Italian utility A2A has closed a Eu1.25 billion ($1.6 billion) financing with a club of 9 banks for its subsidiary, Delmi. The proceeds of the deal, which signed on 24 May, will be used in part to buy a 70% stake in Edipower from Edison (50%) and Alpiq (20%), and marks the culmination of a year-long negotiation process between A2A and EDF, the French state power company, over their equity holdings in Edipower and its parent company, Edison.

EDF and the shareholders in Delmi, which include A2A, acquired Edison in 2005. But EDF has long wanted to take full control of Italy’s second largest utility company in order to gain a foothold in the natural gas markets of southern Europe. The companies agreed a sale in March 2011, but the Italian government initially blocked the deal after expressing concern over a raft of French takeovers of important Italian companies.

In late December, the shareholders reached a new preliminary agreement for the reorganisation of the equity holdings in Edison and Edipower, and signed a final agreement in February this year. Under the terms of the agreement, A2A agreed to sell its 30.6% stake in Edison through its holding company, Delmi, to EDF, while Delmi would purchase EDF’s 50% stake and Alpiq’s 20% stake in Edipower.

The agreement increases EDF’s stake in Edison to over 80% and now means that the state-owned electricity company has exclusive control of the group. EDF is expected to launch a compulsory takeover of the rest of Edison’s free float shortly. Simultaneously, Delmi’s purchase of Edipower increases A2A’s shareholding in Edipower to over 90%, either directly or indirectly, through Delmi.

The agreement stipulated that closing had to take place no later than 30 June 2012 and the different parties have been in the process of tying up all the necessary documentation and seeking approval from antitrust bodies since the agreement signed. In the end, the relevant parties signed the transaction on 22 May and closed the deal two days later, after it met its conditions precedent. The deal means that A2A is now Italy’s second largest power producer, with a total installed capacity of 12,000MW.

Edipower, which was formed out of the partial privatisation of Enel’s generation assets, owns six gas-fired power plants and three hydroelectric plants located in the north of Italy, with a combined output of around 7,600MW.

A2A closed the financing as Eu1.25 billion in debt from a club of nine banks: BBVA, BNP Paribas, Credit Agricole, CDP, ING, Intesa Sanpaolo, Mediobanca, Societe Generale and UniCredit. Financing breaks down into a Eu1.05 billion term loan, a Eu150 million acquisition facility and a Eu150 million revolver. The deal is a non- recourse financing and lenders have a pledge over the shares of Edipower and Delmi as part of their security package.

All nine banks have lead arranger status, but varying ticket sizes. CDP and Intesa Sanpaolo made the largest commitments, which translate into roughly Eu200 million ticket sizes each, while BBVA, BNP Paribas, Societe Generale and UniCredit are providing Eu135 million each. Credit Agricole, ING and Mediobanca have the smallest exposure at about Eu300 million, split equally between the three.

The nine banks are lending on a roughly pro rata basis across each of the facilities, with the exception of CDP, which is not participating in the revolver. The tenor for each of the facilities is 5 years, which is roughly comparable to the length of the offtake and feedstock agreements on the assets. The shareholders also signed an agreement with Edison for the supply of 50% of Edipower’s gas needs for six years as part of the acquisition.

Both the term loan and acquisition facilities are partially amortising, with six-monthly repayments and a bullet at maturity, while the repayment profile on the revolver will depend on when it is drawn. Margins on the debt are understood to be fixed at 400bp over 6- month Euribor, with no step-ups over the life of the loan. First drawdown on the debt has already occurred.

Delmi agreed to pay EDF Eu648 million and Alpiq Eu200 million for the acquisition of their respective stakes in Edipower. The acquisition facility is fairly small because A2A and EDF were able to settle some of their obligations to each other by swapping shares. The bulk of the financing and the proceeds of the term loan will be used to refinance an existing shareholder loan from December 2011.

Many analysts viewed Edipower as the most important asset owned by Edison, since it is far less indebted than its former parent and posts revenue in excess of Eu1 billion. A2A’s acquisition of Edipower could be a shrewd move since it should help diversify its portfolio and form the basis for the Italian company’s emergence as a multi-utility.

Edipower
STATUS: Signed 22 May 2012, closed 24 May 2012
DESCRIPTION: Financing of A2A’s acquisition of a 70% stake in Edipower and refinancing of existing shareholder debt
SIZE: Eu1.25 billion
BUYER: Delmi, a holding company for A2A
SELLERS: Alpiq, EDF
MLAS: BBVA, BNP Paribas, Credit Agricole, CDP, ING, Intesa Sanpaolo, Mediobanca, Societe Generale, UniCredit
SPONSORS’ LEGAL ADVISER: Chiomenti Studio Legale
LENDERS’ LEGAL ADVISER: Clifford Chance