EnBW sells Hidrocantábrico holding to EDP

Karlsruhe. EnBW Energie Baden-Württemberg Aktiengesellschaft in Karlsruhe is selling its 34.58% stake in Spanish energy company Hidroeléctrica del Cantábrico, S.A. (Hidrocantábrico) to Portuguese electricity supplier Electricidade de Portugal, S.A. (EDP). The sale is subject to antitrust approval by the EU Commission and implementation of the scheduled funding concept by EDP. Before the sale of its holding, EnBW controlled Hidrocantábrico together with the other two shareholders - EDP and the regional Cajastur savings bank. The excellent, well-coordinated cooperation between the shareholders resulted in successful growth at Hidrocantabrico.

The sale will generate an inflow of funds totalling 649 million euros for EnBW; it will not generate any major earnings effects in the second half of the year with regard to the income statement. Moreover, the deconsolidation of the Hidrocantábrico holding will reduce the financial debts of the EnBW Group by around 650 million euros. Including the substantial debt reduction achieved since mid-2003, this transaction takes the potential total debt reduction to a figure of around two billion euros since the launch of the restructuring strategy at EnBW. Based on the original restructuring programme, it was estimated that EnBW would not succeed in achieving debt reduction of this magnitude until the year 2006. In addition, the combined effects of the improvement to date in efficiency and performance on the operating front, the successful capital increase and the Hidrocantábrico transaction are expected to boost the equity ratio of the EnBW Group to just under 10% compared to 6.1% at the end of 2003.

The statement made by Prof. Dr. Utz Claassen, CEO of EnBW, on the sale of the shares was accordingly positive: "The sale of our holding in Hidrocantábrico is a milestone on the road to the successful consolidation of EnBW. In terms of liquidity and balance sheet structure, it means that we have regained full strategic and creative control of the Group. Thanks to the major progress made in recent months, we are now well ahead of schedule in our already ambitious consolidation timeframe - around 3 months ahead of target with our TOP-FIT cost reduction programme, almost 6 months within our schedule for other disinvestments, more than 12 months ahead with regard to the first-time posting of profits at Yello, and - if we include the Hidrocantábrico transaction - around 24 months ahead of target with scheduled debt reduction. This is a major success; hardly anyone would have thought it possible that we could make such important strides towards the goal of restructuring so rapidly, so clearly and so successfully. At the same time, that there is still a lot to do in the next two years, and we will certainly be keeping a tight rein on the overall restructuring and reorganisation programme. The light at the end of the tunnel is now clearly visible and drawing ever nearer; we are determined to keep a tight grasp on this turnaround".

EnBW emphasised that the investment in Hidrocantábrico was basically a successful venture. "While reviewing the portfolio of all EnBW holdings, however, it became apparent that the stake we held in Hidrocantábrico did not offer any meaningful market synergies for EnBW in the long term, whereas EDP, being a Portuguese company, is well placed to exploit the synergistic potential in the neighbouring country of Spain and in particular in the future joint Iberian market. As a result, EnBW was able to sell its shares in Hidrocantábrico to EDP on appropriate terms," said Pierre Lederer, the EnBW Management Board member responsible for the transaction.

Lederer also said that the sale of the Hidrocantábrico shares would underpin the EnBW focus on its core region and on the energy market in Eastern and Central Europe, adding that it would also generate greater synergies for EnBW's growth strategy in its core business areas of electricity and gas. "This transaction does not make EnBW's strategic base narrower; on the contrary, it expands this base, as it frees up energy and resources for new activities in other segments and regions", said Pierre Lederer. This is also a key factor with regard to the planned investment in networks and new power stations in Baden-Württemberg in the medium term.

Hidroeléctrica del Cantábrico, S.A. (Hidrocantábrico)
With around 1.1 million energy customers and sales revenues in the order of 1.8 billion euros, Hidrocantábrico is the fourth-largest energy company in Spain. The core operations of Hidrocantábrico are in the electricity and gas markets, and the company also holds stakes in two regional telecommunications companies. In the electricity market, Hidrocantábrico is active along the entire value added chain (generation - trading - transport/distribution - sales) in its home region of Asturias. In the gas sector, the company's transport and distribution activities are focused in the Basque Country and Asturias. However, Hidrocantábrico sells gas and electricity throughout Spain.

Electricidade de Portugal, S.A. (EDP)
EDP is one of Europe's biggest energy suppliers and one of the leading corporations in Portugal. EDP generates, distributes and supplies electricity throughout Portugal and is also active in the telecommunications, natural gas and information technology markets. The company's international portfolio comprises the generation, distribution and sale of electricity as well as telecommunications and information technology. EDP distributes and supplies electricity to around 5.8 million customers in Portugal and posted sales of 7.2 billion euros in 2003.

Cajastur
With more than 200 branches, mainly in the province of Asturias but also with branches throughout the country, Cajastur is one of the leading financial institutes in northern Spain. In December 2000, Cajastur posted assets totalling 7.1 billion euros, and the company finished financial 2003 with pre-tax profits of around 143 million euros.

Cajastur can point to major successes in the area of investments outside the realm of financial products. It was one of the first and few Spanish financial institutes to purchase a holding in Airtel (the number two mobile phone operator in Spain). The company also has wide-ranging activities outside the financial sector in segments like telecommunications, machine construction, the food industry and insurance.

EnBW Energie Baden-Württemberg AG
With around 5 million energy customers and sales of 10.6 billion euros, EnBW is the third-largest energy company in Germany. It plays an active part in shaping the competitive environment and pursues a strategy of customer proximity and innovation. EnBW's core business areas are electricity, gas and near-energy services. Its operations are organised along the value added chain extending from generation and trading to transmission/distribution and sales. The company's electricity generating activities are underpinned by a balanced portfolio. EnBW operates the very high voltage network and major parts of the distribution network in the state of Baden-Württemberg.