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Subject: Enron in Europe: E.On fails in bid to expand water business


E.On fails in bid to expand water business

11/17/2000
Handelsblatt English Summary
Copyright 2000 Handelsblatt. Source: World Reporter (Trade Mark) - FT
McCarthy.

  HB/svu DUSSELDORF. Expansion plans of German utility E.On AG suffered
another setback Thursday with the failure of takeover negotiations with
water utilities Azurix of the U.S. and France's Saur.

  Hans-Dieter Harig, head of E.On Energie AG, confirmed to Handelsblatt
that talks with Azurix had been called off, and that negotiations with
Saur, France's third-largest water utility, had also ended
unsuccessfully.
  These latest developments appear to bring to an end for the time being
to plans by E.On chairman Ulrich Hartmann to take his group to the top
of the industry rankings in its core energy segments  electricity, gas,
and water.

  In August this year, E.On pulled out of advanced talks with France's
water giant Suez Lyonnaise des Eaux, after the two companies failed to
reach agreement on valuation.

  The takeover of Azurix stumbled at the same hurdle, sector insiders
said  even though Azurix's parent, U.S. energy group Enron, has been
trying to sell the unit for some time. In 1999, Azurix generated sales
of around $618 million.

  Talks with Saur were broken off at an early stage, people familiar
with the matter said. E.On's official line is that "no negotiations are
taking place with Saur." The French group generated sales of 2.3 billion
euros on 1999.

  The failure of the talks now puts E.On at a disadvantage vis-a-vis its
closest German rival, RWE AG.

  RWE chairman Dietmar Kuhnt this week proudly announced the completion
of the takeover of Britain's Thames Water, which takes his Essen-based
group to third position in the European water-utility rankings, behind
France's Suez and Vivendi.

  E.On, meanwhile, appears to have few options left that would allow it
to grow quickly through acquisitions. Instead, it is now likely to
pursue its goals in smaller steps.

  The group's growth strategy has so far only been realized in
electricity. Through its creation from the merger of Veba and Viag it
moved up to fourth position in Europe, behind Electricite de France,
Italy's Enel and RWE. The latter gained a slight lead on E.On through
its merger with VEW AG.

  In gas, E.On still has some ground to cover. Hartmann has been trying
for month to buy a majority stake in Ruhrgas AG, Europe's largest gas
trader. He has the support of Klaus Liesen, who chairs the supervisory
boards of both E.On and Ruhrgas.

  But Ruhrgas' complicated shareholding structure is likely to make any
investment lengthy and expensive. Co-shareholders Thyssen-Krupp and
Mannesmann/Vodafone as well as oil multinationals like BP, Shell or
Exxon-Mobil are likely to sell their shares in Ruhrgas only at high
premiums. Sector insiders said premiums of up to 30% were currently
under discussion. Ruhrgas' current market value stands at more than 10
billion euros.



Folder Name: Enron in Europe
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