National Power and Unión Fenosa form alliance

Spanish utility Unión Fenosa has formed a strategic alliance with UK generator National Power involving what is believed to be the largest cross-border acquisition of generating capacity in the European Union.

Under the agreement, National Power will pay Pts97bn ($689.6bn) for a 25 per cent stake in a new company, Unión Fenosa Generacion (UFG). This will be a pure generation company which the Spanish power group will split from its distribution business next year.

The partnership involves a share swap which will allow the two groups to hold equity stakes in each others parent companies and to have a presence on their boards. The agreement gives National Power an option to buy an additional 5 per cent of UFG.

The alliance, which constitutes a tool for growth for both companies, provides for technology transfer between the companies. The alliance will also give rise to agreements and joint investments in key markets, primarily in Europe and Latin America. Unión Fenosa and National Power will invest on a 50:50 basis in generation markets in France and Italy. Fenosa would lead the expansion in Latin America while National Power would open the door to other markets.

The agreement sets up what is termed as an “Iberian alliance” under which UFG will be the exclusive vehicle for investment in new generating activities by both power groups in Spain, Portugal and Morocco.

It also sets up a committee to develop an international alliance between the two groups. Initial projects are likely to include a joint bid in the privatization of Enel; the inclusion of National Power in a major project led by Union Fenosa, to overhaul Mexico`s electricity sector and an involvement by Unión Fenosa in National Power`s generation activities in the US.