RWE, Engie studying tie-up over Innogy -banking sources

By Arno Schuetze, Geert De Clercq and Julien Ponthus

FRANKFURT/PARIS, May 19 (Reuters) - Germany's RWE (IOB: 0FUZ.IL - news) and France's Engie (LSE: 0LD0.L - news) are studying with their investment banks alliance options, one of which would involve RWE swapping part or all of its majority stake in renewables and grids firm Innogy for a minority stake in Engie, four investment banking sources said.

No active talks between the top executives of the two firms are under way, but the two utilities are discussing options and scenarios with advisers and bankers, the sources told Reuters. At this stage, no banks have been given a formal mandate.

A French government source confirmed that talks are going on, but declined to give detail. "There are indeed talks ongoing, but that does not mean they will succeed," the government source said.

An RWE-Engie deal could form the basis of a Franco-German alliance in the field of energy, which has been under discussion for years between the two governments. Any deal would have to wait for German elections in September, the sources said.

One scenario would see RWE swap part or all of its 76.79 stake in its listed unit Innogy for a direct minority stake in Engie.

Bankers said the operation could only take the form of an asset swap, not a cash deal, but a certain cash component could be an option.

With Engie's market value at nearly 33 billion euros and Innogy worth 18.6 billion, the 14.3 billion euro value of RWE's Innogy stake could secure it a stake of about a third of the combined Engie-Innogy.

A spokeswoman for Engie declined to comment but reiterated that Chief Executive Isabelle Kocher said earlier this year that Engie had no plans for a transformative deal.

Innogy and RWE declined to comment.

(Additional reporting by Tom Kaeckenhoff and Christoph Steitz in Frankfurt and Emmanuel Jarry in Paris; editing by Andrew Callus and Jason Neely)