Key RWE shareholder opposed to complete sale of Innogy stake

By Tom Käckenhoff

DUESSELDORF (Reuters) - RWE (RWEG.DE) should keep a majority in network and renewables unit Innogy (IGY.DE), its biggest shareholder said on Wednesday, as the German utility considers options for its 76.8 percent stake.

RWE has said it is considering all options with respect to Innogy, Germany's biggest energy group with a market cap of 19.1 billion euros (17.08 billion pounds), which RWE carved out and listed in 2016.

Sources have said that the group has talked to France's Engie (ENGIE.PA) and Italy's Enel (ENEI.MI) about a possible asset swap deal in which RWE would trade its majority in Innogy for a minority in a new cross-national entity.

"We are in favour of RWE keeping a majority in Innogy," said Ernst Gerlach, head of VkA, which represents the powerful municipal shareholders that together hold a stake of about 23 percent in RWE. "For RWE, Innogy is an important source of profit."

"We would examine very thoroughly a minority stake abroad," Gerlach said. "RWE has not always been successful with its engagements outside Germany," he added.

Others firms that might be interested in all or parts of Innogy include Spain's Iberdrola (IBE.MC) and Australian bank Macquarie (MQG.AX), which has for years been an avid energy infrastructure investor on the continent.

RWE, founded in 1898, spent billions of euros expanding its water business in the United States and Britain during the last decade, but later sold the businesses due to their limited growth potential.

Due to competitive pressure in the British energy market, Innogy said in November it would combine its local retail business with that of peer SSE (SSE.L).

Innogy will report 2017 results on March 12, followed by RWE a day later.

(Writing by Christoph Steitz; Editing by Arno Schuetze and Elaine Hardcastle)