Gas Natural Contemplates Italian Exit

Gas Natural has hired Rothschild to carry out a strategic review of its Italian business which could result in the Spanish energy company selling its assets in the country for as much as 700 million euro ($751 million), sources said.

 

A board meeting will be held in March to decide whether to take advantage of growing appetite for Italian gas distribution assets after a recent reform of the sector, one of the sources said.

 

Gas Natural declined to comment, while Rothschild was not immediately available for comment on the planned review.

 

However, another source close to the Spanish group said it was assessing its strategic options in Italy and had taken no decision yet.

 

The company, which has been in Italy since 2002, runs more than 7,000 km of regulated gas distribution pipelines, mainly in the south, alongside a retail business that sells gas and power to over 420,000 families and 17,000 companies.

 

But Gas Natural (EGAS)'s Italian business generates just 1.3 percent of its core earnings. And in the third-quarter, core earnings in Italy for distribution fell 12 percent to 15 million euros.

 

Italy's gas distribution industry is highly fragmented with more than 200 companies working across almost 7,000 concession areas serving more than 20 million clients. But new rules cutting concession areas to just 177 are set to streamline the industry to make it more efficient and cut bills.

 

A handful of industry players including 2i Rete Gas and Italgas have already flagged an interest in Gas Natural's business, two sources said, with one adding that the grid assets could fetch 500 to 550 million euros if sold on their own.

 

Gas Natural's grid business in Italy is of particular interest to investors due to the regulated nature of its income flows and its growth opportunities.

 

Italy's second-biggest gas distributor 2i Rete Gas could team up with EDF unit Edison to buy the whole package, another source said. Alternatively, Italgas, the third biggest gas distributor in Europe, could make an offer for the grid.

 

This would fit with its plans to increase its market share in Italy to about 40 percent from 34 percent.

 

Italgas and infrastructure fund F2i, which controls 2i Rete Gas, declined to comment on any possible bid.

 

In November, Italgas CEO Paolo Gallo told Reuters that Italgas could consider buying smaller gas distributors across Italy to boost growth.


($1 = 0.9319 euros)

(By Stephen Jewkes and Pamela Barbaglia; Additional reporting by Jose Elias Rodriguez; Editing by Alexander Smith)