Endesa wins Elettrogen with €2.6 bn bid

The consortium led by Spain’s Endesa yesterday succeeded in buying the Italian generating company, Elettrogen from Enel at a cost of €2.6 bn ($2.3 bn). Elettrogen was put up for sale through an international controlled bid process as part of Enel’s divestiture plan.

In an announcement from Italian electricity group Enel, it emerged that Endesa was the only remaining bidder after the Sondel and Edison joint bid was withdrawn. Elettrogen is the first of three generating companies to be sold by Enel as the Italian electricity market undergoes liberalization. The other two are Eurogen and Italpower.

Banco Santander Central Hispano and the Italian ASM Brescia SPA form the balance of the Endesa consortium.

The sale attracted considerable interest with up to eight separate bidding consortia involved at one point. The competition for Elettrogen among groups looking to establish a position in the Italian market has driven up the price for the generator. Endesa’s cash payment of €2.6 bn is in addition to assuming €1 bn in debt and agreeing to invest a further €1 bn in Elettrogen.

Investors may see the price as being too high. Goldman Sachs utilities analyst, Isabelle Hayen, speaking in the Financial times today, said, “We always questioned Endesa’s European strategy, but we’ll have to see the details of the deal before we have a clear idea of what they’re actually buying.”

According to Hayen, the price values Elettrogen at about €66 per kW or about 40 per cent above the European average.

US energy company Mirant, as part of a consortium with Verbund of Austria, was one of groups unwilling to match the Endesa bid. John Chillemi, head of Mirant’s Milan office told PEi, “Mirant was interested in acquiring Elettrogen. We were outbid and I believe Endesa have overpaid.” He confirmed that Mirant would be looking seriously at the remaining Enel disposals.

Elettrogen claims about 7.5 per cent of the Italian electricity generating market with an installed capacity of 5418 MW. Of this, 4424 MW are thermal and 1014 MW correspond to hydroelectric plants. Its workforce is 1721 and its average annual production is 17 000 GWh.

The purchase of Elettrogen will add to Endesa’s expanding presence in the European electricity market. The group also has substantial investments in Latin America and regulation in Spain is forcing it to look for growth outside its domestic market.

Endesa is the strategic and reference partner in the successful consortium. Banco Santander Central Hispano is the consortium’s financial partner with a stake between 30 and 40 per cent, while ASM Brescia SPA holds a stake of between 15 per cent 20 per cent. With the remainder, Endesa will be the majority shareholder. The final shareholding structure will be determined now Elettrogen has been awarded to the consortium.

ASM Brescia SPA is one of the four leading municipal utilities in Italy. It is 100 per cent owned by the Council of Brescia, a city located in northern Italy. The company has its own generation plants and distributes electricity, water and gas to around 400 000 customers in the region.

Shares in Enel were up 45 cents to close at $32.95 on the New York Stock Exchange Monday, while shares of Endesa closed a penny higher at $15.84.

Endesa has been prudent in building its presence in Europe through successive transactions such as the acquisition of 30% of the French SNET – which owns nine coal-fired plants with a total capacity of 2,603 MW – or the signing of a purchase agreement for the Dutch electricity and gas distributors REMU and NRE which is pending a decision from the Dutch parliament.

Endesa is also the first Spanish electric utility with eligible customers in Portugal, France and Italy and a licence for electricity supply in Germany. It is also present in two wholesale markets, the Dutch-based Amsterdam Power Exchange (APX) and the Polish Gielda Energii.

Endesa trades electricity through a joint venture agreement with Morgan Stanley Dean Witter. In the year 2000 over 350 transactions were made for a total 8000 GWh, mainly in the Netherlands, Germany, Switzerland and Spain.

Endesa is one of the largest private electrical groups in the world, with a total installed capacity of 36 994 MW, 153 264 GWh distributed capacity and 22 million customers in 12 countries. The company is aiming to add to its European trading operation over the next five years and, in addition to Italy, has identified France, Poland and central Europe as areas for future investment.

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