RWE Set to Expand in Netherlands and Belgium with Essent Merger

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Researched by Industrial Info Resources (Sugar Land , Texas)--RWE's (Essen, Germany) $12.3 billion agreement to acquire all of Essent NV's (Arnhem, The Netherlands) issued and outstanding shares represents the largest deal yet made in Europe in 2009. Despite the tight credit conditions, RWE obtained a loan to cover the deal from 10 banks, including Barclays (NYSE:BCS) (London), Commerzbank (OTC:CRZBY) (Frankfurt, Germany), Credit Suisse, JPMorgan Chase & Company (NYSE:JPM) (New York, New York), LBBW, Societe General (OTC:SCGLY) (Paris), WestLB (Dusseldorf, Germany) and Unicredit SpA (BIT:UCG) (Milan, Italy). By the time the merger and acquisition process is completed in the third quarter of 2009, RWE intends to have issued bonds to cover the finance.

The deal covers Essent's commercial energy activities but excludes its network and waste management operations. In addition to claiming to be the Netherlands' largest energy company, Essent has operations in Belgium and Germany and will bring an additional 6,200 megawatts (MW) under RWE's control. Essent's shareholders, Dutch municipalities and provinces, had decided to seek an alliance with an international partner to achieve a larger scale position that would be crucial to the continuity of the company in a consolidating international energy market. Essent will become an independent business unit of RWE and serve as the group's platform for growth in the Dutch and Belgian markets and its main locations, such as Arnhem, Den Bosch, Zwolle and Geneva, will continue to operate in their current roles.

RWE envisages the merger increasing the security of power supply in northwestern Europe and in making sustainable and affordable energy available in the Netherlands. Essent's strong renewables profile will complement RWE's aim to increase its renewables capacity to 4,500 MW by 2012. The companies will continue with joint developments in carbon capture and storage. Essent's power fleet includes gas, renewable and coal fed plants and 50% of the 485-MW Borssele nuclear power plant, which was to be phased out in 2003 but is now set to operate through 2034. Delta, the co-owner of the plant, is considering building another nuclear plant near Borssele. RWE has a 1,600-MW coal-fired power plant under construction in Eemshaven in the Netherlands that will have a part biomass-firing capability and is due to be commissioned in 2012.

RWE currently has 63,500 employees and supplies 20 million customers with electrical power and 10 million with gas. In 2007 the company had revenues of $56.6 billion. Through RWE Nederland, it supplies electricity and gas to 353,000 households and 30,000 businesses. Essent had estimated revenues of $8.71 billion in 2008 and has 7,800 employees.

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