3i powers up for E.ON unit buy

3i, a global private equity firm, is eyeing German utility E.ON’s high-voltage power transmission network.

According to reports, Uwe Danziger, a member of 3i’s infrastructure team, is considering a solo or joint bid for the network, which has already attracted interest from National Grid of the UK, Germany’s Allianz and Australian bank and perennial infrastructure investor Macquarie.

A highly regulated business would fit within 3i’s investment strategy, said Danziger, who added that that bidding alone would increase the leverage required for the acquisition.

A significantly highly-geared operation would not fit with 3i’s current strategy, so a joint venture may be a more likely proposition. However, Danziger noted that infrastructure assets’ relatively stable cash flows could allow for a higher debt allocation than traditional buyout deals, particularly if the government remains involved.

E.ON agreed to divest its electricity grid unit in late February as part of an EU antitrust investigation.

3i’s previous activity in the energy sector include Vetco International, an equipment provider to the oil and gas industry, sold by 3i, Candover and JP Morgan Partners last year for €1.5bn, a three times money multiple, to US conglomerate General Electric; CH4 Energy, a North Sea gas business, which made a 7.3 times return in 2006 when sold for £153m to energy group Venture Production. Other investments include Norway’s Epcon Offshore, Spain’s GES, Belgium’s Electrawinds, India’s Vijai Electricals and Salamander Energy, which is focused on South East Asia.