The German utility RWE AG (RWEOY.PK) recorded €42.5B of revenue and €7.9B EBITDA in 2007.  

It is massive with about 63,000 employees who supply tens of millions of customers with electricity and gas.  They focus on Europe being the largest power producer in Germany and 2nd largest in Britain.  Analyzing their 2007 Annual Report it is apparent their balance sheet is solid, income statement is in good shape and the cash-flow statement is extremely regular with €2B of free cash flows.

To keep their debt manageable they have created a new metric which is a 'new definition of net debt (net financial debt plus all major non-current provisions) and a debt factor (net debt:EBITDA).'  

In 2007 €2.2B of dividends were paid.  The current yield is about 5.1% ($89.16 with €3.15 dividend).  Based on the financial statements the dividend could be raised without endangering operations so there may be some opportunity for capital appreciation.

The € does have structural imbalances leading to instability.  It is not Germany but Spain and others that will probably bear the brunt of any potential problems.  The economic turmoil sweeping Europe, which is much worse in my opinion from that in America, is turning into social unrest.

 A prime exampe is the massive rioting in Greece that has resulted in €1.5B in damage.  Germany is among the strongest economically and will probably remain solid socially longer.  Electricity is a basic social service and among top priority.  Owning RWE would provide insulation against and diversification from the American economy.

Because of the strong financial statements, free cash flows, € denomination and Germanic foundation RWE appears undervalued with significant potential.  While waiting to realize this potential a high yield in € will be received.  

Therefore, RWE looks like an attractive place to park capital for a few years.

Disclosures:  No position in RWE but considering a purchase.