Dutch utilities offer rare buying opportunity

AMSTERDAM, NETHERLANDS - The two largest power utilities in the Netherlands, which are looking for foreign partners, present rare opportunities for potential investors in a consolidating European market.

The two companies, Essent and Nuon, said in June that they were looking for an international partner for their production and delivery units. Those units must legally be separated from their network arms by 2011.

Analysts say the relatively small size of the units make them attractive to foreign companies.

Larger utilities, like E.ON, which is based in Germany, are likely to be interested in taking a stake or in cooperation with the Dutch companies. But analysts say smaller, more regionally limited power companies could also see an opportunity to expand across borders.

"Following the consolidation of European utilities, you do not have that many opportunities left, so everybody will be interested," said Hervé Gay, an analyst at Société Générale.

Smaller European utilities, like DONG Energy, a Danish state-controlled oil and gas group, or the British utility Centrica, could use an alliance for growth in Europe.

Experts have estimated that Essent's production and delivery operations could be worth €6 billion, or about $8.8 billion, and Nuon's more than €5 billion.

Essent and Nuon, which are owned by local and regional authorities, called off plans to merge last year, saying conditions were not right.

But being a small utility in Europe is a challenge in a market that has undergone a wave of consolidation. Larger utilities have the advantage, for example, when it comes to negotiating contracts for energy supply and equipment.

A presence in the Netherlands could provide several strategic opportunities for foreign partners, including access to production assets and new clients.

"Production capacity is a very interesting asset for every big utility in Europe," said Stephan Wulf, analyst at Sal. Oppenheim. "The Germans have huge investment plans and I think it would fit quite well. But also looking to France and utilities which are further away, they might also be interested in generation capacities."

Koen Dierckx, analyst at KBC Securities in Brussels, also highlighted the Dutch production assets and their renewable energy activities.

"Nuon and Essent have a number of gas-fired power plants which are pretty new and recent, and both have an important renewables position," Dierckx said.

Analysts also pointed to the Netherlands' strategic regional positioning.

"This will be a good opportunity for external growth in a market which is strategically located between the north, the west and the southern part of Europe," said Gay, the Société Générale analyst.

Either acquisition would pale in comparison with Enel and Acciona's €42.5 billion purchase of the Spanish utility Endesa last year. Essent reported sales of €7.4 billion in 2007, and Nuon had €5.65 billion.

Some analysts did not rule out the chance that proposals to merge the companies could be revived.

"I would not be so sure that such a merger is dead," Gay said. "It has been attempted in the past, then abandoned, then it has been revived, so it is also a possibility that they could come back with a new plan."

Related News

dwight ball

Lump sum credit on electricity bills as soon as July

ST JOHNS - Most people who pay electricity bills will get a one-time credit as early as July.

The provincial government on Thursday outlined a new directive to the Public Utilities Board to provide a one-time credit for customers whose electricity rates are affected by the price of oil.

Electricity customers who are not a part of the Labrador interconnected system, including those using diesel on the north coast of Labrador, will receive the credit.

The credit, announced at a press conference Thursday morning, will come from the rate stabilization fund, which has an estimated surplus of about $50 million because low oil…

READ MORE
berlin pv industry

Berlin urged to remove barriers to PV

READ MORE

california-welcomes-70-volvo--vnr-electric-trucks

California Welcomes 70 Volvo VNR Electric Trucks

READ MORE

Egypt’s Electricity Minister Mohamed Shaker

Egypt Plans Power Link to Saudis in $1.6 Billion Project

READ MORE

ontario nuclear

Ontario confronts reality of being short of electricity in the coming years

READ MORE