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E.ON sells Open Grid

by Paul Whitfield | Published May 16, 2012 at 6:03 PM

German utility E.ON AG on Wednesday agreed to sell German gas pipeline operation Open Grid Europe GmbH for an enterprise value of €3.2 billion ($4.1 billion) to a consortium led by a Macquarie Group Ltd. infrastructure fund.

The deal, which is expected to close in the third quarter, values Open Grid's equity at €2.9 billion, with the price rising to an expected €3.2 billion including adjustments for other assets and pension liabilities. The price values Open Grid at 10 times its 2013 forecast Ebitda of €300 million and is in line with the asset's book value in E.ON's accounts.

The valuation is at the upper limit of expectations, reflecting a competitive bidding process that drew interest from four different consortia.

The consortium is 24.11% owned by Macquarie, 18.75% by MEAG, 32.15% by BCIM and 24.99% by Abu Dhabi.

The winning offer was made by a four-way consortium of Macquarie European Infrastructure Fund 4, Canadian infrastructure investment group British Columbia Investment Management Corp.; Infinity Investments SA, which is a subsidiary of Abu Dhabi Investment Authority; and Munich Ergo Asset Management, or MEAG, the asset management arm of German insurers Munich Re AG and Ergo Versicherungsgruppe AG.

"The sale of Open Grid Europe brings E.ON closer to its goal of generating roughly €15 billion through divestments by the end of 2013," the seller said in a statement. "E.ON will use the money to reduce its debt and invest in growth businesses."

E.ON chief executive Johannes Teyssen has sold more than €12 billion of assets since late 2010, when, just six months into the job, he announced sweeping plans to raise €15 billion by selling some mature European assets and peripheral activities.

Essen, Germany-based Open Grid operates about 12,000 kilometers of gas pipelines and is a key hub for bulk gas shipments from Russia and Norway.

It transports about 62.5 billion cubic meters of natural gas annually and provides about 70% of Germany's total shipping volume.

The operation was unbundled from E.ON's other operations in 2010, in compliance with EU regulations to increase competition in the European gas market. "OGE's geographical footprint and the quality of the network will play an increasingly important role as a European hub transmission operator with the evolution of European gas flows," said Edward Beckley, European head of Macquarie Infrastructure and Real Assets.

Other bidders for the assets included a French consortium of GDF Suez SA and insurer CNP Assurances SA and a second team of Belgium's Fluxys SA, New York's Global Infrastructure Partners and fund manager Caisse de dépôt et placement du Québec.

A fourth bid was lodged by Germany's Allianz SE, Canadian Pension Plan Investment Board and Dutch gas grid operator NV Nederlandse Gasunie, according to Reuters.

Separately on Wednesday, E.On sold a 15.09% stake in Interconnector (UK), owner and operator of a subsea pipeline between the U.K. and Belgium, for €127 million. The buyers are Italy's San Donato Milanese SpA, or Snam, and Belgium's Fluxys G, who expect the deal to close before the end of the year.

The Macquarie consortium took financial advice from Macquarie Capital and Royal Bank of Canada. E.ON received legal counsel from a Hengeler Mueller team that included Hans-Jörg Ziegenhain, Daniel Wiegand, Dirk Uwer, Stefanie Beinert, Thorsten Mäger and Christian Hoefs.

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