Siemens awaits approval from competition authorities

Siemens has acquired of 90 per cent of VA Tech after the company’s shareholders accepted a price of €65 ($84) per share, although doubts have been raised as to whether the takeover will gain approval from the necessary competition authorities.

Alstom has expressed concerns that if the proposed merger were to be allowed, Siemens would control 60 per cent of the European hydroelectric power market, a figure that would alert the EU’s competition regulators.

It is thought that if the merger is given approval then Siemens will have to divest a significant amount of its business portfolio in the areas of hydroelectric power and transmission. The deal will also undergo investigations from the competition authorities in the USA and Canada who must grant acceptance before 20 July 2005.

Siemens has been chasing VA Tech since last autumn when, in an unsuccessful approach, the German company was unable to win the support of the Austrian government, which holds a 25 per cent stake in VA Tech.

Enel’s SE acquisition finally signed

The Slovakian Minister for the Economy, Pavol Rusko, and Enel CEO, Paolo Scaroni, have signed the €840 million ($1.1bn) agreement for Enel’s acquisition of 66 per cent of the electricity company Slovenske Elektrarne (SE).

After initial delays, the Slovakian government agreed to sell 66 per cent of its share capital in the second largest electricity generator in Central and Eastern Europe to Enel in December 2004.

Enel plans to expand the output of its recent acquisition and will soon announce an investment plan that will enhance efficiency and reduce emissions at the facilities it inherited in the takeover. The Italian utility has paid 20 per cent of the final price, which is to be held in an escrow account, and will settle the remainder when the shares of SE are transferred to Enel in the second half of 2005.

EDF considers offers for its Italenergia stake

EDF has said that has received around ten offers from utilities for its stake in Italenergia Bis, the company that controls 63 per cent of Edison. It is widely accepted that EDF is seeking to sell its share in order to avoid being forced to launch a takeover bid for the whole of the Edison group.

Half of the offers are believed to have come from companies wishing to purchase EDF’s entire interest while the remaining half were offers for partial acquisitions.

AEM, the Milan-based electricity and gas company, has made a non-binding offer for 40 per cent of IEB, while ASM Brescia has also let it be known that it is interested in a stake.

However, they may be unable to compete with Endesa, which Spanish reports claim has made a confidential offer to the Italian government, via Merrill Lynch, for 100 per cent of the stake held by EDF. Endesa declined to disclose the value of its offer, but the stake is estimated to be worth over €3.7bn ($4.9bn).

The French government has delayed partial privatization of the EDF group until the Edison matter is settled.

Merger and acquisition activity still increasing in power and gas sector

A global bounce-back in deal activity is taking place in the electricity and gas sector, according to PricewaterhouseCoopers’ annual review of Mergers & Acquisition activity in the industry.

The Power Deals 2004 review shows a resurgence in confidence contributing to record highs after the extreme lows of the previous year. Total deal value in the global gas and electricity sector was $123.1bn in 2004, substantially ahead of the total recorded in any year since 2000.

The value of cross-border deals equalled the all-time highs reached between 1998 and 2002, although the largest deal of the year was US-based. The $26.1bn mega-purchase of PSEG by Exelon Corporation set a new record for a single transaction.

Deal volumes rose in every major region with purchases in North America leading the way. North America target deal values leapt from $18.2bn to $57.9bn, nearly half (47 per cent) of the $123.1bn global total.

The report suggests the upsurge in deal activity is set to continue into 2005. Even excluding the Exelon deal, nearly three quarters of total deal value came in the second half of the year indicating a strong start to current year mergers and acquisitions.

ABB back in black

After three years of restructuring and asbestos-related litigation left ABB deep in the red, results for 2004 saw it return to profit.

The Swiss-Swedish powerhouse earned $1.1bn before interest and taxes (EBIT), while net income was $210m, up $980m on 2003. Fourth-quarter EBIT more than doubled to $264m, fuelled by revenue growth in core divisions. The quarter’s cash flow was up 32 per cent to $880m, most of the year’s total of $962m.

CEO Fred Kindle said ABB “again took out costs and lifted productivity. Coupled with a recovery in most markets, we substantially increased EBIT and reported a rebound in net income of almost $1bn.”

News digest

Debt finance: GE Commercial Finance is to provide debt financing to businesses that deliver clean or renewable energy directly, or develop new technologies for cleaner and more efficient energy generation and distribution.

Iberdrola: Spanish electricity group Iberdrola has announced that net profits in 2004 rose 14.2 per cent to g1.2bn ($1.6bn). The company said this was due to both cost controls and investments of some g2.7bn, 80 per cent of which was spent in Spain.

Dong stake increased: State-owned Danish utility Dong is to buy Kobenhavns Energi, including its 34 per cent stake in Energi E2, for a combined price of DKK10.5bn ($1.9bn). Dong now has a majority stake in both Elsam and E2.

Legal action: The Finnish power group Fortum has launched legal action against E.ON in order to exercise its option to buy the German company’s 66 per cent stake in E.ON Finland for €390m ($521m).

Limiting fault: American Superconductor and Siemens have formed a strategic partnership to develop and explore the commercial viability of high temperature superconductor fault current limiters (FCL) by building and testing related components.

Nuclear focus: Areva and Siemens’ joint venture, Framatome, has formed a new organization to focus on the future need for commercial nuclear generation in North America. A team will lead the North American deployment of the Evolutionary Pressurized Water Reactor.

Record results: Verbund, the Austrian utility, recorded the most successful financial year in the company’s history in 2004. Sales rose by 24 per cent allowing it to increase dividends to its share-holders by 50 per cent.

Schneider measures: Subject to regulatory approvals, in the second half of 2005 Schneider Electric will acquire 100 per cent of Power Measurement, a designer, manufacturer and provider of energy intelligent systems.

Sensors and meters: A new report from Business Communications Company has valued the 2004 global market for gas sensor and metering equipment at $2.8bn and predicted an average annual growth rate of 5.9 per cent until 2009, when it estimates the market will be worth $3.8bn.

Tata bonds: India’s Tata Power is to raise $200m from the international capital market through foreign currency convertible bonds. The bonds will be listed on the Singapore stock exchange.

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