German utility company E.ON Energie AG has received European Commission antitrust approval for its purchase of Sydkraft AB, Sweden’s second largest utility. The approval brings E.ON one step closer to its stated goal of becoming a leading European utility.
E.ON announced its intention to acquire the balance of Sydkraft shares it did not already own in February 2001. EU merger authorities have since been considering the transaction. The decision, announced this week, results in the offer going unconditional, and E.ON expects the deal to be complete by mid-May
On Monday, E.ON announced the biggest ever acquisition in the group’s history, the purchase of UK utility Powergen. The proposed deal gives E.ON a strategically important foothold in the US energy market and the company has announced plans to sell a number of non-core assets to satisfy US regulators.
Reaction to the Powergen deal from rating agencies has varied, with Moody’s Investor Service upgrading E.ON’s long term debt rating from negative to stable, while Standard and Poor’s has warned of a negative outlook reflecting post merger integration risks and the increasingly competitive electricity markets.
US regulations prevent ownership of domestic energy companies by groups generating less than 80 per cent of their sales from electricity and gas supply. In order to satisfy these regulations, E.ON is embarking on a programme of divestment of its non-utility businesses in which it will sell its Degussa speciality chemical division as well its real estate, oil and telecommunications operations.
Powergen’s businesses include LG&E Energy, a vertically integrated energy group based in Louisville, Kentucky. LG&E Energy’s operations include two Kentucky regulated utility businesses serving 840,000 electricity customers and 290,000 natural gas customers.