This story is the second of a two-part series about energy
asset sales in Germany. For the first story see []
* Dresden city frontrunner to buy EnBW's Geso stake-sources
* Geso stake valued at some 950 mln eur-source
* EQT, Macquarie, Gasag also bidding for Geso-sources
* Geso sale might be stopped and VNG stake come up for sale
By Peter Dinkloh
FRANKFURT, Nov 25 (Reuters) - Foreign utilities and
investors such as CEZ <> or Macquarie <MQG.AX> face
another setback in the lucrative German power market, this time
beaten by an eastern German city.
Foreign competitors have had trouble expanding in Europe's
largest power market after initial successes several years ago
by utilities like Sweden's Vattenfall [] and France's EDF
<EDF.PA>.
All four of Germany's dominant utilities -- E.ON <EONGn.DE>,
RWE <RWEG.DE>, Energie Baden-Wuerttemberg (EnBW) <EBKG.DE> and
Vattenfall's [] German unit -- are selling assets.
But life is being made difficult for foreign players by the
fact that most municipalities hold stakes in local utilities and
are seeking to regain control.
In the case of Dresden, the city has formed an alliance with
163 local communities from eastern Germany to buy EnBW's Geso
unit, which holds stakes in 11 local utilities.
Dresden is competing with bidders such as infrastructure
investors EQT <EQT.N> and Macquarie <MQG.AX> as well as German
utility Gelsenwasser <WWGG.DE>, according to two people with
knowledge of the matter.
Gasag -- which supplies gas to the city of Berlin and is
owned jointly by Vattenfall, GDF Suez <GSZ.PA> and E.ON -- has
also bid, the people said.
CEZ, the power giant in the neighbouring Czech Republic, has
said it is also bidding. EnBW, Macquarie, EQT, Gasag and
Gelsenwasser declined to comment.
TAKING CONTROL OF LOCAL AFFAIRS
But Dresden is in a strong position as it holds 55 percent
of Geso unit Drewag, the energy provider to the city of Dresden,
and has invoked its right to buy back the remaining shares in
the utility by the end of 2012 -- even though EnBW is disputing
that right.
Dresden's municipal partners hold a stake in another Geso
unit, Enso, and are therefore better clued in about that part of
Geso's business.
"The group has an edge over all competitors," said a person
involved in the sale who asked not to be named.
The bids value Geso at around 950 million euros ($1.42
billion), including debt, the people said.
But it is by no means certain that EnBW will see through the
sale of Geso. It might well decide to keep the eastern German
utility if the bidding process remains uncompetitive -- and if
another transaction pans out differently than planned.
EnBW is buying a 26 percent stake in northern competitor EWE
and has to sell Geso in order to get approval from the German
cartel office, which wants to prevent the two companies from
getting a dominant position on the eastern German gas market.
But alternatively, the two companies could also sell EWE's
48 pct stake in gas supplier VNG.
That has not been on the agenda as EnBW was keen to buy
EWE's VNG stake, considering eastern Germany's largest gas
company the more attractive asset.
But EWE has so far failed to get the necessary approval from
VNG's other shareholders -- including Gazprom <GAZP.MM> and GDF
Suez <GSZ.PA> -- putting that transaction into doubt and raising
the possibility that EWE might sell VNG, and EnBW keep Geso.
A decision about EnBW's future course will probably be taken
on Nov. 30, when the company's supervisory board meets, a person
with knowledge of the matter said.
The sales processes come as part of wider sale of stakes in
small utilities in Germany.
The German unit of Sweden's Vattenfall [] said on
Aug. 31 it agreed to sell its 80 percent stake in Schwerin-based
Wemag for 170 million euros to the 268 municipalities that hold
the remainder of Wemag.
(Editing by David Cowell)
((peter.dinkloh@reuters.com; +4969 7565 1345; Reuters Messaging
peter.dinkloh.reuters.com@reuters.net))
($1=.6699 Euro)
