Gas Natural To Lead The European Sector To A Consolidation If The Merger With EDP Materialised

Gas Natural and EDP mergerGas Natural and EDP merger

While the group’s management team prepares the results presentation and the new Strategic Plan 2018-2020, Gas Natural’s main shareholders continue to analyse non-organic growth possibilities via acquisitions. The deal to which both Criteria Caixa (with 25% of Gas Natural) and Global Infrastructure Partner (with 20%) are dedicating more time is an eventual merger with EDP. According to the press, Gas Natural chairman Isidro Fainé has recently met with Portugal’s prime minister, Antonio Costa, to try to convince that country’s goverment of the benefits of a merger between the two companies. Apparently, the response from the Portuguese government was that they can’t facilitate Gas Natural taking control of EDP. The reason given is that the country would then be left with just two national companies of reference in the business world (Caixa Geral and Galp) after the sale of Portugal Telecom to Altice and Vivo to Telefónica. So in order to facilitate a hypothetical tie-up between the two firms, Gas Natural has suggested that the chairmanship of the merged company represents Portugal.

Gas Natural’s market capitalisation is almost double that of EDP (almost 20 billion euros for Gas Natural vs 10.5 billion euros for EDP). The Portuguese government is not very keen on facilitating the sale of EDP as it goes against the philosopy of its voters, who prefer to keep their national giants. EDP’s main shareholder is the Chinese group CGT (Three Gorges Corporation), with 21.35%. Repsol has 20% of Gas Natural and has recently confirmed its intention of getting rid of this stake, in which CVC Partners have shown interest. In the wake of the huge technological changes in the sector (nuclear blackout in Germany, Europe betting on renewables, the fact conventional plants have fallen into disuse), the sector now seems to be on the way to a mega consolidation process at a European level. Any corporate move on the part of a big electricity company in the EU would inevitably lead to reaction from the rest.