AMSTERDAM, Aug 27: The two largest power utilities in the Netherlands are looking for foreign partners and present an increasingly rare opportunity for a wide range of potential suitors in a consolidating European market.

The Dutch utilities Essent and Nuon, which failed to merge in September last year, both said in June they were looking for an international partner for their production and delivery units which they are separating from their network arms.

Analysts say the relatively small size of these units would make them attractive to foreign firms. While larger utilities, such as Germany’s E.ON, are likely to be interested in a stake or cooperation with the Dutch firms, analysts say smaller and more regionally limited players could also see them as an opportunity to expand across borders.

“Following the consolidation of European utilities, you do not have that many opportunities left, so everybody will be interested,” said Herve, analyst at Societe Generale.

Smaller European players, such as Denmark’s state-controlled oil and gas group DONG Energy or British utility Centrica, could use an alliance for growth in continental Europe. Experts have estimated Essent’s production and delivery operations could be worth about six billion euros ($8.9 billion) and Nuon’s more than five billion euros.

Essent and Nuon, both owned by local and regional authorities, called off plans to create a merged entity valued at 24 billion euros last year, saying conditions were not right.

They then began to split their commercial production and delivery operations from their gas and electricity transport networks ahead of a law that requires them to do so before 2011.

Existing as small players in Europe is now a challenge in a market which has undergone a wave of consolidation, as larger utilities have the advantage, for example, when it comes to negotiating contracts for energy supply and equipment.

A presence in the Netherlands could provide several strategic opportunities for foreign partners, including access to production assets and clients as well as regional expansion.

“Production capacity is a very interesting asset for every big utility in Europe. The Germans have huge investment plans and I think it would fit quite well,” said Stephan Wulf, analyst at Sal. Oppenheim.

“But also looking to France and utilities which are further away: they might also be interested in generation capacities.” Koen Dierckx, analyst at KBC Securities in Brussels, also highlighted the Dutch production assets as well as their renewable energy activities. “Nuon and Essent have a number of gas-fired power plants which are pretty new and recent, and both have an important renewables position,” Dierckx said.—Reuters