* Italy grids draw interest from China State Grid, IFM -
* China State Grid competing with Italy power grid in Greece
* Italy grids stake on block worth more than 3 bln euros
By Stephen Jewkes
MILAN, July 7 China's state power grid is one of
two bidders for a large stake in Italy's energy grids, but such
a link could create problems because the Chinese and Italians
both aim to buy assets around Europe, sources with knowledge of
the matter said.
As part of a privatisation drive to cut public debt, Italian
state lender Cassa Depositi e Prestiti (CDP) is trying to sell
up to 49 percent of CDP Reti - the vehicle that controls gas
grid Snam and soon power grid Terna.
Sources told Reuters that State Grid Corporation of China
(SGCC) and Australia's Industry Funds Management (IFM) were the
only suitors interested in buying a significant stake, though
they did add CDP was also seeking investment funds to buy
Failure to find a deal with potential investors on
governance of the grid vehicle could put such a sale at risk.
"Terna initially was not over the moon. An operator like
that can't be happy about having an industrial rival in its
shareholder base, since potential conflicts of interest could
crimp overseas ambitions," a source close to the matter said.
CDP and SGCC declined to comment, while officials at IFM
could not immediately be reached for comment.
CDP had initially planned to raise the proceeds by the end
of June, but the sale process is taking longer than planned.
Terna, one of Europe's biggest power grid operators with
63,000 km of high-voltage lines, is interested in Greece's plans
to sell a 66 percent stake in power grid company ADMIE, which
operates an 11,000 km power network. Sources say SGCC is also in
"Terna is interested in the Greek grid, but it doesn't have
the easy money the Chinese have, and it certainly can't afford
to buy as big a stake as them," a source close to the company
Rome supports Snam's ambitions to be a leading player in the
integration of Europe's gas transport grid to turn Italy into a
gas hub and has indicated Terna also could do a similar thing in
SGCC, the world's biggest state utility, aims to more than
quadruple its overseas assets to $30-50 billion as it seeks to
diversify away from the domestic market for higher returns.
The company, whose foreign investment is focused on power
grids and electrical appliance manufacturers, bought a 25
percent stake in Portuguese power grid operator REN two years
ago and has said it will invest further in European utilities if
the price is right.
China's cash-flushed state power groups have been scooping
up overseas assets in recent years, taking advantage of the euro
"There's a big trend for Chinese companies to invest in
infrastructure in Europe. It's certainly good for sellers since
they usually overpay assets and often have no big governance
pretensions," said Alberto Forchielli, managing partner at
private equity Mandarin Capital.
Italy has introduced special powers to protect its major
energy assets, and in any case will sell only a minority stake
in the holding company that controls the grids. But concerns
over governance issues remain.
"There are some investors we are exercising caution with ...
we'll have to see what powers to give them," a source close to
the Treasury said, speaking of suitors interested in CDP Reti.
Last week, CDP Chief Executive Giovanni Gorno Tempini said
he expected a decision on an investor in CDP Reti by the end of
The government is looking to raise around 11 billion euros a
year from privatisations, starting this year. At market prices,
a 49 percent of Terna and the stakes in Snam held in CDP Reti
could be worth more than 3 billion euros.
The privatisation drive announced last year is facing
hurdles as many of the companies on the block are not ready to
be sold to private investors. On Sunday the economy minister
said the sale of 40 percent of Italy's post office may be
CDP, which has already parked its 30 percent holding of Snam
in CDP Reti, said last year it intended to transfer its 29.9
percent stake in Terna to the vehicle as well to make it more
attractive. It has still not done so.
In May, Flavio Cattaneo was replaced as CEO of Terna by a
former CDP general manager, Matteo Del Fante, who has said he
intends to continue his predecessor's strategy.
In his nine-year stewardship at Terna, Cattaneo won plaudits
for increasing returns for investors by expanding operations
beyond the firm's core regulated grid business into battery
storage and renewable energy development and by acquiring assets
(Additional reporting by Francesca Landini in Milan and Charlie
Zhu in Hong Kong; editing by Jane Baird)