UPDATE: E.ON, MPX Partner To Build Power Plants In S America
January 11 2012 - 7:54AM
Dow Jones News
German utility E.ON AG (EOAN.XE) said Wednesday it has agreed to
acquire a minority stake in Brazilian power company MPX Energia
S.A. (MPX3.BR), in a deal that will see both companies jointly
invest billions of euros in new power plants in South America.
The deal marks E.ON's first investment in Brazil and comes as
giant European utilities seek to increase their leverage to booming
emerging economies as growth in Europe stagnates. Peer companies
like Spain's Iberdrola SA (IBDRY) and France's GDF Suez (GSZ.FR)
have also announced recent transactions, in Brazil and China,
respectively.
"The partnership between MPX and E.ON aims to develop a total
[power production] capacity of 20 gigawatt in Brazil and Chile,
thus becoming the largest private energy company in Brazil," both
companies said in a joint statement.
The planned generation capacity represents around 20% of
Brazil's total capacity at present, they added.
Under the deal, E.ON will acquire a 10% stake in MPX for around
EUR350 million, the companies said in a joint statement. The shares
will be purchased in a capital increase at MPX, through which the
Brazilian company expects to raise a total of EUR423 million, they
added.
The companies didn't say how much investment has been earmarked
to develop that power generation capacity. According to a report by
news agency Reuters Tuesday, the companies will invest a total of
around $10 billion in new power plants.
However, a spokesman for E.ON said that it isn't yet possible to
provide capital expenditure estimates for the joint venture, adding
final investment decision for some of the existing power plant
projects haven't yet been made and certain elements of the projects
could still be altered.
The transaction is expected to close in the second quarter of
2011, they said.
Initially, the companies intend to develop MPX's existing
pipeline of power generation projects with a total capacity of 11
GW.
Wednesday's deal is a major step by Germany's most valuable
utility into emerging markets, a goal which it had announced last
year as it seeks to move into regions that have stronger growth
rates than its present core markets of Europe and the U.S. MPX said
the joint-venture would enable it to leverage E.On's international
experience and know-how in power generation.
E.On had previously identified Brazil as one of three markets in
which it would consider an investment. The other two countries are
Turkey and India.
The agreement with MPX comes after E.ON last month lost a bid
for a minority stake the Portuguese government sold in Energias de
Portugal SA (EDP.LB). EDP could have become E.ON's stepping stone
into the Brazilian market, given its strong presence in the
fast-growing South American economy.
MPX is a company controlled by the EBX Group, founded by Eike
Batista, the wealthiest man in Brazil. It is spending 2.3 billion
Brazilian reais ($1.27 billion) to build its first three
gas-powered plants in Maranhao state, with total installed capacity
of 1,500 megawatt.
The plants are being built close to where Batista's oil and gas
company, OGX Petroleo & Gas Participacoes (OGXP3.BR), recently
discovered natural gas deposits.
MPX also said it will spin-off its compliance coal mining assets
in Colombia to form a new company named CCX, adding that this
business won't be part of the partnership with E.ON.
-By Jan Hromadko, Dow Jones Newswires; +49 69 29 725 503;
jan.hromadko@dowjones.com
(Luciana Magalhaes in New York contributed to this article.)
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