Electricity and Gas: towards a North-Italian utility?

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by Fabio Pezzuto 

The closing of financial reorganizations of Edison and Edipower seems to have boosted the plan for a North Italian investor-owned multiutility deriving from the merger of Iren, A2A and other regional utilities.

After two years of negotiations an arrangement has been reached on the reorganization of Edison and Edipower. Delmi, the holding controlled by Iren and A2A, acquired a 70% share in Edipower from Edison and Alpiq, while ceding to Edf a 50% share in Transalpina Energia, a company owning 61,3% of Edison's share capital. In the forthcoming months, Edf will launch a takeover bid for Edison's minority stakes worth €0,89 per share, while Delmi will cover the part exceeding €0,84.

Thanks to the acquisition of Edipower's nine power plants, Iren and A2A are now, in aggregate terms, the second Italian electric utility company after Enel, with 12 GW of installed capacity. Undoubtedly, it's an important step on the path towards the creation of an Italian multiutility able to compete on the European market. 

The plan, which can count on the support of Minister Corrado Passera, has been under discussion since 2011. It takes the German company Rwe, that is now one of Europe's five leading electricity and gas company, as a model. The first step would be the merger of Iren and A2A, owned by the municipalities of Turin, Genoa, Parma and Reggio Emilia in the first case and that of Milan and Brescia in the second.

The second move would be the entry of a new financial partner, the Strategic Fund of Cassa Depositi e Prestiti (a joint stock company whose 70% of share capital is owned by the Ministry of Economy and Finance of Italy), in order to reduce Iren and A2A's debt loads. 

The consolidation would be followed by the acquisition of other local-scale operators: Hera, controlled by the Municipalities of Bologna, Modena, Ravenna and other Emilian cities, Agsm (Verona), and Acegas Aps (Padova and Trieste). 

Then, the Municipalities would leave the stage, ceding their shares to new financial partners or gathering them into a holding company whose majority would be opened to the market. However, they would mantain the ownership of the grid and the new utility would have to pay an annual rent for using it.

Economies of scale and Municipalities' debt relief would be the most important outcomes deriving from the creation of this new electricity and gas company. Nevertheless, although the Municipalities would be granted an annual rent, a democracy deficit would raise with respect to the supply of power, gas and fresh water. But, above all, the invisible hand of the market could do better than the bustling hands of several local politician.


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