E.ON to sell its US utility assets to PPL for $7.625 billion

Germany's E.ON, the world's largest power and gas company by sales, is selling its utility business in the US to the Pennsylvania-based power company PPL Corporation for $7.625 billion.

 Düsseldorf-based E.ON, a member of the Global Titans 50 index said yesterday that it is selling its Louisville Gas and Electric Company (LG&E) and Kentucky Utilities Company (KU) that generates about 7,600 megawatts of electric power, which serves more than 1.2 million customers and has a combined turnover of $2.3 billion.

 E.ON got the two US-based utilities as part of its $15 billion takeover of UK's Powergen in 2003 and the sale of LG&E and KU will be the largest sale in the global utility sector since October 2007, when investors Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs acquired the Dallas, Texas-based TXU Corporation for $45 billion.

PPL, which serves 1.4 million customers in Pennsylvania and 2.6 million in the UK will pay $6.7 billion in cash, assume $925 million debt and will receive tax benefits with a present value of about $450 million as part of the transaction.

It said that taking into account the tax benefits the effective purchase price is $7.175 billion.

PPL has committed bridge financing in place from Bank of America Merrill Lynch and Credit Suisse and financing plan will include a combination of common equity, first mortgage bonds, corporate debt, high-equity-content securities and cash on hand.