Terna to reinvest solar asset sale proceeds

MILAN Mon Oct 18, 2010 2:01pm EDT

MILAN (Reuters) - Italian grid operator Terna will invest proceeds from the sale of its solar power assets in other energy projects as it moves to secure higher returns on investments, its chief executive said.

Terna, Europe's biggest independent power grid operator in terms of assets, said on Monday it had approved the sale of solar plant assets to Terra Firma Investments for 620-670 million euros ($862-$931 million)

"We have shown that Terna, on top of its regulated business, can create value in other non-regulated energy areas," Flavio Cattaneo told Reuters in a telephone interview.

Terna will invest in further solar projects in 2011 and in other energy-related areas, Cattaneo said, adding the new projects will be unveiled in the next business plan.

Rete Rinnovabile, owned by Terna through SunTergrid, is a project Terna has developed to generate solar power on land it owns with a view to extracting value.

"Our track record shows we can create new ideas. In a year we have been able to plan, build out, fund and sell an activity from nothing," Cattaneo said.

Cattaneo said the group's dividend policy will satisfy investors. On Monday, Terna announced an interim dividend of 0.08 euros per share for 2010.

Cattaneo said he did not expect capex investments in the next business plan to be lower than those in the plan presented in January.

In its 2010-2014 plan Terna earmarked 4.3 billion euros, most of it to develop the national grid with a view to ironing out bottlenecks and connecting parts of the country where power prices are higher because of poor connections.

Terna, which last month joined a multi-billion euro international Desertec project to generate power from sunlight in Africa, plans to invest 400-500 million euros in the interconnector to Tunisia.

"Tunisia, which will be the first connection between Europe and North Africa, will provide us with a higher return than our Italian regulated business," he said.

Desertec, expected to cost 400 billion euros, aims to develop solar energy in the deserts of North Africa to supply the local population and potentially up to 15 percent of Europe's power demand by 2050.

Cattaneo reiterated investment in the planned interconnector with Montenegro was around 760 million euros. He said Terna intended to take a minority stake in the Montenegro power company Prenos.

"It will be a small tactical investment of around 30 million euros to allow us to do the interconnection part of the project," he said.

Power demand in Italy is expected to rise 1.7 percent this year after falling almost 7 percent last year, hit by the economic crisis, Cattaneo said.

A return to pre-crisis levels is not expected before 2014, he added.

At 1512 GMT, Terna shares were up 0.8 percent at 3.14 euros in line with the STOXX Europe 600 Utility index.

($1 = 0.7193 euro)

(Additional reporting by Giancarlo Navach; editing by David Hulmes)

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