The asset portfolio is composed of power plants located in the Italian regions of Umbria, Marche and Lazio, with an overall capacity of 527 MW.The portfolio of assets comprises 16 power plants, 7 dams, 3 reservoirs and a pumping station. The estimated overall average annual output is around 1.4 TWh (1.8 TWh in 2014), approximately 40% of which is eligible under the Green Certificate incentive system. The concessions pertaining to the assets expire in 2029.
The price of the transaction at closing amounts to approximately €950 million (US$1042 million) on a debt free and cash free basis. Over the next few years, the hydroelectric business is expected to generate EBITDA of approximately €110 million (US$120.7 million) per year.
The acquisition by ERG Power Generation will be financed by ERG via the partial utilisation of cash available, in addition to a corporate acquisition loan of €700 million signed with a pool of seven Italian and international mandated lead arrangers and bookrunners: Barclays Bank Plc, BNP Paribas S.A., Credit Agricole Corporate and Investment Bank S.A., ING Bank N.V., Intesa Sanpaolo S.p.A., Natixis S.A. and UniCredit S.p.A.
In this transaction, UniCredit has acted as financial advisor and global coordinator and Banca IMI as joint financial advisor and global coordinator. The firm DLA Piper has acted as legal advisor, Ernst & Young as advisor accounting and tax and Fichtner as technical advisor.
Luca Bettonte, ERG's Chief Executive Officer, commented:
"This acquisition is of paramount importance for the group, since it offers the opportunity to diversify our production sources by entering the hydroelectric sector with notable dimensions and is in keeping with our growth strategy in renewables via investments in high quality assets. The acquisition will enable a significant improvement in our economic results and cash generation in the medium term, while the ensuing substantial increase in electricity output is expected to generate important results, also in terms of Energy Management. The significant support we received from seven leading banks in this transaction is a further sign of great confidence in the quality of both the assets and the management team. As a consequence of the transaction, the Group will improve its financial structure, at the same time maintaining an adequate level of cash available to finance further expansion. ERG will present the business plan for the next three years to the market in the autumn."
The transaction, which is subject, to the approval of the Italian Antitrust Authority and the completion of the compulsory notification and consultation procedures with the relevant trade unions, is expected to close before the end of 2015.