Lovells advises Industry Funds Management on consortium bid with Elia Systems Operator SA for the acquisition of German electric

Lovells advised Industry Funds Management ("IFM") on the €810 million joint acquisition with Elia System Operator SA ("Elia") of 50Hertz Transmission GmbH (formerly Vattenfall Europe Transmission GmbH) ("50Hertz") from Vattenfall Europe AG ("Vattenfall").  The transaction was announced on 12 March 2010.

50Hertz is currently one of four German transmission system operators and owns and operates the electricity transmission grid in Eastern Germany and Hamburg.  The transaction involves Elia and IFM respectively acquiring 60% and 40% of the equity of 50Hertz.  The investment continues IFM's strategy of broadening IFM’s portfolio of high quality assets in the European infrastructure sector.  The disposal by Vattenfall is understood to be a voluntary strategic decision taken in 2008 based on its support of the unbundling of generation and transmission. This is the first such unbundling disposal in the German market.

This transaction raised interesting issues in relation to the implementation of the 3rd EU Package Directive (the "Unbundling Directive"), which will require the separation of control of transmission grid operation from power generation/supply businesses and complex cross-border corporate and tax issues given the various jurisdictions of buy-side parties and with the seller and target assets in Germany.

The Lovells team was led by Steven Bryan, a Partner in Lovells' London Corporate Energy, Natural Resources and Infrastructure practice.  Steven was assisted by: Ben Higson (Partner) and Karima Fahmy (Senior Associate) in the London corporate team; Alexander Loos (Partner) and Thorsten Volz (Senior Associate) in the Dusseldorf corporate team; Michael Dettmeier (Partner) and Stefan Schultes-Schnitzlein (Senior Associate) in the Dusseldorf tax team; and Matthew Levitt (Partner) and Simon Barnes (Of Counsel) in the competition and EU law team based in Belgium and London.

Steven Bryan, speaking for Lovells, said: 

"We are delighted to assist IFM as a long standing client in their latest investment in European infrastructure and their first in Germany.  This was also a ground-breaking transaction in the liberalisation of the German energy market.  The transaction shows the range of Lovells' corporate infrastructure expertise across European markets."