Naturgy could close sale of Chilean gas distribution assets for 5 Bn euros (22x Ev/Ebitda)


Renta 4 | Naturgy (NTGY) has hired Santander and BofA to close the sale of its assets in Chile, press reports said. According to El Confidencial, the sale involves the company’s gas distribution assets in Chile and is for a total of 5 billion euros. Colombian group Promigas is the main candidate for the acquisition. 

Valuation: In the event the deal is confirmed, the price would be equivalent to 22x EV/Ebitda. This is a very high price with respect to our current valuation of around 2.250 billion euros (10x EV/EBITDA). So if that sale price is confirmed, we believe it would be a clear catalyst for the valuation as it would mean a nearly 10 pct increase in our valuation.

We recall that in November 2020, Naturgy sold its electricity distribution assets in Chile for 15x EV/Ebitda. Therefore, although the 22x EV/Ebitda mentioned in the reports seems very demanding, it’s likely that a sale at a multiple of over 10x could go down well.

The transaction would be included in the company’s plan for rotating non-strategic assets. It would allow for a significant cash entry benefitting the development of its growth plan for renewables. And although it is still some time away, it could allow Naturgy to revise its dividend policy upwards from 2023 (fixed dividend of 1,20 euros/share charged against 2021 and 2022).