With the acquisition of Compañía General de Electricidad in Chile for 2.6 billion, the Spanish energy company has solidified its position as the leading natural gas provider by number of customers and the fourth-largest electric utility on the continent.
The acquisition of CGE expands Gas Natural Fenosa's presence in Latin America to include a new country. The Chilean company has a business model very similar to that of the company chaired by Salvador Gabarró: an energy company with integrated electricity and gas operations, serving more than 2.5 million customers and holding a 40% market share in electricity distribution, including part of the capital, Santiago, Chile. Evidence of this significant leap forward is that the Spanish company now operates in the energy sector in seven of Latin America’s nine largest cities, including Bogotá, Buenos Aires, Mexico City, Rio de Janeiro, and Santiago, Chile.
CGE focuses almost all of its operations on the electricity and natural gas sectors in Chile, but it also operates in four provinces in Argentina and is responsible for natural gas distribution in 26 of Colombia’s 32 districts. CGE’s EBITDA for fiscal year 2013 reached $743 million, of which 96% corresponds to its operations in the Chilean energy market.
The transaction was closed last November for 2.55 billion euros following the launch of a tender offer for 100% of the company’s shares, after reaching an agreement with the major shareholders. The Familia Marín Group, the Almería Group, and the Familia Pérez Cruz Group controlled 54.19% of the company’s capital. Including CGE’s consolidated debt and the minority stakes held by its subsidiaries, the total amounts to approximately 6,000 million euros. CEO Rafael Villaseca stated during the presentation of the transaction details that the acquisition does not affect the company’s financial strength and accelerates the achievement of the objectives set forth in its 2013–2015 strategic plan.
Gas Natural Fenosa explains that the Chilean company reduces the risk of investments in Latin America, noting that the country offers a stable market with favorable regulatory frameworks compared to other economies. Chile’s growth outlook for this year is for GDP growth of 3.3%—perhaps with less potential than that of Peru or Colombia, but with the assurance that it is one of the most Europeanized countries in the region and has a more mature market. Chile is the country in the region with the lowest perceived risk for foreign investment, as demonstrated by the ratings agencies, which assign a double-A rating to its sovereign debt—well above the “junk bond” status of Mexico or Brazil, to give just one example.
The transaction represents another step toward achieving the growth objectives outlined in the strategic plan, strengthening the company’s position in gas and electricity distribution in Latin America. Once the integration is complete, more than 50% of the multinational’s EBITDA will be generated outside of Spain.
