RWE to Sell Net4Gas to Consortium Comprising Allianz Unit, Borealis -Source

By Jan Hromadko and Jessica Hodgson

FRANKFURT--German utility RWE AG (RWE.XE) has agreed to sell its Czech gas grid unit Net4Gas to a consortium comprising Europe's largest insurer and a Canadian infrastructure fund, a person familiar with the transaction told Dow Jones Newswires Thursday.

RWE has agreed to sell the business to Allianz SE's (ALV.XE) investment unit, Allianz Capital Partners, and Borealis, the investment arm of Canadian pension fund, Ontario Municipal Employees Retirement System.

The person declined to provide a valuation of the deal, but said recent media speculation that the price tag would be around 1.8 billion euros ($2.3 billion) was exaggerated.

Other people familiar with the transaction previously said that a fair valuation of RWE's Net4Gas business would be around EUR1.4 billion.

RWE and Allianz declined to comment. Borealis couldn't immediately be reached for comment.

The sale is part of a broader disposal program at RWE, which needs to reduce its debt pile as it restructures its business to mitigate the impact of low power prices in a weak European economy, and as it continues to prepare for Germany's complete exit from nuclear energy over the next ten years, which has cost it billions of euros in impairments and lost profits.

Earlier this month, RWE said it also plans to sell its entire oil and gas exploration and production business to raise cash to strengthen its balance sheet, as muted energy demand in Europe sharply erodes the price it can charge for its electricity.

Net4Gas, which operates a gas transmission network that stretches more than 3,600 kilometers across the Czech Republic, is a crucial piece of European energy infrastructure as it transports large amounts of Russian natural gas into central and western Europe via Ukraine.

However, alternative new gas transportation routes, like the Nord Stream Baltic Sea pipeline, have reduced the strategic importance of Net4Gas. New pipeline infrastructure has been built in the past few years after disputes between Russia and Ukraine over gas prices caused major supply disruptions in eastern and southern Europe.

In the sale of Net4Gas, the consortium between Allianz and Borealis fended off offers from other suitors, including Australian banking giant Macquarie Group Ltd. (MQG.AU), which filed a joint bid with Czech investment firm Energeticky a Prumyslovy Holding, or EPH.

Macquarie last year acquired a gas transmission grid from German utility E.ON SE (EOAN.XE) and previously bought RWE's German gas grid business, Thyssengas.

Other bidders in the Net4Gas sale included Czech privately held financial and industrial group KKCG, infrastructure investment firm Global Infrastructure Partners, and Belgian gas transmission company Fluxys SA (FLUX.BT).

JPMorgan Chase & Co. (JPM) was managing the sale for RWE.

Eyk Henning in Frankfurt contributed to this story

Write to Jan Hromadko at [e-mail] and Jessica Hodgson at [e-mail]

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