E.ON's Asset Swaps Shake Up European Power Scene

---

Researched by Industrial Info Resources (Sugar Land, Texas)--In the process of shedding 4,800 megawatts (MW) of power assets in Germany, which was mandated by the country's federal Court of Justice during an anti-competition ruling, the country's power major E.ON (OTC:EONGY) (Dusseldorf, Germany), is creating new models for power asset swapping and cross-European power-utility cooperation in order to stimulate competition in Germany.

In one of the latest of a series of deals, the Belgian power operator Electrabel (Brussels), a subsidiary of the GDF Suez group (EPA:GSZ) (Paris, France), will take more than 1,700 MW of E.ON's generating capacity and power procurement rights in Germany in return for similar power rights in Belgium, which will in effect give the German company 12% of Belgium's power market. E.ON will take over Electrabel's 556-MW hard-coal-fired plant at Langerloo, the gas-fired 385-MW plant at Vilvoorde and 770 MW of procurement rights from the Doel 1, Doel 2 and Tihange 1 nuclear power stations. E.ON's Belgian market share could be further increased by a plan to build a coal-fed power station in the port city of Antwerp by 2014.

In the German power market, EnBW (Karlsruhe, Germany) has signed a memorandum with E.ON to take a stake in the 446-MW Lippendorf brown-coal-fired plant and the 79-MW Bexbach coal-fired plant. Also in Germany, Electrabel will purchase the 350-MW Farge and the 449-MW Zolling hard-coal-fired plants and a total of 700 MW power procurement rights from the Kruemmel, Grundremmingen and Unterweser nuclear power plants from E.ON. GDF SUEZ and E.ON are expected to complete the power transactions by mid-2009 following due diligence, the signing of definite agreements and the necessary approvals from the antitrust authorities.

E.ON has already disposed of 750 MW in an asset-swap deal with Statkraft (Oslo, Norway) and is looking to shed another 2,100 MW in the European Union by asset swaps. For additional information, see related news item from November 14, 2008 - E.ON and Statkraft in $8 Billion Renewables-Driven Asset Swap.

Industrial Info understands from a market source that another 325 MW could be disposed of in the form of E.ON's 50% share in the Mehrum power station in the Peine district of central Germany, which has been retro-fitted with a flue-gas heat-recovery system. A number of European power majors are possible buyers with the exception of operators RWE, Vattenfall and EnBW. Stadtwerke Hannover already holds 33% of the plant operation and could be a possible buyer, as could Statkraft or Electrabel. Mehrum has a 99% coal feed with 1% heavy fuel-oil usage.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.