RWE said to struggle to find buyers for Dea oil, gas unit

Hannelore Failing to sell Dea would represent a fresh blow to RWE’s divestment efforts after the company was forced to scrap a sale of gas fields in Egypt last year amid tepid interest and the country’s political unrest. Foerster/Bloomberg

RWE AG (RWE), Germany’s second-largest utility, is struggling to find buyers for its Dea oil-and-gas unit, three people with knowledge of the matter said.

So far, only BASF SE (BAS)’s energy unit Wintershall has expressed serious interest in buying all of Dea, two of the people said, asking not to be identified because the talks are private. RWE may have to accept a lower price than the 4.5 billion euros to 5 billion euros ($6.6 billion) it initially sought if it proceeds with a sale of the entire unit, the people said. RWE spokeswoman Annett Urbaczka declined to comment on the process.

Failing to sell Dea would represent a fresh blow to RWE’s divestment efforts after the company was forced to scrap a sale of gas fields in Egypt last year amid tepid interest and the country’s political unrest. In March, it also abandoned a target of 7 billion euros in disposals by the end of the year after prices fell short.

“We do not want to divest at just any price,” Peter Terium, chief executive officer at RWE, said in March when he announced plans to sell the unit.

RWE shares have dropped 17 percent in Frankfurt this year, the third-worst performance in Germany’s benchmark DAX index, as a surplus of wind and solar production forces power prices to a record low. The reduced revenue from generation comes as utilities seek to shoulder the cost of closing nuclear power stations as part of Chancellor Angela Merkel’s shift to alternative energy.

Under Pressure

“For the negotiation of prices it is problematic if potential buyers know that RWE is under pressure to sell,” Sven Diermeier, an analyst at Independent Research GmbH, said by phone from Frankfurt. “A sale in 2013 is improbable.”
RWE declined as much as 1.3 percent to 25.85 euros, the lowest since April, and was down 1 percent at 9:44 a.m. in Frankfurt trading. Larger competitor EON SE was little changed.

German utilities are seeking to reduce debt after Merkel ordered them to close their nuclear plants by 2022 in the wake of the Fukushima nuclear accident in Japan in 2011. EON is selling assets valued at as much as 20 billion euros.

“We continually check possible acquisitions,” said Stefan Leunig, a spokesman for Wintershall, declining to comment further. Rainer Seele, CEO of Wintershall, expressed interest in acquiring RWE Dea at a press conference in Kassel on March 12, Handelsblatt reported.

Expressed Interest

While other buyers have expressed interest in parts of Dea and RWE would be open to selling them, the unit’s management is pushing for it to be sold as a whole, two of the people said. RWE has attracted interest in its Norwegian and North Sea assets, while buyers are more reluctant to purchase the Egyptian segment, which requires investments and is exposed to a less politically stable region, people familiar with the matter said last year.

“I can’t imagine that RWE will sell Dea in parts,” Diermeier said. “They will achieve a higher price for the package than for the parts.”

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