Enel Takes Control of Endesa in EU11.1 Billion Deal

By Adam L. Freeman and Gianluca Baratti

Feb. 21 (Bloomberg) -- Enel SpA agreed to buy a 25 percent stake in Endesa SA from Acciona SA for 11.1 billion euros ($14.2 billion), gaining full control of Spain’s largest hydropower producer.

The purchase by Enel, Italy’s biggest utility, will include the transfer of 2.9 billion euros worth of the Spanish generator’s renewable energy assets to Acciona, Enel said today in an e-mailed statement. Acciona will receive 9.6 billion euros from Enel, with the remaining 1.5 billion euros paid through an early dividend by Endesa. The move gives Enel a 92 percent stake.

Acciona and Enel, which bought the Spanish utility for 42.5 billion euros in October 2007, are ending their joint venture a year early. Enel will secure management power over Endesa, which has plants in Latin America and Europe, while Acciona gets cash and becomes the world’s second-largest renewable energy provider.

“Enel always wanted to get Endesa, but wasn’t allowed to do so without Acciona’s help,” Antonio Lopez Silvestre, a Madrid-based utilities analyst at Fortis Bank SA, said yesterday. “It will now get it a year before planned.”

Under the original terms of the acquisition, Acciona had an option to sell its interest at 43 euros a share from March 2010. Endesa shares traded 1.6 percent higher at 24.21 euros yesterday in Madrid before being suspended.

Utility Debt

Enel, the Rome-based company which became Europe’s most indebted utility when it bought Endesa with Acciona, said it will fund the transaction with 8 billion euros in loans from 12 banks. Enel will collect 4.2 billion from its share of the early Endesa dividend.

Enel was saddled with 55.8 billion euros of debt after the original takeover, and succeeded in cutting that to 51 billion euros by Sept. 30 through asset sales. This deal will cause Enel’s debt to rise again by 11.7 billion euros.

“Enel will feel the weight of carrying so much debt, especially at a time of so much global economic turbulence,” Salvatore Provinzano, an analyst at IlNuovoMercato in Rome, said before the announcement. “Even if it hurts a little, the debt is sustainable because the assets have such a safe return.”

Of the total loan, 5.5 billion euros fall due in 2014 while the remaining 2.5 billion euros mature in 2016.

“The rise in Ebitda will be strong enough to make debt sustainable,” said Emanuele Vizzini, a Milan-based analyst who helps manage about $1 billion at Investitori SGR, including Enel shares. “It’s a price you have to pay to be among the biggest,” Vizzini said before today’s announcement.

Investment Plan

For Acciona, which said Feb. 4 it would rein in spending unless it sold the stake, the transaction will help fund a 6.77 billion-euro, three-year investment plan. The transfer of Endesa’s renewable assets will make it the world’s second- largest wind-power operator after fellow Spaniard Iberdrola Renovables SA, according to a company presentation this month.

“They are getting financing at a time when financing is hard to find,” Antonio Lopez Silvestre, a Madrid-based utilities analyst at Fortis Bank SA, said yesterday. “They are also getting the renewable assets they wanted.”

The Madrid-based builder that is trying to expand in alternative energy will gain 2,105 megawatts of renewable energy assets in Spain and Portugal, including 682 installed megawatts of conventional hydropower, Enel said.

Acciona is not the only Spanish builder seeking asset sales to reduce debt and fund investment. Sacyr Vallehermoso SA, the country’s fifth-biggest construction company, agreed in December to sell highway operator Itinere Infraestructuras SA to a Citigroup Inc. fund in a transaction valued at 7.9 billion euros to cut borrowing.

Spain’s largest power producer is Iberdrola SA.

To contact the reporters on this story: Adam L. Freeman in Rome at afreeman5@bloomberg.net; Gianluca Baratti in Madrid at gbaratti@bloomberg.net