshaven in the north of the Netherlands.

The present owners of Nuon are the provincial authorities of Gelderland, Friesland, North Holland, and the city of Amsterdam. Currently Dutch electricity prices are among the highest in NW Europe.

The joint / companies also plan to increase investment in solar and tidal power while accelerating carbon capture and storage projects (see details on website) at Schwarze Pumpe in Germany and Nuon's Willem-Alexander power plant in Buggenum in the Netherlands.

Dutch competition authority NMa and minister of economic affairs Maria van der Hoeven are yet to approve the deal. Nuon's workers council is reacting positively to the takeover, on the basis (which has been agreed by both companies) ,that no redundancies will result from the move.

Nuon's grid company Alliander is not included in this transaction.

PS : Stories surfaced on Feb. 1oth that Vattenfall was in £11bn talks to buy Perth based Scottish & Southern Energy - not for the first time. There does not seem to be much furthr support to what are persistent rumours. S & S

Scottish & Southern have said they are on course to deliver a "modest" increase in adjusted pre-tax profits on the £1.23bn it made in the year to March 2008. Profits for six moths to September 30th were £302.6m in the six months to September 30 but expect more in the second half as price increases and higher winter demand take effect. They expect a rise of at least 9.1% in the full-year dividend.

Through their renewable energy development division Airtricity, S &S have been granted exclusivity (20th Feb 200) by The Crown Estate to develop offshore wind farms at four locations in Scottish territorial waters. The locations are Beatrice, Bell Rock, Islay and Kintyre.

With all the oil and gas (and still a lot of coal) the UK has had, there maybe a commercial fable or two in this tale.....

UPDATE : German Press comment today.

DER SPIEGEL comment on the Vatenfall move today is " When energy giants join forces, competition dies, prices increase and consumers get a raw deal"

"Every merger chokes competition," Aribert Peters, the head of the German Association of Energy Consumers (BVE), told SPIEGEL ONLINE. "It always brings the danger of higher prices." Peters also called on Germany's Federal Cartel Office to block the deal from going through.

"This is a big day for the Swedish state-owned Vattenfall and a bad day for German consumers." said Die Welt."The consumer's freedom of choice is smaller; the range of products is narrower; and prices will probably go up."

The Financial Times Deutschland said "Germany's (energy) retail market has been and will continue to be lacking in sufficient competition. This takeover is another setback."

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