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January 29, 2007 11:21 pm

Essent and Nuon close to €20bn link-up

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Essent and Nuon, the two largest Dutch power utilities, said on Monday that they were close to agreeing a long-awaited €20bn ($25.8bn) merger and had created a joint administrative vehicle in readiness for a deal.

Nuon said on Monday it was “close to the end of the process”, while Essent added that it hoped “to be able to say something soon”, in the clearest indication to date that significant progress was being made following more than six months of negotiations.

The transaction requires the approval of shareholders, comprising Dutch provinces and municipalities, as well as antitrust clearance. In a report last year, the Netherlands Competition Authority (NMa) said it would require the divestment of a proportion of the companies’ combined assets and customer-base before approving the deal. That is because the regulator is opposed to the creation of a Dutch national champion that would dominate the domestic energy market.

The combined companies would have 8,800 megawatts of electricity capacity and 4.5m clients. NMa estimates the merged group would have 37 per cent of Dutch market share.

Industry analysts value the assets of the combined company at about €20bn and people close to the companies said the merged enterprise would pursue acquisitions in north-west Europe.

But based on turnover they are relatively modest by European standards. Nuon reported 2005 sales of €5bn to Essent’s €6.3bn.

The companies would not speculate on the precise timing of a merger, cautioning that no agreement had yet been reached.

However, people close to the matter said they were confident there would be a deal, even though it could take a few more weeks.

Nuon said there had been no immediate need to establish a special-purpose vehicle before a formal merger agreement, but added that it “wanted to be prepared”. The utilities have registered a company called Nusent with the Dutch chamber of commerce. The entity will oversee the merger process once the terms are established.

However, that did not mean that a merged company would also be called Nusent, Nuon said.

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