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Investing.com -- German utility company RWE AG (ETR:RWEG) has announced a long-term partnership with Apollo to secure funding for its 25.1% equity stake in grid operator Amprion.
Apollo will provide €3.2 billion to RWE in exchange for an equity stake in a newly established joint venture that will hold RWE’s stake in Amprion.
RWE will receive the funds upfront and plans to reinvest the proceeds into Amprion over the next decade as part of Amprion’s grid expansion plans.
The €3.2 billion will be accounted for as equity and will strengthen RWE’s balance sheet by reducing net debt. This effect on net debt is temporary as the amount will be reinvested into Amprion over time.
According to Jefferies, Apollo’s agreed return is below the expected return on Amprion’s regulated grid, with RWE achieving a spread of 150-250 basis points. At a high level, the annual value creation for RWE post all investments could be considered as approximately 200 basis points multiplied by €3.2 billion.
RWE has retained the option to buy back Apollo’s stake in the joint venture at a pre-determined agreed return, which allows RWE to monetize the full stake at a future point when Amprion has a higher regulated asset base level.
The company expects a €2.6 billion positive impact on fiscal year 2025 net debt from this deal, along with an improved net financial result due to lower net debt over time.
RWE has confirmed its 2027 earnings per share target, with a capital allocation plan update scheduled for March 2026. The deal closing is expected in the fourth quarter of 2025.
Jefferies maintains a "Buy" rating on RWE shares with a price target of €40.00, representing a 14% upside from the current price of €35.02.
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