Erfurt’s municipal utility company finds buyer for shareholding in VNG

HKCF acted as exclusive M&A Advisor to Stadtwerke Erfurt

Stadtwerke Erfurt has received a binding offer from a municipal utility consortium for its multi-million euro shareholding in the gas company VNG. This was confirmed by Managing Director Peter Zaiß on Friday. The proposed sale, which still requires approval from the Erfurt City Council in a special session scheduled for April 5, would bring an end to years of negotiations, relieve pressure on the city’s budget, and give the municipal utility greater financial flexibility for investments.

While Zaiß did not confirm the reported purchase price of €11 per share, he stated he was “extremely proud of the negotiation result.” At that price, the nearly 5.4 million shares in the gas company VNG owned by Stadtwerke would generate proceeds of approximately €60 million.

Debt Repayment and Surplus Use
Of the €60 million, around €52 million would be used to repay loans originally taken out to finance the share purchase. The resulting €8 million surplus is intended to support, among other initiatives, the City of Erfurt’s financing of the upcoming Federal Garden Show (Buga).

Although a suspension of annual profit distributions to the city had been planned during the Buga preparation years, the additional liquidity will now allow Stadtwerke to resume its annual €1 million dividend payment to the city.

Following repayment of the large loan, the municipal utility’s already strong equity ratio will rise above 80%. The added financial flexibility and remaining surplus will be directed toward investments in renewable energy. This supports the city’s climate goals, Zaiß explained. Specifically, investments are planned in wind farms and solar installations. Stadtwerke also intends to develop a new business area focused on district cooling for residential neighborhoods, with the planned ICE-City East development named as a potential pilot project.

The prospective buyer is the Zweckverband Oberschwäbische Elektrizitätswerke (OEW), a municipal utility association and major shareholder of Energie Baden-Württemberg AG (EnBW), which in turn holds a majority stake in VNG. Given this connection, resistance to the transaction at the upcoming VNG annual general meeting in May is considered unlikely.

An Iranian investor also expressed interest and reportedly offered a significantly higher price per share. However, geopolitical instability in Iran prevented a binding offer, and it is widely assumed that any sale to an Iranian buyer would not have gained approval from VNG shareholders. The main risk associated with the VNG shares lay in their narrow strategic focus: the volatility of the gas market had a direct impact on dividend payments, and in weak years, loan interest payments exceeded earnings. Nevertheless, Zaiß emphasized that the investment had paid off over time, with cumulative profits exceeding interest costs by a low double-digit million euro amoun

Due to the complex stakeholder landscape, the expected share price had fluctuated in recent years — ranging from near worthless to almost €18 per share. The now-agreed price is seen as pragmatic. “It’s a very reasonable price,” said Mayor Andreas Bausewein (SPD). “This is money we can all put to good use.”