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KfW in advanced talks to take stake in EnBW's power grid -sources

By Christoph Steitz and Markus Wacket

FRANKFURT/BERLIN (Reuters) -German state lender KfW is in advanced talks to take a minority stake in the high-voltage power grid owned by EnBW, three people familiar with the matter said, in a sign that Berlin is tightening its grip on energy assets.

KfW intends to exercise its pre-emptive right to take one of two 24.95% stakes in TransnetBW that EnBW has put up for sale and thereby squeeze out the bidder that has made the lowest offer in an official ongoing auction, the people said.

Shares in EnBW rose 5.5% after the news to end the day at their highest level in five weeks.

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The transaction coincides with growing concerns in Berlin over the question of ownership of key energy infrastructure, stoked by the end of gas flows from Russia that have exposed the risks of Germany's dependence on foreign fuel imports.

KfW, which has been increasingly active in Germany's energy sector on behalf of Berlin since Russia invaded Ukraine, is also mulling whether to take a majority stake in the German unit of Dutch grid operator Tennet, sources said in November.

EnBW last year said it was seeking buyers for two minority stakes of equal size in TransnetBW because it needs a partner to share the 6 billion euros ($6.45 billion) it plans to spend by 2025 to upgrade its power and gas grids.

The savings banks in Baden-Wuerttemberg, where EnBW is based, are part of the final bidding round, their president Peter Schneider said last week.

Danish renewable investor Copenhagen Infrastructure Partners (CIP) is also still in the process, two of the people familiar with the matter said, adding any deal could value the 3,100-kilometre (1,926-mile) grid at more than 2 billion euros.

KfW, EnBW and CIP declined to comment.

EnBW Chief Financial Officer Thomas Kusterer in November said EnBW hoped to conclude the sales process in early 2023.

While the savings banks are seen as the better fit due to their regional ties, Denmark's CIP would draw no opposition from the government as a potential co-owner, the people said.

Soaring interest rates have made the talks, which could still collapse, more challenging, the people said, because they eat into the fixed regulated return energy networks provide to their owners.

($1 = 0.9297 euros)

(Reporting by Christoph Steitz and Markus WacketEditing by Miranda Murray and Emelia Sithole-Matarise)