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Shell and PGGM want to buy Eneco together

Printed below is an English translation of an article published today by the Dutch Financial Times, Financieele Dagblad.

Shell and PGGM want to buy Eneco together

Bert van Dijk: Martine Wolzak

Oil and gas multinational Shell and pension provider PGGM want to bid together for Eneco, one of the three largest energy companies in the Netherlands. The combination is the first party to publicly announce its interest. Shell and PGGM agree to jointly want to expand Eneco into a European player, while maintaining the company’s sustainable strategy.

The shareholders of Eneco, 53 Dutch municipalities, announced at the end of last year after one and a half years of internal dispute to sell the company through a ‘controlled auction’. Interested parties are invited to make an offer, but they also have different criteria than price. At Eneco, this includes guarantees for the sustainable character and retention of employment. The market takes into account a sales price of around € 3 billion.

Avances from PGGM to Shell

With the combination Shell and PGGM a wealthy Dutch buyer reports. Shell’s interest in Eneco was a public secret that the energy company would not engage with PGGM.

The pension investor, who has Pensioenfonds Zorg en Welzijn as its main client, approached Shell last year to look together at Eneco, says Frank Roeters of Lennep, head of investments for private markets of PGGM, in an interview with the FD. The purchase is even too large for the second pension investor in the Netherlands, with an invested capital of around € 215 billion (mid-2018). ‘Shell and PGGM both want to invest in the energy transition and in the Netherlands’, says Roeters van Lennep. ‘So often it does not happen that there is such an interesting investment opportunity in the Netherlands, so it makes sense that we are enthusiastic about this possibility.’

The fact that Shell wants to offer will not fall well with all Eneco shareholders and employees. According to some critics, Shell would invest too little in green energy. Some of the shareholders even wanted the company to remain in public hands in order to guarantee the sustainable strategy. ‘Yes, it is sometimes said:’ you have to become a greener company ‘. Well, here we are, ‘says Maarten Wetselaar, director Integrated Gas & New Energies at Shell. “We hope it will be welcomed.”

Expand Eneco at home and abroad

Shell and PGGM say that they want to build on the sustainable strategy of Eneco. With investments at home and abroad. That should also lead to employment growth. Rotterdam remains the head office for the two potential buyers. The municipality of Rotterdam is the largest shareholder. ‘We want to keep Eneco as a whole and invest in it further’, says Wetselaar. “We are not planning to buy this company with a load of debt and then stripping it. Eneco is a model company for what we want to achieve: upscaling with sustainable energy. ‘

In an open letter to all stakeholders, Shell and PGGM stress Monday that they want to invest in Eneco for the long term. ‘As parties firmly rooted in our country, we attach importance to maintaining the Dutch profile and local involvement’, they write. ‘And we understand and appreciate the diverse interests of everyone involved.’

Eneco says Monday at this stage of the process not to respond to messages about interested buyers. The chairman of the central works council also finds it too early to react substantively. Alderman Herbert Raat of the municipality of Amstelveen and one of the critics is positive: ‘If this sets the tone for potential buyers, I am very happy with it.’

According to Wetselaar, Eneco’s activities fit well with Shells New Energies activities and with Shell’s ambition to do more with sustainable energy. Shell is still investing the bulk of its budget in oil and gas, but has announced that it will significantly increase the investment budget for new forms of energy. Last year the company already acquired a number of solar energy companies, power companies and charging stations for electric cars.

PGGM sees sustainability as a cornerstone of its investment policy for Dutch pension capital and invests in the global energy transition for the long term. PGGM also has a small stake in Shell of € 200 million on behalf of the affiliated pension funds, and has exercised a lot of pressure on Shell over the past few years to make it greener. However, a joint investment in Eneco will be a multiple of the investment in Shell in value. PGGM also has interests in, among others, the American power company Puget Sound Energy and in wind farms Baltic 2 and Walney in Europe.

Substantial investment

Neither party provides financial information about the bid or the exact relationship between Shell and PGGM. They emphasize that there is no clear underlying party. ‘We both want to make a substantial investment in Eneco,’ says Roeters van Lennep, responsible for this type of large investments outside the stock exchange at PGGM. ‘We want to be able to exert our influence on this type of investments.’ It will in any case not be 90% against 10%, ‘but the exact percentage depends on what the price is going to be’.

Shell and PGGM also expect to be able to invest together in Eneco in new tenders for large wind farms in the North Sea in the future. Shell is already doing this together with Eneco at the Borssele III + IV wind farm.

According to insiders, the French companies Total and Engie, the Italian Enel, the Japanese Mitsubishi and the Australian investor Macquarie Infrastructure are also considering a bid. The Dutch pension investor APG would also be interested. The Eneco sales process starts in March. Completion is expected in 2020.

Correction: PGGM owns wind farm Baltic 2 and not Baltic 3 as mentioned earlier in this article.

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