German energy company E.ON AG (EOA.XE) said Wednesday it will file an undertaking with the European Commission by the End of May 2008.
The undertaking document will contain details of the proposed divestment, announced in February, of E.ON's transmission system and 4,800 megawatts of generating capacity.
E.ON's Supervisory Board approved the undertaking's contents late Tuesday.
In accordance with the undertaking document, E.ON is prepared to sell its ultrahigh-voltage transmission system (380,000/220,000 volts) in Germany to an operator not active in power generation or power supply. This system has a total length of 10,000 kilometers and extends from the Danish border to the Austrian border.
The 4,800 megawatts that E.ON proposes divesting is equal to slightly less than one fifth of its generating capacity in Germany. It will consist of the following power plants and procurement rights:
E.ON is prepared to sell a total of 1,500 megawatts of procurement rights for nuclear capacity from its minority stakes in Gundremmingen and Kruemmel nuclear power stations and, to a smaller extent, from Unterweser nuclear power station. E.ON would retain ownership of the minority stakes and of Unterweser nuclear power station.
E.ON also proposes divesting 600 megawatts of lignite-fired generating capacity by disposing its stake in Lippendorf power station and a portion of its procurement rights from Buschhaus power station.
E.ON's proposal includes slightly more than 1,700 megawatts of hard-coal-fired generating capacity consisting of its stakes in Rostock, Mehrum, Veltheim, and Bexbach power stations and of Farge and Zolling power stations, which are wholly owned by E.ON.
E.ON does not intend to divest gas-fired generating capacity beyond what is included in its agreement with Statkraft. The EU will consider those as fulfilling the gas-fired component of the capacity to be divested.
E.ON's proposal also includes hydroelectric capacity that is part of its agreement with Statkraft: E.ON's run-of-river plants on the Weser plus Erzhausen pumped-storage hydroplant. To this will be added E.ON's stake in the run-of-river plants on the Inn River that it owns jointly with Austria's Verbund; Nußdorf, Egglfing, and Ering hydroelectric stations, which are also on the Inn; and the run-of-river plants in the Jansen power plant group.
Altogether, E.ON is prepared to sell 330 megawatts of run-of-river capacity. Along with Erzhausen, E.ON also proposes selling the two pumped-storage hydroplants that are part of the Jansen power plant group. E.ON's proposal thus includes a total of about 350 megawatts of hydro capacity.
The European Commission will review E.ON's undertaking document in the coming months. At the same time it will conduct a market test in which it will ask other market participants in Europe how E.ON's proposals could affect competition. The Commission will then decide whether to end its current antitrust proceedings against E.ON. This process is expected to take until the fall of 2008. E.ON would then have six months to divest the agree-on generating capacity (plus, if necessary, six additional months) and two years to divest its transmission system.