Iberdrola is sounding out possible acquisition opportunities in the European energy sector and Innogy is on its radar. According to financial sources, the Spanish firm could be interested in launching a bid for the German utility company.
Innogy is valued at some 20 billion euros and is the result of its parent company RWE’s decision to spin off its renewable assets, as well as its distribution network and the commercialisation of energy. RWE still owns 70% of Innogy and is looking to obtain funds to deal with the massive bill caused by nuclear power outages in Germany.
In opinion of Bankinter, after huge technological changes (the nuclear outage in Germany, Europe betting on renewables, conventional plants becoming obsolete), “it looks as if the sector is heading for a mega-consolidation process at a European level.”
In this regard, the market was considering before the summer that there could be a three-way transaction between Engie (antes GDF Suez), RWE and Innogy. In this potential scenario, RWE would hand over its shares in Innogy to Engie in exchange for becoming one of the core shareholders in the French firm. There were also rumours about a possible merger between EDP and Gas Natural.
Then E.ON, which spun off assets to create its own subsidiary Uniper, is also looking for opportunities. The Finnish group Fortum is one of the potentially interested parties. Any corporate deal on the part of a big European utility within the EU would inevitable spark a reaction from the others. Iberdrola is the second biggest company in the sector in terms of market capitalisation, which stands at 43 billion euros. For the time being, it is focused on meeting the objectives in its 2016-2020 Strategic Plan. This includes investing 25 billion euros over the period and obtaining attributable net profit of 3.5 billion in 2020(TAMI +6.7%). In principal, analysts at Bankinter says:
A potential corporate transaction of this size could be favourable for Iberdrola, as it would allow it to obtain synergies and greater capacity for financing growth. That said, we first need to know the details of a potential deal before giving a clearer opinion.