Germany’s EEW spared no expense to welcome its high-profile guests from the Far East. The program included a tour of its waste-burning facilities, which are used to generate renewable energy, as well as detailed talks with top managers and even a bit of sightseeing around Germany.
Clearly, the delegation from China Tianying, which visited in December and January, liked what they saw. The company has put in an aggressive bid to acquire the German waste-management and renewable energy firm from its current owner, Swedish private-equity firm EQT.
In total, two Chinese firms and two European companies are bidding to buy EEW, Energy from Waste, for as much as €1.8 billion, or $2 billion, Handelsblatt has learned.
If one of the two Chinese firms, China Tianying or Beijing Enterprises, succeeds in buying EEW, it would be the biggest-ever Chinese takeover in Germany, topping the $1-billion deal of machine maker KraussMaffei announced just two weeks ago.
In addition to the two Chinese firms, German power station operator Steag has teamed up with Australian investor Macquarie Group to bid for EEW, while Finnish utility Fortum is also in the running, people familiar with the sale told Handelsblatt, confirming an earlier report by Reuters.
EEW has an attractive model: The one-time subsidiary of German utility E.ON is a pioneer in the business of using waste to generate renewable electricity. It's one of the many examples of innovative businesses that China sorely needs to grow.
It would be the biggest-ever Chinese takeover in Germany, topping the $1-billion deal of machine maker KraussMaffei announced just two weeks ago.
Chinese companies have been aggressively stepping into the European market over the last few years, hoping in particular to acquire German technologies and know-how that could help the emerging-market power develop its own economy. Auto parts suppliers, machinery companies and renewable energy firms have been a priority.
What has helped is that money is often no object. With EEW, the two Chinese firms expect they have a good chance of winning the bidding process, thanks to their well-funded owners or backers, people familiar with the matter told Handelsblatt.
Ping An, China's second-largest insurance company, is one of the owners of Tianying, a publicly-listed waste management and energy producer in China. Beijing Enterprises is majority government-owned.
The EEW owner, Swedish private equity firm EQT, has set a February 1 deadline to accept bids and will make a decision by the middle of the month, the sources said. EQT bought EEW from German utility E.ON in two transactions in 2012 and 2015.
EEW operates 19 waste power plants to generate electricity, steam and heat. EEW made annual sales of more than €500 million and had an operating profit before interest, taxes, depreciation and amortization of around €190 million in 2015, Handelsblatt learned from people familiar with the company. EQT does not release results for its subsidiary.
The main reason for EEW’s success in the last year was Germany’s solid economy: The more goods that are produced, the more waste that needs to be disposed.
But there’s another reason for the strong numbers: More and more waste is being imported to Germany from other countries.
The United Kingdom alone sent nearly 670,000 tons of waste to Germany for incineration last year, according to ITAD, the German association for thermal waste disposal. That’s because a new law in Britain has restricted new waste disposal sites.
Other countries might soon follow suit. Even the European Commission is considering a law that could limit waste disposal sites. EEW, which has pioneered generating energy from waste, could be one of the key firms to profit.
But the biggest opportunities lie in Asia. China’s cities have struggled mightily to dispose of waste, which at least partly explains the interest of the Chinese firms in acquiring EEW.
Whether the Chinese firms have convinced EEW that they’re best-suited to take over the company remains to be seen.
Franz Hubik covers renewable energy for Handelsblatt in Düsseldorf. To contact the author: [email protected]