Eni could weigh Union Fenosa Gas buyout - sources
21 JUN 2019
Eni [BIT: ENI] could consider buying Naturgy’s [BME: NTGY] 50% stake in Union Fenosa Gas (UFG), according to four sources familiar with the situation and two sector advisers following it.
Spain-based Naturgy, formerly known as Gas Natural Fenosa (GNF), has been looking into a possible sale of its UFG stake, but has not received any offers, the first source said. UFG is a 50/50 joint venture between Spain’s Naturgy and Italy’s Eni.
Spain-based Naturgy, formerly known as Gas Natural Fenosa (GNF), has been looking into a possible sale of its UFG stake, but has not received any offers, the first source said. UFG is a 50/50 joint venture between Spain’s Naturgy and Italy’s Eni.
A buyout would be strategically sound for Eni, the second source said. The Italian company could achieve synergies across the value chain particularly from the Damietta LNG plant, an Egyptian regasification plant 80%-owned by UFG, this source added.
Offshore Egypt, Eni operates the giant Zohr gas field, which is producing around 2bn cubic feet of gas per day, playing a fundamental role in supporting Egypt’s independence from LNG imports, according to Eni’s website.
Offshore Egypt, Eni operates the giant Zohr gas field, which is producing around 2bn cubic feet of gas per day, playing a fundamental role in supporting Egypt’s independence from LNG imports, according to Eni’s website.
A transaction between Eni and Naturgy has been on the cards for the past two years but has been shelved due to UFG’s exposure to Egypt’s volatile political situation, the third and fourth source said. Now that the situation is more stable, potential discussions between the two companies could lead to a positive outcome, the third source added.
The joint venture between Naturgy and Eni is a legacy business that doesn't need to be run by two companies and it would therefore make sense for one company to buy the other, said the first adviser.
UFG is a specialist gas company operating in international liquefied natural gas (LNG) markets as well as at the national level, according to its website. It generated EUR 40.9m in EBITDA and a consolidated loss of EUR 62m in 2017. The JV sells gas to industrial and electricity companies in Spain, as well as LNG in international markets.
The joint venture between Naturgy and Eni is a legacy business that doesn't need to be run by two companies and it would therefore make sense for one company to buy the other, said the first adviser.
UFG is a specialist gas company operating in international liquefied natural gas (LNG) markets as well as at the national level, according to its website. It generated EUR 40.9m in EBITDA and a consolidated loss of EUR 62m in 2017. The JV sells gas to industrial and electricity companies in Spain, as well as LNG in international markets.
Naturgy has been retreating from markets in which it has a small footprint since announcing a EUR 300m divestment target in July 2018, as previously reported by this news service.
A divestment of Naturgy’s LNG business was first suggested in press reports in June 2018, following acquisitions of 20% stakes in Naturgy by CVC, GIP and Corporacion Financiera Alba. However, the potential sale was more likely to occur in 2019, according to a report in July by this news service, and other options, such a spin-off, could be considered.
Eni and Naturgy declined to comment.
A divestment of Naturgy’s LNG business was first suggested in press reports in June 2018, following acquisitions of 20% stakes in Naturgy by CVC, GIP and Corporacion Financiera Alba. However, the potential sale was more likely to occur in 2019, according to a report in July by this news service, and other options, such a spin-off, could be considered.
Eni and Naturgy declined to comment.