March 7, 2019 / 3:15 PM / 3 months ago

Eni and Edison lead race for Ascopiave's retail clients: sources

MILAN/LONDON (Reuters) - Italy’s Eni and Edison have emerged as the strongest suitors to buy utility Ascopiave’s retail customers as they prepare rival bids for a business worth up to 600 million euros ($678 million), sources told Reuters.

Eni's logo is seen in front of its headquarters in San Donato Milanese, near Milan, Italy, April 27, 2016. REUTERS/Stefano Rellandini

Ascopiave, one of Italy’s biggest gas utilities, is looking to sell a majority stake of a portfolio of more than 700,000 clients as it seeks to focus on its gas distribution network business in the north east of Italy.

Its portfolio is one of the largest still up for grabs in the Italian market, six sources said.

“It’s a valuable portfolio because we’re talking about regulated market customers who are loyal and have not switched to competitors,” one of the sources said.

Italy’s retail gas and electricity market is due to be fully liberalized in July 2020 and energy companies are vying for market share ahead of that date.

Two sources close to the matter said Ascopiave’s management was planning to put its client base in a vehicle for a six year period and sell a majority stake. It would have a put option to gradually sell down the rest.

“That could impact the valuation since synergies in this kind of deal mean migrating clients quickly to your system,” one of the sources said.

Ascopiave, which is being advised by Rothschild, has asked bidders to submit indicative offers by a deadline of April 15 with binding bids expected by the end of July, the sources said.

Ascopiave, Eni and Edison declined to comment.

Based in the affluent Veneto region, Ascopiave is owned by more than 90 local municipalities. It has core earnings of about 50 million euros and could be valued at up to 600 million euros, the sources said.

Ascopiave, which launched the process to dispose of its retail clients on February 20, plans to use the proceeds to strengthen its gas distribution business.

Bidders in a position to swap distribution assets for the retail clients might have an edge, a source familiar with the matter said. In such a case the retail portfolio could be swapped in its entirety.

Edison, owned by French energy giant EDF, is considering offering distribution assets in the area to clinch a deal and has hired Mediobanca to work on an offer, two of the sources said.

Italy’s biggest regional utility A2A, which has expressed an interest in the portfolio, has grid assets in the area and could also seek a possible swap, the same sources said.

Italy’s retail energy market is dominated by former power monopolist Enel, Eni and Edison.

Eni, Italy’s biggest retail gas operator, is ready to bid aggressively for the portfolio to build scale in an area where its presence is limited, another source said.

Eni has hired Banca IMI, the investment bank arm of Intesa Sanpaolo, to work on its bid, he said.

“In this case it makes more sense to have an Italian adviser than an international one,” he added.

Other potential bidders include Britain’s Centrica, France’s Engie, Spain’s Iberdrola and Germany’s E.ON, the sources said.

Regional utility Hera has also expressed an interest as has local energy seller Vivigas which could join the race and team up with smaller operators, the sources said.

Financial investors have been excluded from the process as Ascopiave’s owners are looking for an industry player who could drive growth, the sources said.

Centrica, Engie, Iberdrola, E.ON, Hera and Vivigas did not comment or were not immediately available for comment.

Editing by Elaine Hardcastle

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