Chapter 719 E.ON Group

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E.ON Group Guo Shouyun is no stranger to one of the four major integrated power groups in Germany, an integrated power company involved in power generation, transmission, distribution and retail. Before the reform of the German power industry, it was one of the four major monopolies in the German power industry, along with Baden-Württemberg Energies, Rheinland Energies and Great Falls.

As one of the largest power groups in Germany, E.ON has an installed capacity of 43,500 megawatts, accounting for 26.5% of Germany's total installed power capacity, and has a monopoly on the transmission link in Germany, and occupies a market share of 22.1% in the electricity sales chain, far exceeding that of Baden-Württemberg Energies, Rheinland Energie and Great Falls. In addition, E.ON Group is one of the six largest power companies in the UK and the acquisition of it further strengthens our position in the UK power sector. ”

"As for funding, although the market value of the E.ON Group is 43.27 billion euros, the market value of the integrated power business alone is around 20 billion euros after excluding the chemical, petroleum, trade, transport and service industries. With our US$21.25 billion in capital reserves, together with some bank credits, the acquisition of E.ON Group's power business is sufficient. Jonathan Weil said confidently.

Guo Shouyun nodded, compared with the Swedish government's wholly-owned Big Falls company, Baden-Württemberg Energy, which is controlled by the Baden-Württemberg government, and Rhein Energy, which is 71.37% a coal-fired power plant, E.ON Group is indeed more suitable for the acquisition of Pacific Energy.

"Do you remember what I told you at the beginning, Pacific Energy's development strategy in the United States and Europe?"

"Increase the scale of natural gas power plants and new energy power plants, and expand the transmission, distribution and sales networks. Jonathan Weil nodded.

"As a developed country, Europe has much better infrastructure than developing countries. But it also poses a serious problem. When new technologies begin to be gradually applied, the elimination of outdated production capacity will produce serious losses. Rhein Energy has 71.23% coal-fired power plants and 23.16% nuclear power, E.ON Group has 61.27% nuclear power and 26.14% coal-fired power, Great Falls has 88.94% lignite power plant, and the remaining three companies have nuclear and coal-fired power plants with the majority of Baden-Württemberg Energy Company's 30.12% renewable energy plants, which means that if we buy their power business, the huge loss of obsolete capacity will fall on us. ”

"Therefore, the best power development policy for developed countries such as Europe, North America, Australia and New Zealand is to actively deploy the transmission, distribution and sales links, and the layout of renewable energy power plants. Taking advantage of the hesitation of new energy investment in major European power groups, they actively seize the market. … What I really value in acquiring Scottish Power is not its 13 power plants with a total capacity of 7,000 megawatts, but its transmission, distribution and sales networks in central and southern Scotland, northern Wales, and Cheshire, Shropshire, Worcestershire and Leicestershire in the north of the UK, especially those 5.2 million electricity users. There are 26 million households in the UK, and Scottish electricity accounts for one-fifth, which is what makes them the most attractive. ”

"Boss, I admit that coal is indeed the target of European phase-out in the future, but nuclear energy is safe and efficient, and should not be part of the backward production capacity that will be phased out. Jonathan Wellau.

"Since the Chernobyl incident in the Soviet Union, there has been a huge controversy in Europe over the construction of nuclear power plants, which has increased the uncertainty in the industry. Moreover, the European nuclear energy industry belongs to the second generation, and after 30 years of use, it needs to update and maintain equipment, which requires huge investment. ”

Guo Shouyun still has one thing to say, that is, the Fukushima incident in Japan in 2014. The leak at the Fukushima nuclear power plant led directly to the German government's policy of abandoning nuclear power and stipulating that all power generation companies in the country must phase out all nuclear power plants by 2022. At this time, the takeover of E.ON Group will have to pay for the dismantling of nuclear power plants and the storage of nuclear waste of up to 16 billion euros in the future.

Jonathan Weil doesn't know what will happen in the future, but Guo Shouyun can't step into this giant pit by himself.

However, Guo Shouyun's explanation is obviously a bit far-fetched, and there is no way to really convince Jonathan Weir. But he also explained a lot.

