Essent partnering with RWE - enters a new future
Arnhem, 12 January 2009 – Essent today announced it will enter a partnership with RWE to become part of the fourth largest energy supplier in Europe. With this strategic step Essent ensures its long stated ambition to play a leading role on the consolidating North-West European energy market.
Both parties have reached agreement on the terms and conditions for a binding all cash offer from RWE of EURO 9.3 billion to the shareholders of Essent for the acquisition of all of the issued and outstanding shares of Essent, excluding the network and waste management operations. The new scale of business will guarantee the long-term continuity of the company. With this strategic step Essent will enter a new future that will bring a wide range of new opportunities:
- Access to better financing conditions will enable Essent to develop further necessary large-scale power generation and gas infrastructure. This will improve the security of supply in Essent's core markets.
- As an independent identity within the RWE organisation, Essent will become the operating company in the Benelux region.
- Clear benefits for customers (competitive prices) and employees will be realised as result of a stronger, international foundation.
- Joint efforts to boost renewable energy, energy savings and to develop carbon capture and storage technology will strengthen our leading position in sustainable energy in the Netherlands.
Essent’s Chief Executive Officer, Michiel Boersma comments: “Essent will now team up with a leading and respected foreign partner. This opens a wide range of possibilities for our company, our employees and our customers. In the current situation of a rapidly changing market Essent partnering with RWE will create a strong foundation for the future.”
Describing Essent as an excellent match for RWE, Juergen Grossmann, Chief Executive Officer of RWE, said: “I am extremely pleased with this partnership. We are teaming up with a very successful and attractive company, with leading market positions in gas and in the power retail market in the Netherlands and Belgium – markets that are very close to us, not just geographically but also culturally. Essent’s track record in the renewables and trading business, its customer service activities and its expertise in the gas sector make it a perfect match for our company. Jointly, we will strengthen our position as one of the leading energy companies in Europe. Together, we are well positioned to increase security of supply in North-West Europe and to contribute to making sustainable and affordable energy available in The Netherlands.”
“We are determined to foster and strengthen the Essent brand. Essent will become RWE’s operating company in The Netherlands and Belgium and will continue as an independent entity responsible for the execution of the Group’s strategy on the Dutch and Belgian markets. We’re joining forces in the renewables sector and in our efforts to develop the carbon capture and storage technology for a climate friendly and affordable future energy supply”.
Recommending the offer
The Executive Board and the Supervisory Board of Essent, after having duly considered the strategic, financial and social aspects of the transaction, support the transaction and conclude that it is in the best interest of the shareholders and all other stakeholders of Essent. They recommend that Essent’s shareholders accept the contemplated offer. The Shareholders Committee, representing 100% of Essent’s issued and outstanding share capital of Essent has also indicated its support for the transaction.
Offer details
The contemplated offer will be a binding all cash offer from RWE to the shareholders of Essent for the acquisition of all the issued and outstanding shares of Essent, excluding the network and waste management operations. The contemplated offer will have a transaction value of EUR 9.3 billion, including net indebtedness (enterprise value). This is in line with the value of the shares before the international credit crisis and represents the value Essent will have after the split of the company into a commercial part and a network provider.
The new organisation
The transaction only concerns the commercial energy activities. Essent will become an independent business unit of RWE and serve as the group’s platform for growth in the Dutch and Belgian markets. The main locations such as Arnhem, Den Bosch, Zwolle and Geneva will continue in their current roles.
Essent’s trading activities will be merged with the trading activities of RWE. RWE’s current businesses in The Netherlands and Belgium will be integrated into those of Essent.
An Executive Board of four members will lead the new organisation. Two of these will come from RWE and two from the senior management of Essent. The new Supervisory Board will have five members. Three members from RWE, one will be nominated by the Central Works Council and the position of chairman will be filled by an independent Dutch national. The composition of both Boards will be announced at a later date.
A logical next step
To achieve sufficient scale within Europe, it is essential for Essent to join one of the leading players in the European energy market. Following the unbundling of the network activities and in the absence of a merger with another Dutch energy company, Essent cannot reach the required size on its own. Partnering with RWE is therefore a logical next step.
The impact of the unbundling means it has become increasingly difficult for Essent to compete in the commodities market and to ensure attractive terms and an adequate security of supply for our customers. This also applies in the construction of new power plants and in securing new business capital on favourable terms.
Anticipating the rapidly changing market conditions and the effects of the unbundling process, Essent has, in close cooperation with all relevant stakeholders, diligently and carefully undertaken the task of finding a suitable partner. By taking the initiative Essent has been able to agree favourable conditions on the future and the objectives of the company, the position of our employees and the degree of independence and visibility of Essent in the new company.
Our customers
Essent’s customers will benefit when Essent becomes part of a large company.
- Competitive tariffs: the new company is better positioned to control the purchase costs and compete on better terms with other energy companies in The Netherlands and Europe.
