UPDATE 1-E.ON makes 3i favorite for Italy gas grid-sources

Wed Feb 17, 2010 2:52pm EST

Related Topics

* Erogasmet-3i favorites for E.ON Italy gas grid-sources

* Snam unit Italgas not interested in E.ON grid-spokesman (Adds Snam spokesman comment in 6th para)

By Stephen Jewkes and Peter Dinkloh

MILAN/FRANKFURT, Feb 17 (Reuters) - E.ON (EONGn.DE), the world's largest utility, selected a consortium of private equity fund 3i (III.L) and local Italian gas supplier Erogasmet as favorites to buy their Italian gas grid, two people with knowledge of the matter said.

E.ON needs to sell the 9,400 kilometers of gas lines in order to reach its target of completing 10 billion euros of divestments by the end of 2010.

"Yes, there are exclusive talks for two months," said one person with knowledge of the matter. E.ON and 3i declined to comment.

E.ON had three binding offers for the grid -- in addition to the 3i group, also from Italian infrastructure fund F2i with Axa Private Equity and from Snam Rete Gas (SRG.MI) -- four people with knowledge of the matter told Reuters in October.

The consortium of F2i and Axa is not in the process any longer.

Late on Wednesday, a Snam spokesman told Reuters the group's Italgas unit is not interested in the German group's Italian gas grid.

In December, E.ON Italia Chief Executive Klaus Schaefer told Reuters that the regulatory asset base of the grid was 307 million euros ($421.5 million) and that he expected the sale to close in the first quarter of 2010. [ID:nLDE5BE20W]

The regulatory asset base of the grid is the value of assets the regulator is overseeing. Investors can expect a return only on the regulatory asset base. ($1=.7283 Euro) (Reporting by Stephen Jewkes, Ian Simpson in Milan and Peter Dinkloh in Frankfurt; Additional reporting by Ian Simpson in Milan; Writing by Peter Dinkloh; Editing by Gerald E. McCormick)

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