Germany's RWE is considering ways to slash its €16.8bn (£15bn) stake in retail utility Innogy, including a deal with Italy's Enel, according to reports.
RWE owns a 76.8 per cent stake in Innogy, which was spun-off in 2016. The company has taken hits following the UK government's move to intervene in the energy market with a price cap: this month Innogy said the pressure on margins in Britain was "very high" as it booked a €480m impairment on Npower, which it owns.
Previously, RWE had said it would not sell its stake because of the steady dividend Innogy provides. However, Reuters reported the firm was still in the market for a sale of all or parts of the stake and that it had held talks with Enel.
Enel, which is based in Italy, is Europe's largest utility by market volume.
Bank of America Merrill Lynch is said to be advising RWE on its strategic options. Enel's advisers include JP Morgan.
A RWE spokesperson said the company was in talks with “many participants in the market about many topics” and that it would not comment on speculation.
Innogy, Bank of America Merrill Lynch, and JP Morgan all declined to comment.
Enel said it routinely received pitches from investment banks, but that does not mean talks are underway.
Earlier this month, Francesco Starace, the boss of Enel, said the company was “doomed” to grow its core distribution business through mergers and acquisitions, which sparked market speculation. Starace had said before that big utility deals in Europe destroyed shareholder value.