EnBW and Ferroatlantica likely to succeed in battle for Spanish utility

The alliance between Germany’s Energie Baden-Wurttemberg AG (EnBW) and the private Spanish power and industrial group Ferroatlantica is heading for success in its attempt to gain control of Hidroelectica del Cantabrico (Hidrocantabrico).

The Spanish power group has been targeted by a number of companies since March 2000, when TXU-Europe made a failed bid. Hidrocantabrico is the fourth-largest electric utility in Spain and supplies 90 per cent of electricity demand in Spain’s northern Asturia province. It accounts for 7.3 per cent of Spain’s electricity generation and five per cent of the retail market.

The German and Spanish partners now control nearly 60 per cent of Hidrocantabrico between them and have offered $23.7 per share. The consortium will have to negotiate with Electricidade de Portugal (EdP), which has a 19.2 per cent stake in Hidrocantabrico and has itself made a bid for Hidrocantabrico. EnBW and Ferroatlantica will also need to win over local savings bank Cajastur with whom EdP has a shareholders agreement.

The German and Spanish partners recently acquired a ten per cent holding in Hidrocantabrico from Belgian power group Electrabel for $23.7 per share. Electrabel paid $19.7 per share for the stake in July 2000, and has therefore realised a $45.32m capital gain from the transaction.

Earlier this year, Hidrocantabrico was the target for another German utility, RWE, which at the time, bid $22.5 per share. With Spanish electricity demand projected to grow at a rate of four per cent over the next few years, the deregulated electricity sector is a prime target for growth-hungry multinationals.

EnBW is pursuing a strategy of growth underpinned by strategic investments and alliances such as its partnership with Ferroatlantica. It is part owned by Electricite de France, one of Europe’s biggest energy companies.

The RWE bid for Hidrocantabrico was launched in February 2001 and sought to acquire 100 per cent of the shares. It was seen as a suitable vehicle to manage all of RWE’s activities on the Iberian Peninsula. Although gaining approval from the Spanish stock exchange, the bid was ultimately unsuccessful.

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