Power games

13 May 2005

In order to resolve its squabble with the Italian government, the French group has to share control with a local utility. When the two partners buy out Edison s minority shareholders, too, EDF will have to bear a disproportionate part of the cost.

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Electricite de France has decided to remain a core shareholder in Edison, the Italian power group, in partnership with AEM Milano, a local utility, after receiving assurances from the Italian government that the 2% limit on its voting rights in Edison will be scrapped.

The details of the deal struck with AEM are as follows: after EDF takes control of Italenergia Bis, the holding company that controls 63% of Edison, the holding company will sell of all of its Edison shares to a vehicle owned 50% by EDF and 50% by a group of Italian investors captained by AEM. The vehicle will pay E4.1bn for Edison's shares.

The vehicle will then have to launch a mandatory takeover on Edison's minority shareholders, at E1.86 a share. The maximum cost of the buyout will be E3.2bn including a voluntary offer on Edison's outstanding warrants. The cost will be disproportionately borne by the French group.

EDF will pay its allies E3.7bn for the 82% that it doesn't already own in Italenergia, and will assume the holding company's E1.1bn of debt.

Meanwhile, Enel, Italy's largest power group, has the outlines of an industrial agreement with the French. Enel will be allowed to participate in the EPR nuclear project. It will also buy 35% of SNET, a French power plants company, and get authorisation to build two new power plants on EDF brownfield sites.

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