Naturgy has reached an agreement for sell its 96.04% stake in its Chilean subsidiary, the Compaines General de Electricidad en Chile (CGE), a la china State Grid International Development Limited (SGID) for a total purchase price (‘equity value’) of 2,570 million euros, set in euros and payable in cash at the close of the transaction, the company reported.
The transaction involves a ‘enterprise value’ (EV) by 100% of CGE of € 4,312 million (including debt) and pre-tax capital gains for Naturgy are expected to reach approximately € 400 million.
The closing of the transaction is subject to the pertinent regulatory approvals and the Chilean competition authorization. The group indicated that it expects to complete the sale before the end of February 2021, provided the conditions are met.
The president of Naturgy, Francisco ReynÃs, highlighted that this agreement allows the group to advance “decisively” in its transformation and represents “an important first step” in the objectives of asset rotation “that will allow us to be more ambitious in our investment and growth plans” .
“We want to be a leading company in the global energy transition, and this operation provides us with strategic flexibility and greater financial capacity to grow,” he added.
Likewise, the transaction it will allow the net debt of the company to be reduced by approximately 4,000 million of euros, up to 10,800 million euros, thanks to the deconsolidation of CGE’s debt and the cash income before taxes obtained from the transaction.
With this operation, the company indicates that it is monetizing the value of an investment made in 2014 and crystallizes an important value that, from the start, will have resulted in a return of more than 13% net per year (in euros).
Almost six and a half years ago, Naturgy, then still Gas Natural Fenosa, strengthened its presence in Latin America with its entry into the Chilean electricity and gas market with the purchase of CGE for some 2,550 million euros, in the largest international acquisition in its history.
SGID, which has been advised on the operation by BBVA and Santander, is a subsidiary of State Grid Corporation of China, the largest utility in the world founded under the corporate law of the People’s Republic of China and operates primarily as an investment holding company investing and operating regulated electricity assets abroad on behalf of China’s Sate Grid.
Recently, SGID acquired 100% of Chilquinta Energia in Chile from Sempra Energy, thereby consolidating its position in the South American country.
INVESTMENT OF FUNDS
Naturgy plans to use the funds from the transaction to invest in assets, especially renewables and electricity grids, which meet the profitability indicators defined by the group and which add to their positioning in the energy transition.
“Our investment in assets, as we have said on other occasions, must be guided by the search for predictability, be focused on projects that add to the energy transition and on geographies and regulatory frameworks with greater stability”, highlighted Reynà © s.
Once the sale to State Grid is completed, the contribution to the company’s gross operating profit (Ebitda) in Europe and the rest of the world (excluding Latin America) increases to 66%, from 61%, to the nine months of 2020.
NEW STRATEGIC PLAN IN FEBRUARY
With the closure of this operation, the group indicates that it thus begins a process of transformation to generate value for shareholders, “given its importance, positive impact and the moment in which it takes place”.
In this sense, after the transaction, Naturgy has decided to schedule his Capital Markets Day next February, coinciding with its presentation of annual results, to launch the update of its strategic plan.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
