Naturgy Energy S A : sells its electricity grids in Chile to China State Grid

Naturgy sells its electricity grids in Chile to China State Grid

• The Spanish energy company, Naturgy, has reached an agreement with the Chinese state-owned company State Grid International Development Limited (SGID) to sell its holding (96.04%) in Compañía General de Electricidad (CGE) based in Chile.
• In financial terms, the transaction of 100% of CGE is valued at an Enterprise Value of €4,312 million. It is also expected that the transaction will create pre-tax capital gains of around €400 million.
• The transaction has been closed for a price of €2,570 million for a holding of 96.04% and it is expected to be able to complete the deal by the end of February 2021.
• This transaction will reduce Naturgy's consolidated net debt by around €4,000 million, providing the company with significant financial capacity to take on growth opportunities linked to the energy transition, always ensuring value is created.
• For Naturgy, after a first stage that was focussed on optimising its operations, this transaction means the start of a second stage that will be focussed on the group's transformation by means of rotating its assets.
• Naturgy will monetise the value of an investment made in 2014 and ensure a high value that, since it began operating on the market, will have achieved an annual net profitability higher than 13% (in euros). In addition, the contribution to the EBITDA of Europe and the rest of the world, excluding Latin America, will be increased from 61% to 66% at the end of the third quarter of 2020.
• Due to the significant impact of this transaction on the company and its implications for its future strategy, Naturgy has scheduled its Capital Markets Day for February 2021, coinciding with the time when its profits and losses of 2020 will be presented.

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Today, Naturgy has reached an agreement with the Chinese state-owned company State Grid International Development Limited (SGI) for the sale of its 96.04% holding in Compañía General de Electricidad (CGE) based in Chile for an aggregate amount of 2,570 million, calculated in euros and payable in cash once the transaction has been completed.

'The agreement reached today will enable us to make firm progress in our transformation and it is an important first step in achieving our targets of asset rotation that will allow us to be more ambitious in our investment and growth plans. Our aim is to be a leading company in energy transition at a global level and this transaction will provide us with strategic flexibility and greater financial capacity for growth', explained the President of Naturgy, Francisco Reynés.

The transaction implies an aggregate value (Enterprise Value) for CGE of €4,312 million. Once completed, it is expected to create pre-tax capital gains of around €400 million for Naturgy.

The transaction will also reduce the company's net debt by around €4,000 million, to €10,800 million, thanks to the de-consolidation of CGE's debt and the pre-tax cash revenue obtained from the transaction.

By means of this transaction, the company monetise the value of an investment made in 2014 and ensure a high value that, from the time it began operating on the market, will have achieved an annual net profitability higher than 13% (in euros). Its completion is subject to the required regulatory approvals and authorisations by the competition supervisory bodies in Chile. Naturgy hopes that the transaction will be completed by the end of February 2021.

Review of assets to achieve a firm foothold in the energy transition
'The transaction proves Naturgy's capacity and patience to perform transactions that obtain the utmost value for its shareholders. It also marks an important step in the company's transformation and its future asset portfolio. We are increasing our financial capacity, which will allow us to take on growth opportunities linked to the energy transition', explained Mr. Reynés.

In this respect, the company has planned to earmark the funds from the transaction for investment in assets, in particular renewable energies and electricity grids, which will achieve the profitability indicators set by the company and strengthen its position in the energy transition.

'Our investment in assets, as we have already said on other occasions, must be guided by a search for predictability and focussed on projects that contribute to the energy transition and on geographic regions and regulatory frameworks with greater stability', summarised Mr. Reynés.

Once the sale to State Grid International Development Limited has been completed, the contribution to the EBITDA of Europe and the rest of the world (excluding Latin America) will be increased from 61% to 66% at the end of the third quarter of 2020.

A boost for the road map
This transaction is the start of a transformation process to create value for the shareholders and, due to its significance, the positive impact and the timing, Naturgy has decided to schedule its Capital Markets Day for February 2021, coinciding with the time when the annual profits and losses will be presented.

About State Grid International Development Limited (SGID)
SGID is a subsidiary of State Grid Corporation of China, the largest utility company in the world and an enterprise established under the Company Law of People's Republic of China. SGID primarily operates as an investment holding company investing in and operating regulated power assets overseas on behalf of China's State Grid. Most recently, SGID acquired 100% of Chilquinta Energia in Chile from Sempra Energy.

About Compañía General de Electricidad de Chile (CGE)
Founded in 1905, CGE is the largest electricity distribution company in Chile by number of clients and supplies electricity to 45% of the country's households. CGE is also the main energy transmitter in the zonal transmission segment and is present in 14 regions of Chile. Between 2016 and 2019, CGE completed a significant corporate restructuring and simplification. The total workforce amounts to 1,463 employees as of September 2020.

Scoop and topic:International, Corporate

In Madrid, on 13 November 2020