Foreign Funds Show Interest In Assets With Regulated Revenues: Buy Spain’s Redexis

Redexis gasRedexis gas

Goldman Sachs has reached an agreement to sell its Spanish energy business Redexis to a consortium formed by First State and CPPIB for 2 billion euros.

Redexis transports and distributes gas to retail and wholesale clients in 26 Spanish provinces through a network of 9,400 km of pipelines and 630,000 supply points. It is the third biggest retail gas distributor in the country, after Gas Natural and Naturgas. Goldman Sachs bought Redexis from Endesa in 2010 for 1 billion euros.

First State is an Australian fund which is part of the financial group Commonwealth Bank of Australia. CPPIB (Canadian Pension Plan Investment Board) is one of the biggest pension funds in Canada. The other consortium eyeing Redexis was ABC, known by the initials of its participants, namely Allianz, Borealis and China Investment Corporation.

Bankinter analysts point out that over the last few months, the main gas distributors have been the target of corporate deals. In their opinion:

This shows the huge interest on the part of infrastructure funds, insurance companies, sovereign funds, pension funds and private equity in acquiring these kind of assets with regulated revenues.

In fact, Madrileña de Gas – the fourth biggest network in Spain – was bought by Dutch pension fund PGGM, the Chinese group Gingko Tree Investment and French energy firm EDF. Just yesterday, there was the news that EDP sold Naturgas to a consortium formed by JP Morgan Infrastructure, the insurer Swiss Life and sovereign fund Abu Dhabi Investment Council for 2.591 billion euros (200 million of which will be paid from 2017 for a period of 5 years). Naturgas’ distribution network is the second biggest in Spain, with almost a million supply points. The sale of the company was completed at a multiple of 15.0x 2016 EBITDA. The analysts conclude:

These deals have had a positive impact on Gas Natural’s share price. The company obtains 38% of its EBITDA from this type of activity and the multiple implied in these operations is higher than the one given by the market to this business in Gas Natural’s case.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.