Spain's Gas Natural to Sell Power Plants and Gas-Distribution Points for Union Fenosa Takeover

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Researched by Industrial Info Resources (Sugar Land, Texas)--Gas Natural SDG SA (MCE:GAS) (Barcelona, Spain), an energy firm engaged in the sale and distribution of natural gas, has reportedly identified assets in Madrid, Murcia and La Coruna for sale in order to meet the requirements imposed by Spain's National Competition Commission pertaining to the firm's acquisition of Union Fenosa Group (MCE:UNF) (Madrid, Spain), also an energy generation and distribution firm. The assets identified include three power generation facilities with a combined capacity of 2,060 megawatts (MW) and part of Gas Natural's customer portfolios in Madrid and Murcia. These divestments were directed in February 2009 by the National Competition Commission, which authorized Gas Natural's acquisition of Union Fenosa at the time.

Union Fenosa's stake of 50% in the 800-MW combined-cycle power plant in Campo de Gibraltar will be sold. Cepsa SA (QUI:CEP) (Quito, Ecuador), a firm engaged in distribution and sale of petroleum derivatives, owns the remaining 50% stake in the plant. Also, an 800-MW facility in Plana del Vent, owned by Gas Natural, and a 460-MW power plant in Sabon, La Coruna, owned by Union Fenosa, will be sold.

Gas Natural will also divest 600,000 points of distribution -- 500,000 in Madrid and 100,000 in Murcia -- along with the portfolio of small customers connected to the natural gas network to other suppliers such as Energias de Portugal SA (OTC:EDPFY) (EDP) (Lisbon, Portugal) and E.ON AG (OTC:EONGY) (Duesseldorf, Germany), which have expressed interest in picking up the customer base. However, the merged entity, Gas Natural-Union Fenosa, will continue to command a leading share in the gas supply market of Madrid, providing services to 1.1 million customers.

In July 2008, Gas Natural announced plans to acquire a 45.3% stake in Union Fenosa held by Actividades de Construccion y Servicios (MCE:ACS) (ACS) (Madrid) in an all-cash deal. The acquisition took place in two stages. In August 2008, Gas Natural acquired an initial stake of 9.99% in Union Fenosa from ACS for $2.34 billion. In February this year, Gas Natural formalized the acquisition of the remaining stake of 35.31% from ACS for $8.14 billion.

In December 2008, Gas Natural also entered into an agreement with Caixanova (Vigo Area, Spain), a savings bank, to buy the latter's stake of 4.72% in Union Fenosa. With a stake of 50.02% in Union Fenosa, Gas Natural had exceeded the equity holding limit of 30% and was accordingly required to exercise a compulsory takeover bid for 100% of the equity capital. Gas Natural currently holds a stake of 95.22% in Union Fenosa and expects to complete the merger by September.

Gas Natural's acquisition of Union Fenosa will lead to the creation of the first integrated gas and electricity firm in Spain. The two firms together have about 20.2 million customers, of which 8.9 million are in Spain and 11.3 million are based overseas. The combined installed power generation capacity of the merged entity stands at 17,000 MW, of which combined-cycle units in Spain account for 5,200 MW, while combined-cycle units overseas account for 4,074 MW of power generation capacity. The merged entity is also set to emerge as one of the leading liquefied-natural-gas operators in the Atlantic and Mediterranean basins.

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