Italian energy group ERG is to buy German utility E.ON's Italian hydroelectric power plants for about $1 billion, expanding its renewable portfolio which mostly comprises wind farms.
E.ON's Terni Hydroelectric Complex, which has 527 megawatts of generating capacity and produces about 1.4 terawatt hours of electricity a year, was put up for sale in late 2013 along with other assets in the country.
ERG currently operates wind farms in Europe with a total capacity of 1.38 gigawatts, including 1.1 gigawatts in Italy, as well as a gas-fired thermal plant in Sicily with a capacity of 480 MW, Reuters reported.
Through the acquisition, whose 1-billion-euro price tag is in line with what sources familiar with the matter said earlier this year, the former oil refiner continues its transformation into becoming a specialized renewable energy company.
"The acquisition will enable a significant improvement in our economic results and cash generation in the medium term," ERG Chief Executive Officer Luca Bettonte said in a statement.
The acquisition comprises 16 hydro plants, one pumping station, seven large dams and three reservoirs, 22 weirs and 155 kilometers of channels and tunnels.
ERG said the business was expected to generate annual earnings before interest, tax, depreciation and amortization of about €110 million "over the next few years".
The transaction will be financed via cash and a €700 million loan signed with seven banks, including Barclays , BNP Paribas and Unicredit. It is expected to close at the end of the year.
