E.on has signed an agreement with Italian energy group ERG Power Generation to sell its 527MW of hydropower plants located in the Italian regions of Umbria, Marche and Lazio, for $1bn.

The assets considered for acquisition include 16 hydro power plants, one pumping station, seven large dams, three reservoirs including Salto, Turano and Corbara, 22 weirs and 155km of channels and tunnels.

The combined power plants are capable of generating about 1.4 terawatt-hours of power annually using water of the river Nera, Velino and Tiber, the company noted.

ERG CEO Luca Bettonte said: "This acquisition is of paramount importance for the Group, since it offers the opportunity to diversify our production sources by entering the hydroelectric sector with notable dimensions and is in keeping with our growth strategy in renewables via investments in high quality assets.

"The acquisition will enable a significant improvement in our economic results and cash generation in the medium term, while the ensuing substantial increase in electricity output is expected to generate important results, also in terms of Energy Management."

Subject to the approval of the Italian Antitrust Authority and the completion of consultation procedures with trade unions, the transaction is planned to be completed by the end of this year.

At present, ERG operates wind power plants, which have combined generation capacity of 1.38GW, in Europe, as well as a 480MW gas-fired thermal plant in Sicily, Italy, reported Reuters.

Earlier, E.on divested coal, gas and solar generation businesses in Italy.