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Funds vie for power grid bids

ALLIANZ SE and Goldman Sachs Group Inc's infrastructure funds have teamed up to bid for Vattenfall AB's German power grid, vying with another group that includes Morgan Stanley, insiders said.

The network may fetch as much as 1 billion euros (US$1.3 billion), said the insiders. Allianz is teaming up with Deutsche Bank AG's RREEF fund, they said. Morgan Stanley, which invests in utilities through its infrastructure arm, is working with an unidentified United States' private equity firm on a rival offer, the insiders said. Vattenfall is short-listing bidders after receiving indicative offers for the network.

Infrastructure funds buy toll roads, ports and utilities, investments which often provide predictable returns even when economic growth slows. Vattenfall Transmission GmbH operates 9,500 kilometers of power lines in seven German states, supplying 18 million people and companies responsible for 20 percent of the country's gross domestic product, according to the company's Website. "In the face of a deepening recession, selling this unit now may be wise," said Annerose Tashiro, head of cross-border insolvency and restructuring at Schultze & Braun, an insolvency law practice. "Everyone needs cash. However, there are few investors out there, and very few strategic ones."

Lars Josefsson, CEO of Vattenfall, said in September that the sale of its power network may be agreed upon in the first half of 2009, Bloomberg News reported. Vattenfall put its grid up for sale as the European Union pressures German utilities to split power generators from their networks to increase competition.

E.ON AG, Germany's biggest utility, has also started on a plan to sell its domestic power grid to resolve an EU Commission antitrust probe.


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