- Attractive products and services: the new company is able to offer a broad range of products and services, for example in green energy, energy saving schemes, solar power, micro-CHP’s and other sustainable products.
- Security of supply: the new company has a much larger and diversified generation capacity and is better able to invest in new generation capacity
Our employees
A strong international company provides a better perspective for the career and personal development of our employees. Essent will retain key functions in The Netherlands such as the head office functions and activities to support research and knowledge institutions in the Benelux and Europe. RWE shares Essent’s belief that its employees are key for the company. The integration of the two companies will be conducted with the utmost care and in full compliance with Essent’s existing social plan. The transaction is not expected to adversely affect the existing employment levels and employment conditions in The Netherlands. RWE has given certain undertakings to protect the interests of Essent employees, which the Essent Executive Board and Supervisory Board consider particularly important.
The position of Essent’s shareholders
The share sale follows the earlier decision of the shareholders to seek an alliance with an international partner based on a broad set of criteria that goes beyond value alone. The reasons for that decision was to achieve a larger scale which is crucial to the continuity of the company in a consolidating international energy market, and at the same time avoid the conflicting interests of public shareholders in a commercial energy company.
Following the adoption of the unbundling law Essent’s shareholders had concluded that a public shareholding no longer matched the objectives and financial risks of a commercial enterprise. This may also not serve the primary objective of the public shareholder, which is performance of a duty to the general public.
The public interest in a free market is sufficiently assured through national laws and regulations - supplemented with activity monitoring by sector and anti-trust supervision on the competitive behaviour of the energy suppliers. Additionally in the next few years’ substantial investments are required to ensure the future of Essent and the security of a sustainable energy supply in The Netherlands. Postponement of the sale would bring about unacceptable risks for the current shareholders.
Conditions and further process
RWE and Essent intend to enter into an agreement regarding an offer by RWE for up to 100% of the issued and outstanding shares in Essent N.V., excluding the network and waste management business and including 51% of Stadtwerke Bremen A.G., as soon as the Essent Central Works Council has given its advice on the transaction. A submission will be made shortly to the Essent Central Works Council for their advice and RWE and Essent anticipate to receive such an advice within the next few weeks.
The transaction would, among others, be subject to the satisfaction or waiver of certain pre-completion conditions precedent customary for a transaction of this kind, such as at least 80% of the issued and outstanding share capital of Essent being tendered under the offer, approval by the Essent shareholders meeting, successful completion of the unbundling and restructuring and obtaining the required competition clearances. The process of preparing the competition filings will commence immediately.
Relevant bodies notified
Management and staff of the companies involved, the Essent European Works Council, the Essent Central Works Council, the Dutch trade unions and the Social Economic Council (Sociaal Economische Raad) and the relevant competition authorities have all been or will be duly notified of the contemplated transaction.
Indicative timetable
It is expected that Essent and RWE will enter into an agreement regarding an offer by RWE for up to 100% of the issued and outstanding shares in Essent N.V., excluding the network and waste management business, in the coming weeks. Following this, we anticipate to get all necessary approvals and satisfy all conditions precedent to closing in the next few months. We expect the contemplated transaction to close in the third quarter of 2009.
Advisors
Citigroup is acting as financial advisor to Essent. Freshfields is acting as legal advisor to Essent.
About Essent
Essent is the largest energy company in The Netherlands and delivers electricity, gas and heat to households and business customers. Essent is active in the complete energy chain from production to delivery to the final customer. The company considers The Netherlands as its domestic market but has built up a significant market share in Germany and is increasingly active in Belgium. The company’s environmental branch processes waste into energy and electricity. Essent, excluding the network and waste management activities, has pro forma estimated revenues and a pro forma normalised EBITDA for 2008 of EURO 6,551 million and EURO 882 million and approximatelty 7,800 employees. More information can be found at http://www.essent.eu
About RWE
RWE is among Europe’s five largest utilities. The Group is active in the generation and transmission as well as the sale and trading of electricity and gas. 63,500 employees supply 20 million customers with electricity and 10 million with gas. In fiscal 2007, the Group recorded € 42.55 billion in revenue. RWE is the biggest power producer in Germany and No. 2 in the UK. The comprehensive power plant portfolio and investment programme for the modernization and construction of new generation capacity are the basis for growing earnings in the future. Power generation from renewables plays a key role in this with a particular focus on wind, biomass and hydro power.
RWE is not new to the Dutch market: RWE has started the construction of a coal-fired power station in Eemshaven, which will use 10% biomass, and is scheduled to be completed by 2012. Essent’s experience in biomass co-firing is industry leading and will complement RWE’s construction of the Eemshaven power station. Furthermore, RWE’s transmission systems operator and its Dutch counterpart TenneT TSO have recently set up a first security centre of its kind in Europe to support the security management of the extra-high-voltage grids of Germany and The Netherlands. Through its regional company RWE Nederland, RWE already today supplies gas and electricity to 353,000 households and more than 30,000 businesses.
Check www.rwe.com for more information.