EnBW now official majority shareholder in ZEAG

Heilbronn/Karlsruhe. Following the official approval of the German anti-trust authorities (Bundeskartellamt) for the sale of the ZEAG shares held by the city of Heilbronn to EnBW Energie Baden-Württemberg AG on July 29, 2002, EnBW now holds a majority stake in ZEAG. The transfer of the city's 50.1 percent shareholding in ZEAG to EnBW and payment of the purchase price of Euro 159.1 million was completed on Monday, August 5, 2002. The Lord Mayor of Heilbronn, Helmut Himmelsbach, and EnBW Board member Gerhard Jochum made a symbolic exchange of a cheque and one share. Himmelsbach and Jochum welcomed the transaction. Both described the merger of ZEAG and EnBW as an im-portant contribution to both the strength of the Heilbronn economic re-gion and the efficiency and competitiveness of ZEAG.

Lord Mayor Himmelsbach made reference to the location protection agreement with EnBW signed at the end of 2000 which stipulated, among other things, the economic and legal independence of ZEAG and the protection of the jobs and apprenticeships at ZEAG in both the Heil-bronn and Lauffen locations. In this connection, EnBW Board member Jochum emphasised that the Karlsruhe-based energy company will stand by its word and do everything it can to promote the development of business at ZEAG. He said that EnBW is looking forward to develop-ing the partnership with ZEAG. He described ZEAG as a financially sound company with a committed and dynamic strategy that fits in well with the EnBW Group. EnBW plans to relocate its Neckar-Franken re-gional centre in Heilbronn and to transfer responsibility for the centre to ZEAG. The relocation of the regional centre will create around 60 new jobs in Heilbronn.

Himmelsbach and Jochum both welcomed the fact that the competition-based reservations of the German antitrust authorities resulting from the ZEAG/EnBW merger had been overcome in meetings between the par-ties. These reservations were based on the assumption that there is still insufficient competition for private customers in the electricity market. According to Gerhard Jochum, the most important condition for the granting of approval by the antitrust authorities is the implementation of measures by ZEAG and EnBW to offset the antitrust-related reserva-tions. It was agreed, for example, that ZEAG will reduce its network utili-sation fees as of September 1, 2002 and publish the new prices on the Internet. In addition, EnBW has granted special termination rights to the electricity distribution plants it supplies in the Heilbronn region. In the opinion of the antitrust authorities, these measures will facilitate market access for competitors in the region.

Following the transfer of the city's ZEAG shares, EnBW now holds 62.22 percent of the ZEAG voting rights (previously 12.1 percent). This means that EnBW is above the minimum 30 percent voting right threshold for the submission of a compulsory offer and is therefore under an obliga-tion to submit an offer to all external ZEAG shareholders for the pur-chase of their ZEAG shares in accordance with the German Securities Purchase and Takeover Act (WpÜG). Gerhard Jochum said that a cor-responding offer will be drawn up in the coming weeks and presented to the German Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) for review. Once the offer documents have been approved, the offer will be published in accordance with the provisions of the WpÜG legislation.

Debt reduction has top priority

The Euro 159.1 million from the sale of shares will be supplemented by income from an earlier ZEAG dividend payout, with the result that the city of Heilbronn will now have a total sum of Euro 178.2 million at its disposal. "This money will primarily be used to reduce our debt burden to ensure that future generations can continue to build the local economy on a solid foundation", said Lord Mayor Helmut Himmelsbach: Nearly two thirds of the proceeds will be used to reduce the municipal budget deficit (Euro 83.6 million) and to strengthen the financial position of the municipal utilities (Euro 25.6 million).

In addition, the municipal council put together a package of "future-oriented investments" back in February: Euro 42.4 million are to go into a fund for education and research and are earmarked for the expansion of the university sector in Heilbronn. Euro 25.56 million will be spent on a hall for large-scale events and/or the purchase of former railway prop-erty. Last but not least, Euro 1 million will be used to set up a community foundation.

The next steps

The authorities have drawn up a debt reduction concept with the aim of achieving a drastic reduction in liabilities during the next one and a half years. Whereas the 2002/2003 two-year budget was based on a pro-jected debt volume of Euro 134.4 million at the end of 2003, this figure should be down to around Euro 50 million after receipt of the ZEAG funds.

The capital for future investments will be temporarily invested; after the summer break, the council will decide on longer-term investment in funds, fixed-income securities or similar instruments.