Uniper shares in market debut

In midday trading at the Frankfurt Stock Exchange, Uniper shares gained close to 8 percent at about 10.80 euros ($12.15) a share - down from a peak of 11 euros, but higher than at its launch in the morning at 10.02 euros. However, at the end of the trading day gains dwindled to less than 2 percent as shares closed at 10.30 euros ($11.56).

The closely watched listing, under which Germany's biggest utility, Eon, is floating 53.35 percent in the power generation and energy trading unit, is expected to provide deeper insight into the market value of ailing gas- and coal-fired power plants in Germany.

Eon said in late 2014 it would pool and list its struggling power plants, hoping this would free up enough cash for future investments and give a boost to its renewable and grid business.

"The new energy world is so vastly different from the traditional one that they need completely different entrepreneurial strategies," Eon CEO Johannes Teyssen said at the time.

The company and its German rival RWE have seen profits tumble as subsidized wind and solar energy, coming online in the wake of the country's shift to renewables, squeezed the energy they generate from coal and natural gas out of the market.

Uniper - short for "unique performance" - has been operating independently since January and is generally viewed as a kind of "bad bank" for Eon's struggling conventional assets. The impression was reinforced by a string of writedowns Eon took on its power stations - 8.8 billion euros last year and 2.9 billion euros earlier this year.

Selling pressure

Initial fears of a massive sell-off of the stock apparently haven't materialized so far. Even though Eon gave no advance price range for the listing, the opening price of 10 euros was in line with the company's expectations, giving Uniper a market capitalization of about 4 billion euros.

However, there might be selling pressure from index trackers in the course of the next few days because they will have to dump Uniper stock as it will be excluded from Germany's benchmark DAX index.

Other investors seem are holding the stock, especially after Uniper promised to pay out 200 million euros in dividends this year, and at least 75 percent of its free cash from operations from 2017. It also pledged to cut costs and sell two billion euros worth of assets to strengthen its balance sheet.

"It was meant to be the 'bad bank', but without the German nukes, which stay with Eon now, it looks OK to us," said Sam Arie, a utilities analyst at UBS. "With a 200 million dividend for 2016 that could mean a yield of as high as 6.5 percent - not bad when the risk free rate in Germany is negative," he added.

Among analysts, the flotation is also seen as an indication for the initial public offering (IPO) of Innogy - a spin-off of Germany's second biggest utility RWE expected later this year. However, while Eon decided to list its loss-making units, RWE will chose to go public with its renewables, retail and network business in hopes to win over much higher investment.

uhe/cjc (AFP, Reuters, dpa)