Vattenfall and Nuon to Form Energy Company in Europe

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Researched by Industrial Info Resources (Sugar Land, Texas)--Government-owned energy company N.V. Nuon (Amsterdam, The Netherlands) and Vattenfall AB (Stockholm, Sweden) recently announced that they would form an energy company in Europe. The two firms will jointly invest to attain a climate-neutral state of operations for the new entity by 2050. Alliander NV (Arnhem, The Netherlands), Nuon's grid company, is not included in the deal.

Vattenfall has made an all-cash bid worth $10.9 billion for the deal. After the payout of the 2008 dividends, the total cost of the deal would amount to $12.97 billion. Under the terms of the agreement, Vattenfall will initially own 49% of Nuon's shares and will acquire the remaining 51% over the next six years under fixed terms. The transaction is expected to be closed by the second quarter of 2009, provided that 80% of Nuon's shareholders and the European Commission competition authorities approve of the deal. Nuon's shares are owned by local and regional authorities in The Netherlands. With the initial 49% acquisition, Vattenfall will be able to control the operations of Nuon. The gradual transfer of shares signifies the commitment of both companies to protect the Dutch identity and public interests of Nuon. In fact, a foundation will monitor and protect the public interests of Nuon. Vattenfall will finance the deal through available cash reserves and a committed debt financing of $6.3 billion with nine banks.

The new partnership will increase the financial capacity, scalability and stability of Nuon, which will become Vattenfall's third regional business group and build the business in the Benelux region. The partnership is strongly committed to ramping up investments in the renewable energy sector and developing carbon capture and storage (CCS) technology, an area where Vattenfall already has a strong presence. It also intends to become a European leader in offshore wind power. The new company intends to generate 15 billion kilowatt-hours (kWh) of wind power by 2015 against the existing capacity of 2.5 billion kWh. Investments will be made in research and development activities in the fields of ocean power and solar foil development. The combined expertise of both the companies will offer customers attractive offers and increased energy efficiency.

Vattenfall is considered to be a strong force in fighting climate change while Nuon is acknowledged as an expert in clean and renewable energy technologies. According to Vattenfall CEO Lars G. Josefsson, the partnership will enable Vattenfall to implement its strategy of improving its gas business and becoming a leader in the European energy market. Combined with Nuon's expertise, Vattenfall will be able to realize its plans of producing clean electricity. The addition of the Benelux market to Vattenfall's existing customer base will help the partnership strengthen its position in Europe.

Nuon is a multi-utility company involved in the marketing, selling and distribution of energy and energy-related products and services. With more than 3 million customers across The Netherlands, Germany and Belgium, Nuon occupies a leading position in the Dutch energy market. The company's turnover in 2008 was around $7.7 billion.

Vattenfall generates electricity, supplies energy, and produces heat. It also produces electricity from fossil fuels, nuclear power, hydroelectric power, and wind power. The German, Polish and Swedish markets account for 80% of Vattenfall's sales. In 2008, the company's sales amounted to more than $18 billion with a net profit of $ 2 billion. For related news, see February 17, 2009, article - Vattenfall Could Make $16 Billion Bid for Takeover of Scottish Southern Energy.

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