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RWE rallies on hopes for Innogy deal, less stringent German climate policy

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RWE rallies on hopes for Innogy deal, less stringent German climate policy

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FRANKFURT (Reuters) – Shares in German utility RWE <RWEG.DE> rallied on Monday on renewed investor hopes for a deal for its Innogy <IGY.DE> unit as well as on expectations of a less stringent climate policy following the failure of coalition talks in Germany. RWE is looking at ways to cut its 16.8-billion euro (£14.9 billion) stake in retail business Innogy <IGY.DE> and one option involves a deal with Italy’s Enel <ENEI.MI>, Reuters reported at the weekend. Despite having no immediate need for cash, RWE has recently held talks with Enel, Europe’s largest utility by market value, according to a person familiar with the matter. RWE shares were up 3.1 percent on Germany’s DAX market <.GDAXI> , which was off 0.34 percent at 0945 GMT. Investor sentiment was also helped by expectations that the collapse of talks to form a government in Germany could lead to a more lenient outcome for RWE. The Greens, which had been expected to be part of a new German government, have been pushing for the closure of coal-burning power plants. That threat has weighed on RWE’s share price this month. “The plant closures will likely be delayed,” one trader said. Analysts from Goldman Sachs said in a note on Monday that they see large potential for RWE’s price due to factors such as compensation payments for early plant closures, an expected increase in power prices and an M&A related valuation for Innogy. A possible deal with Enel is the latest scenario for Innogy after sources earlier this year said RWE and France’s Engie <ENGIE.PA> had studied a share swap under which RWE would trade part or all of its stake in Innogy for a minority stake in Engie.

(Reporting by Arno Schuetze; editing by Jason Neely)
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