• Continental European water business to remain within RWE Energy
• RWE aims to temporarily increase dividend payout ratio on completion of each transaction and reduce debt
RWE intends to sell the water business of RWE Thames Water in the UK as well as that of American Water in North America. RWE has come to this decision because the Company believes it can make the best use of its core strengths by concentrating on the converging European electricity and gas markets. The limited synergies between the North American and UK water businesses and the European energy business were also a major factor in this decision.
RWE Thames Water's Continental European activities, excluding Pridesa, Spain, will be fully integrated into RWE Energy as these assets offer cost-efficiency synergies within the RWE Energy's regional markets.
RWE will initiate the exit process by evaluating various divestment alternatives for American Water. Options include an initial public offering as well as a sale of American Water to a group of long-term financial investors. Once this transaction is well underway RWE plans to begin the sales process for RWE Thames Water. Both the North American and UK transaction will be subject to the approval of the RWE AG Supervisory Board as wells as to regulatory approvals. The target is to complete both transactions during 2007.
Under observance of the strict acquisition criteria on strategic fit and financial performance RWE will also continue to consider opportunities for value-adding external growth in the European markets.
RWE expects the RWE Group, as well as American Water and RWE Thames Water, to benefit from the planned separation of ownership. "The transactions will lead to greater transparency of the value of our water business. Both American Water and RWE Thames Water are market leaders in their respective regions," stated Harry Roels, CEO of RWE AG. "As stand-alone entities, they are well positioned to continue on their stable growth paths going forward and maintain the breadth and quality of their service," Roels added.
RWE shareholders will also benefit from the transactions. RWE plans, upon the closing of the proposed American Water transaction, to increase the dividend payout ratio for fiscal 2006 to a level between 70% and 80% of recurrent net income. Upon completion of a sale of RWE Thames Water, RWE also expects to be able to increase its dividend payout ratio for fiscal 2007 to a level between 70% and 80% of recurrent net income. In addition, RWE does not plan to refinance its maturing 2006 and 2007 debt, which accounts for approximately €5 billion in bonds and bank loans.
Both American Water and RWE Thames Water are currently included in RWE's financial reporting within the RWE Thames Water Division. In 2004, this Division accounted for about €4.1 billion or 9.6 percent of the RWE Group's total external sales and contributed €1.4 billion or 23.2 percent of RWE's total operating result. In the same year, the Division accounted for €1.5 billion or 43% of the Group's total capital expenditure requirements.
This press release contains forward-looking statements regarding the future development of the RWE Group and its companies. These statements are assessments that we made based on information available to us at the time this document was prepared. In the event that the underlying assumptions do not materialize or additional risks arise, actual performance can deviate from the performance expected at present. Therefore, we cannot assume responsibility for the correctness of these statements.
This press release is not an offer of securities for sale or the solicitation of offers to buy securities in the United States or in any other jurisdiction in which said offer or solicitation is prohibited. Any such securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended, or in any other jurisdiction in which such offer or sale is prohibited. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer and that will contain detailed information about the company and management, as well as financial statements.
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