FRANKFURT: Hundreds of local power companies in Europe's biggest power market, Germany, are likely to join forces or seek new partners to invest in renewable power generation capacity as the top players run into trouble.
The four market leaders, burdened by heavy debts and a government decision to exit nuclear power generation, are likely to restructure and sell stakes in regional utilities, or Stadtwerke, to raise cash.
That could open the way for foreign companies and investors to enter the market as well as lead to an increase in competition.
"The substantial changes in the German energy structures will bear some risks but likely more opportunities for the Stadtwerke, and we will see more investments of European companies into German-based power trading companies like PCC Energie," said Maik Neubauer, managing partner of the German consultancy Executive Partners Group.
Stadtwerke account more than half of Germany's national power distribution.
They have been heavily influenced by the big four RWE, EnBW and Vattenfall via minority shareholdings.
But over a decade of liberalisation and fat profits, they have retained most of their power to make decisions locally and can now roll back any influence the dominant firms gained.
And large utilities, wholesale giants and infrastructure investment funds abroad are evaluating moves into Germany, according to industry sources. Spain's Nexus bought Duisburg-based PCC last year in an early move.
Most notably, Russia's Gazprom has been sniffing around German downstream markets. The company seeks power assets in exchange for attractive gas supply offers.
Spanish Iberdrola and France's GDF Suez are also keen to expand in Germany, and infrastructure funds are eyeing power generation and distribution assets.
Copyright Reuters, 2010
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