E.ON shortlists 3 bidders for U.S. business-sources

By Peter Dinkloh and Michael Erman

FRANKFURT/NEW YORK, April 25 (BestGrowthStock) – Germany’s E.ON
(EONGn.DE: ), the world’s largest utility by sales, has
shortlisted three bidders for the multi-billion euro sale of its
U.S. business, three people with knowledge of the matter said.

U.S. utilities Duke (DUK.N: ) and PPL (PPL.N: ) are among the
bidders, two people with knowledge of the matter said. A
financial consortium including Australian investor MacQuarie
(MQG.AX: ) is the third bidder, one person said.

“It’s looking very good,” said one person, without being
more precise about the value of the bids.

The people declined to be identified as the sales process is
confidential. E.ON was not immediately available to comment.

The sale, part of a slew of divestments by European
utilities to cut debt after a takeover spree, is part of E.ON’s
efforts to shed more than 10 billion euros worth of assets by
the end of the year.

A sale of the unit based in Louisville, Kentucky, could be
the second largest utility deal in the U.S. this year after
Ohio’s FirstEnergy Corp (FE.N: ) takeover of Pennsylvania’s
Allegheny Energy Inc (AYE.N: ) in a deal currently valued at about
$4.4 billion in stock.

E.ON had bought the E.ON U.S. unit, formerly known as LG&E,
in 2002 as part of its 9.6 billion pound ($14.85 billion)
takeover of Britain’s Powergen, but the overseas operation
remained separate while it was integrating European operations
such as energy trading.

Powergen had paid about $3.2 billion for LG&E in 2000.

The division, which E.ON calls “U.S. Midwest”, generated
earnings before interest, taxes, depreciation and amortization
of 552 million euros ($742 million) in 2009 on sales of 1.8
billion euros.

Utility deals in the United States are a drawn-out
procedures which face tough scrutiny from states and regulators.
A planned merger of FPL Group (FPL.N: ) and Constellation Energy
Group (CEG.N: ) fell apart due to such scrutiny.

Because E.ON is still 4 billion euros shy of its divestment
target, selling the business would be a major step to execute
its strategy.

The divestments are meant to reduce E.ON’s economic net
debt, which soared to 45 billion euros by the end of 2009, from
18 billion at the end of 2006.

Economic net debt includes the company’s liabilities plus
its pension liabilities and obligations for its nuclear power
plants, minus its cash and other funds.

E.ON had to cancel the sale of its Italian gas grid earlier
this week.

E.ON also operates wind farms in the United States which are
part of its renewables business and are not operated by the E.ON
U.S. Midwest unit.

Goldman Sachs is advising E.ON on the sale.
(With reporting by Quentin Webb in London; Writing by Peter
Dinkloh)

E.ON shortlists 3 bidders for U.S. business-sources