German energy utility RWE is in talks with an Arab investor about several possible forms of co-operation, a spokeswoman for the company said, offering hope that the cash-strapped group may gain a new shareholder with deep pockets.

RWE warned last week that profits and investments would fall further this year, reflecting the tough business environment faced by traditional power utilities in Europe where they have to contend with relatively weak demand and preferential treatment for renewable energy sources.

Shares in the 117-year old company, now saddled with some 31 billion euros ($33 billion) of net debt, are down 8 percent this year and more than 70 percent since 2007, wiping nearly 40 billion euros off its market value.

"We are exploring several options for a cooperation," the spokeswoman said, adding nothing could be ruled out in terms of potential outcomes.

The spokeswoman said that RWE, Germany's second-largest utility after E.ON, had been approached by the investor a few months ago.

The news also highlights continued interest from foreign investors in German companies, following Qatar's move to take stakes in Volkswagen and Deutsche Bank and Kuwait's investment in Daimler.

RWE shares closed up 3.7 percent at 24.535 euros, valuing the group at 14.13 billion euros ($15.1 billion).

"The interest from the Arab world is a positive sign," a Frankfurt-based trader said, adding that a possible investment would also curb the power of German municipal shareholders, which control about 24 percent of RWE.

Bloomberg earlier said RWE was considering selling a 10 percent stake to Abu Dhabi investors, including Sheikh Mansour bin Zayed Al Nahyan.

However, RWE has no 10-percent stake to sell and the group's chief financial officer, Bernhard Guenther, said last week the company has no plans currently for a capital increase.

On Wednesday, RWE declined to say whether that was still the case.

"A capital increase would be very problematic for us," said Ernst Gerlach, head of VkA, which represents the municipal shareholders in RWE, adding that most of the local communities, most of them indebted, would be unable to participate.

However, he also said it would be viewed as positive if an Arab investor were to take a stake.

Investors and analysts have repeatedly called on RWE's management to find a solution to the industry crisis, with pressure rising after E.ON said in November it would split in two and spin off its own ailing power plant business.-Reuters