Eni Sheds EEV's Stake to EnBW, Streamlines Mid-Downstream Ops - Analyst Blog

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Italy-based Eni SpA ( E ) is farming out of a German gas grid joint venture.  German utility EnBW, which is the other partner holding 50% stake has purchased Eni's interests in the joint venture. EnBW, which has taken complete control over the asset, is expected to generate stable returns over the coming years.

Established in 2002, EnBW Eni Verwaltungsgesellschaft mbH (EEV) comprises gas grid Terranets BW GmbH as well as gas supplier Gasversorgung Sueddeutschland (GVS).

Terranets, which manages a 2,000 kilometer gas pipeline system in the German state of Baden-Wuerttemberg, along with GVS, garnered sales of 1.7 billion euros in 2013. Notably, Terranets has 278 staff.

In Oct 2013, Eni had stated that it was in negotiation with EnBW over the future of EnBW/Eni Verwaltungsgesellschaft, thus raising speculation relating to the oil and gas group's intention to sell off its stake.

The sale is subject to approval from the relevant antitrust authorities. Per EnBW, both parties have agreed not to reveal the purchase price. However, sources familiar with the process have informed Reuters that a deal had been struck, putting the value of the stake at over 150 million euros ($205 million).

The joint venture, which operates a 2,000 kilometer gas pipeline system in the German state of Baden-Wuerttemberg, is likely valued at about 300 million euros as per the sources.

Weak energy demand and a substantial boom in renewable energy capacity across Europe have caused the utilities to suffer from falling profits. This has led regulated power and gas networks to be attractive assets for utilities.

Eni's decision to farm out forms part of its strategy of rationalizing the mid-downstream portfolio by exiting regulated gas transport assets. Eni remains actively involved in the commercialization of natural gas in Germany through its commercial branch in Dusseldorf.

Currently, Eni carries a Zacks Rank #5 (Strong Sell). Meanwhile, one could consider better-ranked players in the same sector like ConocoPhillips ( COP ), BPZ Resources, Inc. ( BPZ ) and Magellan Midstream Partners LP ( MMP ). All these stocks sport a Zacks Rank #1 (Strong Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: EEV , COP , MMP , E , BPZ

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