* To list about 10 pct of grids, retail, renewables
* Nuclear provisions will remain with parent group
* Plans follows spin-off by larger peer E.ON
* RWE shares close up nearly 17 pct
* Utility being advised by Goldman Sachs
(Recasts, adds fund manager, details)
By Christoph Steitz
FRANKFURT, Dec 1 German utility RWE
moved to restructure its businesses to better absorb the cost of
nuclear plant closures on Tuesday, sending its shares up nearly
17 percent, their biggest one-day gain in seven years.
To extract funds from its healthier businesses, Germany's
second-biggest utility will hive off its renewables, grids and
retail units into a separate entity and sell a 10 percent stake
in an initial public offering late next year.
It said it would keep its conventional power generation
business, including its remaining nuclear plants and the
liability for their shutdown, hoping to avoid a political
stand-off over nuclear provisions that led peer E.ON
to backtrack on a similar plan.
RWE's Chief Executive Peter Terium was tight-lipped as to
why the group decided to split now, a year after larger peer
E.ON said it would spin off power plants, energy trading and oil
and gas activities into a separate unit, Uniper.
Analysts, however, said RWE's plan should ease concerns in
Berlin, which has been worried that utilities would not honour
the costs of Germany's policy to close its nuclear plants by
2022. Political pressure forced E.ON to change its plans and
take back its German nuclear plants along with the 16.6 billion
euros ($17.6 bln) in provisions.
"I think that Terium is responding to the most recent
political developments. At E.ON there was a certain race for
liability, which the company lost," said Thomas Deser, senior
fund manager at Union Investment, which holds 1.45 million RWE
"With his plan, Terium avoids this conflict."
RWE said it could sell further stakes in the new subsidiary
at some point, but added it would remain the unit's majority
shareholder over the long term.
Shares in RWE, Germany's biggest electricity producer,
closed up 16.6 percent, their biggest one-day gain since October
The shares had tumbled more than 50 percent this year,
reflecting declining profitability in German utilities'
conventional power businesses.
Squeezed by a decline in wholesale power prices and a surge
in renewables, German utilities are struggling to make money
operating coal- and gas-fired power plants.
In addition to falling prices, the utilities have suffered
from concerns over their ability to come up with as much as 80
billion euros in combined funding to pay for shutting down the
country's nuclear plants by 2022.
RWE said the group's new set-up would not impact its nuclear
liabilities, pledging it would stand by its responsibility to
bear all the costs connected to the shutdown of its plants.
"On the contrary, the shares of the new subsidiary will be
an asset that will make it easier for us to fund provisions in
the future if necessary, whatever the circumstances," Terium
RWE said the new unit, which will begin operations as an
independent company in the course of 2016, would employ about
40,000 of the group's 60,000 staff and has core EBITDA earnings
of more than 4.3-4.5 billion euros, based on pro-forma figures
For the group as a whole, RWE forecasts 2015 EBITDA of
6.1-6.4 billion euros.
Goldman Sachs is advising RWE on the split, two people
familiar with the matter told Reuters.
For a FACTBOX on RWE's new structure, click on:
($1 = 0.9416 euros)
(Additional reporting by Tom Kaeckenhoff in Duesseldorf and
Alexander Huebner and Vera Eckert in Frankfurt; Editing by Maria
Sheahan and Susan Fenton)