Italgas CEO sees 2i Rete Gas deal as big opportunity
Recasts to add CEO comments on potential 2i Rete Gas deal
By Francesca Landini
MILAN, May 14 (Reuters) -The possibility of buying smaller rival 2i Rete Gas will allow Italgas IG.MI to consolidate its leadership in Europe and get multiple benefits, the CEO of Italy's biggest gas distributor said on Tuesday after reporting first-quarter results.
The group, which manages more than 80,000 kilometres of gas pipes in Italy and Greece, on Monday entered exclusive talks to buy 2i Rete Gas after it presented a preliminary offer for the company, which is majority owned by infrastructure fund F2i.
Speaking with analysts, Italgas CEO Paolo Gallo said the group could not provide go into details about the bid, but added that the regulated asset base (RAB) for 2i Rete Gas was estimated at 4.9 billion euros ($5.3 billion) last year.
The RAB is one key factor to calculate revenue for regulated businesses such gas distribution.
2i Rete Gas, is Italy's second-largest gas distributor, said in February it wanted to list on the Milan bourse, but media speculation emerged the following month about an approach by Italgas valuing the rival at between 4 and 5 billion euros.
Italgas said on Tuesday it would postpone the presentation of its business plan, previously planned for June 12, as it wanted to complete due diligence on the rival, which could take a couple of months.
Should the acquisition go through, Italgas will finance it via a bridge credit facility underwritten by JP Morgan, which could be refinanced through a combination of equity, debt or equity like instruments, it said.
The group pledged to keep the same credit profile and the current dividend policy if the acquisition proceeds.
Italgas reported a rise in its first-quarter core earnings but a fall in sales, which were hit by a drop in non-regulated activities.
Between January and March the group's earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 10% to 326 million euros, also thanks to the improvement in the regulated gas distribution weighted average cost of capital (WACC) in Italy.
Total sales fell 10% to 431 million euros as an increase in gas distribution regulated revenue only partially compensated for a sharp drop in revenue relating to energy efficiency activities.
The phase-out of a costly Italian government incentive scheme to improve home energy efficiency - the so-called Superbonus - was at the base of the poor performance of Italgas' non-regulated business, the group said in a statement.
($1 = 0.9277 euros)
Reporting by Francesca Landini, editing by Cristina Carlevaro, Kirsten Donovan and Keith Weir
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