"I think Power Grid is a better place to buy than E.On. The Warwick-based company owns 7,200 kilometers of high-voltage overhead lines, 1,500 kilometers of underground cables, 342 substations in England and Wales, as well as 7,660 kilometers of high-pressure natural gas pipelines, 133,600 kilometers of natural gas distribution pipelines, and 10.6 million natural gas users in the United Kingdom. ”

“… In addition to its U.K. assets, NGG operates more than 14,000 kilometers of electricity transmission networks, 116,600 kilometers of distribution networks, 781 kilometers of natural gas pipelines, 56,300 kilometers of natural gas distribution pipelines, and provides electricity and natural gas to the northeastern regions of Massachusetts, New York and Rhode Island, providing electricity to 3.3 million customers and natural gas to 3.4 million customers. ”

“… If we were to acquire Power Grid, Pacific Energy would have three-quarters of the UK's high-voltage transmission grid, one-sixth of the distribution network, and one-fifth of its customers, and one-half of its natural gas transmission network, three-fifths of its natural gas distribution network, and one-half of its users. We will be the largest utility in the UK. It will also greatly enrich our business in the northeastern states of the United States. ”

“… NGG's assets totaled £21.74 billion, with a market capitalization of £11.2 billion and liabilities accounting for 42.34%. The amount of funds we raise is sufficient to acquire all of the assets of Power Grid Corporation. ”

Jonathan Weil pondered for a moment, "If we launch a takeover of British Power Grid, we are afraid that we will encounter an investigation from the British antitrust department." ”

"Even if we buy the British Power Grid Corporation, it's not enough to be a monopoly. In addition, we can commit that if we acquire Power Grid UK, we can invest £10 billion over the next 10 years to enter the field of new energy power generation and effectively improve the UK's electricity supply structure. ”

"Boss, the cost of new energy power plants is too high, the profits are meager, and the technology is far from mature, is it too early to enter?"

"That's really where we should be concerned. But, Jonathan, do you know why I'm reluctant to take Pacific Energy Group public?"

"Pressure from Wall Street investors?"

"That's right!" Guo Shouyun nodded, "The cash flow of public utilities is very rich and the returns are stable, but the return on net assets is very low, and it is good to maintain 7%." And it's also very susceptible to policy influences. Coupled with the large proportion of investment in public utility projects and the long payback period, it is naturally not liked by Wall Street investment bankers who are chasing short-term profits. So, I'd rather invest my own money to grow Pacific Energy than give up my stake in the company to Wall Street bastards who have nothing but speculation in their heads. Otherwise, under the control of capital, Pacific Energy Group, which began to chase short-term revenues, would not end much better than Enron. ”

In the history of American business, too many public companies have abandoned sound business strategies and long-term corporate goals in order to build a beautiful balance sheet to curry favor with Wall Street and investors, and finally collapsed. Closer are Enron, WorldCom and Consecal, and farther are Chrysler and Texaco. However, the latter two were a little luckier than the previous ones and did not completely collapse at that time.

“… For Pacific Energy, the best way to invest is to focus on the long-term development of the group. Obviously, with the increasing attention to environmental issues around the world, fossil fuels are being phased out, and if natural gas power generation is also because it exists as a clean energy source and as a rich energy mix, then coal will be slowly phased out. Nuclear energy has also been slowed down by accidents and external threats. ”

“… It is foreseeable that in the future, with the continuous subsidies of various countries for green energy, the practical need to improve the environment, and the progress of technology, new energy power plants will become the main force of power supply in major countries in the world in the future. When we invest now, we are tantamount to occupying the market in advance. In addition, the energy landscape of developed countries such as Europe and North America has basically solidified after hundreds of years of development, and through acquisitions and expansion, not only will it cost huge sums of money, but it will also face scrutiny from government agencies, as well as undertake the maintenance and renewal of equipment in old power plants. ”

“… But if we invest in new energy plants, the governments of the host countries will be our helpers. Moreover, most European countries have implemented market-based electricity policies. Even vertically integrated power operators such as Rheinland Energie and Baden-Württemberg Energy must open their transmission and distribution networks to us. In addition, if we use new energy as a selling point, we can also attract more electricity users. ”

“… compared to the benefits that can be obtained in the future. The current difficulties do not justify our hesitation to enter the new energy sector. Although the margins of new energy power plants are very small, they are not completely unprofitable. Investing now, taking the first-mover advantage, will help us make more profits in the future. ”

Jonathan Weil thought for a moment and nodded.

"When I go back, I have a management meeting to discuss the boss's views and make an investment plan accordingly. ”

"Jonathan, what I appreciate most is your resolute attitude. However, before the specific new energy investment plan comes out, you must first do a good job of the employee equity incentive plan and the employee equity incentive plan. Otherwise, we wouldn't have the money to buy Power Grid Corporation. ”

"Yes... Employee Equity Award Plan, how many shares are you going to set up?"

"15% tentatively, but this requires a long-term plan, not a 15% stake in advance to set up an option pool. ”

Guo Shouyun also needs this part of equity financing to invest in the future, especially the subprime mortgage crisis three years later, and of course he will not give up his equity early.

As for the employee equity incentive plan, this is the same as going public, and the funds raised expand Pacific Energy's business, which is equivalent to increasing the value of the remaining shares in his hands in disguise. These are two completely different concepts from equity award plans, which distribute shares to outstanding employees without expecting returns.

Jonathan Weil nodded, just as he expected. Guo Shouyun will guarantee his absolute controlling stake in Pacific Energy Group.

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