* RTE weighing formal bid for 24 pct of Greek grid firm
* French operator will not overpay, yield is key factor
* EU power market review could ease takeover restrictions
* RTE ready to play role in EU power network consolidation
By Geert De Clercq, Bate Felix and Benjamin Mallet
PARIS, Oct 17 (Reuters) - French grid operator RTE, a unit of state-owned utility EDF, says it is considering a bid for Greek grid operator ADMIE and would be ready to play a role in consolidating Europe’s power networks if EU regulations allow this.
RTE, China’s State Grid and Italy’s Terna have all been shortlisted by Greek power utility PPC to submit binding bids for a 24 percent stake in ADMIE by Oct. 21.
RTE Chief Executive Officer Francois Brottes told Reuters in an interview on Monday RTE had been approved as a candidate bidder but that it had not yet entered a formal bid because it was waiting for additional information from the vendor.
RTE would not overpay for ADMIE or other acquisitions, he said.
“We have no intention to spend money in order to lose money just in order to get our foot in the door. We need to earn a profit,” he said.
He added that even if international investments may not be hugely profitable from the start, they need to meet minimal profitability requirements.
Under Greece’s bailout agreement struck in 2015, ADMIE owner PPC, itself 51 percent state-owned, must either sell a minority stake in ADMIE or fully privatise the grid by next year. A preferred bidder has to be chosen by Oct. 31 and the deal is expected to be concluded in the first three months of 2017.
Unlike Terna, which is market leader in neighbouring Italy, and State Grid Corporation of China (SGCC), which has built up a Mediterranean network through minority investments in Portugal grid operator REN and Terna shareholder CDP Reti, RTE has no interests in the region.
But Greece is one of the few countries where RTE, eager to play a role in the consolidation of EU grid operators, can bid for a sector peer.
Under the level playing field provisions of EU energy directives, RTE is not allowed to bid for independent grid operators that have been unbundled from the utilities that used to own them.
Like ADMIE, RTE is an “Independent Transmission Operator” (ITO) - a grid operator owned by a vertically integrated utility, but managed independently - and can only bid for stakes in other grid operators with a similar legal status.
Since only a few countries in Eastern Europe have opted for this status, RTE - Europe’s largest grid operator with a network of 105,000 km of high-voltage lines - has limited options to buy stakes in foreign grid operators.
Brottes said the planned sale of a 49.9 percent stake in RTE to state-owned bank Caisse des Depots would not change RTE’s ITO status, but said he hoped that EU grid regulation might change in an upcoming European Commission review of the Third Energy Package that regulates Europe’s power markets.
“The rules governing transmission grid operators in Europe could change with the Winter Package,” he said.
Brottes said RTE was observing consolidation in European grids, notably Belgian grid operator Elia and Dutch grid operator Tennet’s investments in German peers, as well as the Chinese investments in Portugal and Italy.
“If there is consolidation in Europe, RTE cannot watch the match from the stands like a spectator,” he said, adding that RTE would not act aggressively.
Brottes said that its shareholder EDF and CDC were in exclusive talks until the end of November. He said the indicative value of 8.45 billion euros for 100 percent of RTE agreed between the two parties in was fair.
Given its 2015 revenue of 4.6 billion euros, this puts RTE on a price/sales ratio of just 1.8, compared to 5.3 for Spain’s Red Electrica, 4.4 for Terna and 2.6 for Britain’s National Grid.
“We are properly valued, maybe the others are overvalued,” he said, adding that unlike many other grid operators, RTE had public service duties, such as guaranteeing the same power price nationwide and organising the power market.
He also said that RTE has no plans or need for a capital increase, but would in the next five years spend about 10 percent of its 1.4-1.5 billion annual investments on digitising its grid. (Editing by Ruth Pitchford)