This summer, Criteria proposed a merger between Naturgy and Portuguese energy company EDP | Companies

Following the failure of Emirati group Taqa to take over Naturgy in June last year, shareholders of the Spanish energy company continue to seek solutions to exit the two main investment funds that form part of its capital with a stake of just over 20% each. one: BlackRock (which replaced the US GIP, which it acquired in January last year) and CVC. According to market sources, CriteriaCaixa, the main shareholder of Naturgy with 26.7% of the capital, is considering, among other alternatives, a merger with some public utilities The European and in this context this summer proposed business integration to the Portuguese group EDP (Energías de Portugal). According to sources familiar with the contacts, they took place in Lisbon and claim that EDP representatives listened carefully to the proposal, but in the end it did not move forward.

When asked about the proposal, EDP and Criteria refrained from making any comments on the matter. In turn, sources within Naturgy itself indicate that “the company has never maintained contact with EDP.” At the time, following the withdrawal of Taqa, the investment arm of CaixaBank issued a statement in which it emphasized that it was going to “explore all possible options” for Naturgy, and recalled that it “usually negotiates to explore possible partners who could allow Naturgy to deepen its transformation and accelerate the energy transition” by maintaining its presence in Spain.

EDP ​​took issue with the “official” value of Naturgy, with a capitalization of 23 billion euros compared to 16.280 million for the Portuguese company, as well as with its self-assessment of its good position in the international market (it is present in Brazil). USA and Europe), as well as in the renewable energy sector. The Spanish energy company, whose shareholding complements the Australian IFM fund, has just one free swimming (shares outstanding) of 11.9%.

A merger with EDP has been one of Naturgy’s dreams for many years, with which both companies could strengthen themselves in the Iberian market, dominated by Iberdrola and Endesa. An attempt in this regard had already been made after the failure of the takeover attempt by Endesa of the then Gas Natural (later Gas Natural Fenosa and then Naturgy) already in 2017, when Isidro Faine was president of the Spanish company. Integration was proposed to the then president of the Portuguese group, Antonio Mexia.

EDP ​​gave a better assessment of Naturgy’s proposal made in 2022 to buy Galicia’s electricity networks through the Gemini project, with which Naturgy President Francisco Reines made his first attempt to untangle the tangle of shares through segregation. enterprises. By then, both GIP and CVC had already exhausted their investment cycles.

Integration through a stock exchange is not easy for companies with complex shareholders. In the case of the group chaired by Miguel Stilwell, the main investor is the Chinese company Three Gorges, which, with a 21% stake, does not control the company. The company launched a bid for a full takeover of EDP in 2019, but withdrew it after shareholders refused to lift the cap on the company’s 25% voting power. They are followed by Oppidum (company of the Asturian group Masaveu and Unicaja) with 6.82%; BlackRock itself (also a Naturgy shareholder) with a stake of 6.33%, as well as Canadian Pension Plan Investment and Norges Bank with just over 5%, respectively.

In the project of a hypothetical merger, which on paper always turns out to be additive (i.e. the value of the resulting group’s share is greater than that of the companies individually) it would be possible to include shareholder exit. Value is based on revenue and cost synergies.

In this sense, various analysts admit that a Naturgy-EDP merger would make a lot of sense since it would lead to many synergies, no incompatibilities in the international market and few in the Spanish market (although the operation would be controlled given that there is a single Iberian market ). They may have to sell off some combined cycle plants (Naturgy is present throughout the gas value chain), they add. In 2020, EDP Spain sold its portfolio of 2.5 million domestic customers to TotalEnergy and, in contrast, acquired the electricity distribution networks of Cantabrian Viesgo.

The Portuguese group has nine million electricity and gas customers and more than 75% of its output comes from renewable sources. In Spain, the company has 1,550 employees, a capacity of 5,500 MW and a distribution network with 1.4 million supply points. For its part, Naturgy has 16 million supply points worldwide, with a generating capacity of 17 GW, of which 6.4 GW is renewable (4.9 GW in Spain).

Repsol, thrown out?

It is not known whether Naturgy shareholders have tested other European energy companies (logically, the large ones are excluded), and although there have been rumors that a possible merger with Repsol could be on the agenda, sources close to the company deny this. Other sources confirmed that a “sophisticated transaction” was being explored with the oil company following a partial takeover bid that IFM submitted to Naturgy in January 2021. Under this, Naturgy’s Latin American assets will be sold to the fund, with Repsol retaining part of the business.

In any case, the purchase of shares by the historical shareholder of Naturgy, who exited the capital in 2018 after 30 years in it after selling his 20% CVC, is complicated, among other things, by the price: while Repsol He then charged 19 euros per share, today the price is 23.62 euros. In addition to the difficulties in balancing their businesses: the inclusion of Naturgy’s gas business does not fit with the decarbonization strategy of the group led by Antonio Brufau.