CPPIB and Allianz in €1.5bn deal for Gas Natural network

The Canada Pension Plan Investment Board and Allianz Capital Partners have agreed a deal worth €1.5 billion to buy 20 percent of Gas Natural Fenosa’s Spanish gas distribution business.

The Canadian group will pay €900 million in equity for the share, while Allianz will contribute €600 million. Gas Natural Fenosa said the deal implies a €13.9 billion enterprise value for its distribution business, with the purchase price representing a 15.7 multiple to the network’s 2016 EBITDA of €889 million.

The company, 20 percent owned by Global Infrastructure Partners, will continue to own the remaining 80 percent of a business it said is “a premium asset in the gas sector in Spain and essential part of our investment strategy”. The business is the largest gas distribution network in Spain with more than 5.3 million connection points through a network of about 53,000km, representing 71 percent of the Spanish market share.

In its half-year results published last week, EBITDA from the distribution business came to €439 million, a 3.5 percent year-on-year increase.

The deal is not the first time CPPIB and Allianz have combined in a gas distribution investment. The duo, together with the Abu Dhabi Investment Authority, bought a 24.1 percent share of Norwegian gas transportation network Gassled for about €2.2 billion in 2011. However, that investment would later turn sour when the Norwegian government reduced tariffs in 2013 by as much as 90 percent. The Norwegian appeals court in June upheld the 2015 verdict of a lower court that found in favour of the state.

Allianz retains other gas distribution investments in Europe, most recently with its share in the deal for the National Grid’s network last year, as well as in systems in Romania, Czech Republic and Austria.

The move for Gas Natural’s network is the latest in a flurry of deals in the sector in Spain. JP Morgan Asset Management, the Abu Dhabi Investment Council and Swiss Life Asset Managers last week completed the purchase of all of Naturgas, EDP’s Spanish gas distribution subsidiary, for an enterprise value of €2.6 billion. Meanwhile, USS and ATP bought an additional 18.8 percent stake in Redexis Gas from Goldman Sachs Infrastructure Partners in May, bringing their total ownership to 49.9 percent.

Standard & Poor’s two months ago hailed the regulatory framework in Spain and Portugal for gas and electricity transmission and distribution. In the case of Spain, it stated how “it is easy to project long-term remuneration, while maintaining a fair return” for investments.

Further Gas Natural Fenosa divestments are expected in the near future, with the company looking to sell its distribution business in Italy. Binding bids are expected next month, with Italgas publicly expressing its interest.