Italy to sell energy grid stake to China for 2b euros

Italy's Cassa Depositi e Prestiti (CDP) said on Thursday it was in advanced talks to sell a 35 percent stake in energy grid holding company CDP Reti to China's State Grid Corp in a deal that could be worth some two billion euros ($2.69 billion).

CDP Reti, wholly owned by CDP, owns a 30 percent stake in gas transport group Snam and will soon receive a similar stake in power grid Terna.

CDP gave no financial details of the deal but Italy's Economy Minister Pier Carlo Padoan said the transaction could be worth about 2 billion euros, making it one of the biggest Chinese investments in Italy.

The planned sale is part of Italy's efforts to sell off state assets to help reduce the country's public debt and to raise funds to invest in infrastructure projects.

CDP is negotiating with State Grid International Development Ltd (SGID), a wholly-owned subsidiary of China's State Grid, the state lender said in a statement, confirming what sources told Reuters on Monday.

"CDP has admitted SGID to the final stage of the auction procedure started in December 2013," CDP said.

The state lender's Chairman Franco Bassanini said at a press briefing in Beijing that the agreement would likely be signed by the end of July.

Italy has been urging China to invest more in Italy for a number years and Prime Minister Matteo Renzi visited the country last month to encourage investment.

Power and gas networks have become an attractive asset class in recent years as their return is regulated by governments, giving investors a predictable source of income even when the economy is struggling.

With the purchase of a stake in CDP Reti, State Grid Corp, which distributes power to 1.1 billion people across nearly 90 percent of China, would gain access to a stable flow of dividends, an analyst said.

"The State Grid of China is keen to invest in CDP Reti because its holdings in Terna and Snam are assets regulated by the state, with a stable cash flow generation," said Mediobanca Securities's analyst Javier Suarez, adding that this was very attractive at a time of low interest rates in Europe.

Investment bank Lazard is advising CDP on the sale, while State Grid Corp of China has hired Morgan Stanley as financial adviser.

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