The purchase will be backed by a €2.43B investment in RWE (OTCPK:RWEOY) by the Qatar Investment Authority, which becomes a major shareholder in the German utility with a 9.1% stake.
Noting the "healthy premium" RWE (OTCPK:RWEOY) is paying for the U.S. business unit, Citi analysts like the deal "from a Con Ed (ED) perspective in that it could generate ~$3.96B... and position ED to retire holdco debt, avoid up to $1.6B of equity, and increase capex guidance," adding they expect Con Ed to announce new capital spending plans with the company's Q3 earnings release or at the EEI financial forum.
For RWE (OTCPK:RWEOY), the acquisition could send a clear message to policy makers in Germany, UBS analysts said, who may now "think twice before applying any new windfall taxes, in case RWE responds by directing its investment firepower elsewhere."
"The deal also increases RWE’s pipeline in solar and storage and rebalances the company to approximately one-third in Europe, one-third in the U.K., one-third in the U.S., giving RWE a lot of flexibility in terms of where it might invest in future," UBS wrote.
Consolidated Edison (ED) previously reported Q2 adjusted earnings of $0.64/share on revenues of $3.42B.