Reuters: Hot Stocks: UPDATE 2-RWE to sell oil and gas exploration unit to cut debt

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UPDATE 2-RWE to sell oil and gas exploration unit to cut debt Mar 5th 2013, 08:36 Tue Mar 5, 2013 3:36am EST * 2012 EBITDA 9.31 bln eur vs Rtrs poll avg 8.69 bln * Keeps 2013 EBITDA outlook of about 9 bln eur * Says won't reach asset sale target of 7 bln euros * Shares rise 4.5 percent (Recasts, adds details on asset sales, shares) By Christoph Steitz ESSEN, Germany, March 5 (Reuters) - Germany's No. 2 utility RWE has put its oil and gas exploration unit up for sale in a move that could raise about 4.6 billion euros ($6 billion) for its drive to cut debt. RWE had previously said it only wanted to sell parts of the unit, called DEA, which accounted for 23 percent of the group's operating profit in 2012. "The planned disposal would be in line with RWE AG's strategic repositioning. It would also take considerable pressure off future capital expenditure and therefore make an essential contribution to improving RWE's financial headroom," RWE, which has net debt of 33 billion euros, said on Tuesday. Analysts have in the past put a price tag of about 4.6 billion euros on DEA. RWE initially planned to sell assets worth up to 7 billion euros by the end of this year, but the group said on Tuesday this would likely take longer because it could not get adequate prices for its assets. German top utilities RWE, E.ON and EnBW are recovering from the country's decision to pull out of nuclear energy by 2022, a move triggered by the nuclear disaster at the Fukushima plant in Japan. RWE posted a stronger-than-expected rise in 2012 core profit, boosted by its profitable fleet of lignite plants that give it a key advantage over main peer E.ON. The group's earnings before interest, tax, depreciation and amortisation (EBITDA) reached 9.31 billion euros ($12.1 billion), beating the 8.69 billion average forecast in a Reuters poll of banks and brokerages. Lignite, or brown coal, plants accounted for more than a third of RWE's power generation in 2012, benefiting from a big decline in the price of emission permits that increased their profitability. At E.ON, lignite only accounted for 6 percent of the company's owned generation in the January-September period. RWE also kept its outlook for 2013 EBITDA of about 9 billion euros, compared with analysts' consensus forecast for 8.84 billion euros. At 0830 GMT, RWE shares were up 4.5 percent at 29.965 euros. The stock has lost 29 percent since Germany announced the nuclear exit in mid-2011, against a 35 percent drop in E.ON's shares. These falls compare with a 20-percent drop in the pan-European benchmark utility index. DEA's production in 2011 was 5.1 million cubic metres in oil equivalents. The unit is active in countries including Egypt, Norway and Libya and Britain. Analysts have said big European energy groups like Total , GDF Suez, ENI and Repsol are likely to be interested in assets in Egypt, Libya and Algeria, keen to expand their upstream operations following the Arab Spring uprisings. RWE is currently valued at 7.1 times 12-month forward earnings, cheaper than the 10.3 average of Europe's largest utilities, according to Thomson Reuters StarMine. ($1 = 0.7687 euros) (Editing by Mark Potter) Link this Share this Digg this Email Reprints

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