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RWE mulls $10B UK deal
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November 3, 1999: 5:37 a.m. ET
German electricity firm seeks to boost presence in Britain
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LONDON (CNNfn) - RWE, Germany's biggest electricity company, is on a shopping spree in Britain and looking to spend up to 6 billion pounds ($10 billion) on acquiring a U.K. water or electricity company, the German firm confirmed Wednesday.
RWE intends to spend 19 billion pounds in the next 10 years to boost its share of the European energy market to 10 percent from its current position of 2.3 percent.
An RWE spokesman ruled out a bid for beleaguered electricity generator National Power (NPR), which is struggling to change its strategy and has no chief executive. "We already have enough generating capacity in Europe," said the spokesman. "We have no interest in National Power at the moment."
A £6 billion war chest would allow RWE to cast its eye over a large part of the U.K. utility sector, with few companies beyond its price range.
Analysts warned however that pressure on RWE to pull off a deal may force the firm into a hasty move.
"The U.K. may offer a do-able deal, rather than a sensible deal," according to one London-based utility sector analyst. He said British power or water companies would not be especially complementary to RWE. However, there are far fewer political constraints on an overseas company acquiring a utility in Britain, while many other power firms in Europe are state-controlled.
"It's difficult to argue that they (RWE) could make a better fist of running most of the U.K. companies," added the analyst, who spoke on condition of anonymity.
Consolidation is gathering pace among European energy companies, and RWE is in the process of a $21 billion merger with German rival VEW. RWE is under pressure to do more deals because its principal domestic rivals, Viag (FVIA) and Veba (FVEB) have announced plans to merge.
Liberalization of the energy markets has brought a renewed focus on competition and the need for companies to achieve critical mass. U.K. utilities have led the way in Europe in terms of privatizations.
The news that RWE is considering action in the United Kingdom helped push the major utilities against the tide of a falling London stock market Wednesday. Severn Trent Water (SVT), named by the Daily Telegraph newspaper Wednesday as a possible RWE target, rose almost 1 percent. Severn is capitalized at about £3 billion, while rival United Utilities (UU-), valued at £3.3 billion, surged 5 percent to 609 pence.
RWE stock was gently lower at  39.00 in Frankfurt Wednesday
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