Italy’s state lender Cassa Depositi e Prestiti is ready to invest over 500 million euros ($686 million) in municipal utilities after Prime Minister Matteo Renzi’s call for consolidation in the industry.
“We see opportunities particularly in southern Italy,” Chief Executive Officer Giovanni Gorno Tempini said in an interview in Rome this week. “Municipal utilities and tourism are two sectors we’re focusing on right now.”
Renzi pledged last month to reduce the number of city-controlled utilities in Italy from 8,000 to 1,000 in an effort to reduce costs for consumers. CDP’s investment fund, Fondo Strategico Italiano SpA, made its first foray into municipal services in 2013, when it bought a stake in the northern Italian utility Hera SpA -- the country’s largest by market value .
“Italy’s municipal utilities sector has too many small companies right now and consolidation is needed to reduce costs and assure a good return on investments,” said Osvaldo Vitrone, an equity analyst at Syz Asset Management SA in Lugano, Switzerland. “Cassa’s interest is important in that it gives credibility and can attract others.”
Milan’s city utility, A2A SpA, is interested in the race for consolidation of an industry that ranges from tiny waste disposal companies to water and energy distributors to larger regional multi-utilities. A2A Managing Director Renato Ravanelli said in an April 9 interview he expected “major restructuring,” adding that the company was considering acquisitions in the waste disposal area.
With over 300 billion euros in assets mainly from postal savings bonds, Cassa Depositi provides credit to small and medium-sized businesses and invests in Italian companies through FSI, whose chairman is Gorno Tempini. FSI, created three years ago, has 4.4 billion euros of funds, of which 2.6 billion euros is invested in Italian industries.
CDP is looking for new deals as Italy emerges from its longest recession since World War II. “We’ve spoken to almost 200 businesses in the past three years and we’ve seen a part of Italy that continues to do well,” Gorno Tempini said. “New projects are imminent.”
Some of the new investments may come from FSI’s partnership with Qatar Holding LLC, a 2 billion-euro joint venture focused on “Made in Italy” brands in the fashion, design, food and tourism industries.
Not all projects have worked out for FSI. The fund recently lost out to money manager Blackstone Group LP in a bid to buy a stake in Italian luxury brand Versace and was beaten by private equity firm CVC Capital Partners in the contest for a stake in Spanish olive oil-maker Deoleo SA.
Last week FSI sold a 40 percent stake in Ansaldo Energia, an Italian power equipment maker, to Shanghai Electric Group Co. Ltd for 400 million euros. Gorno Tempini said the listing of Ansaldo Energia is “on the table” and probably will take place in the second half of next year.
CDP also plans to sell a minority stake in CDP Reti, a subsidiary that owns gas network Snam SpA, in the next few months. “We’re seeking partners that will remain alongside us in this important investment that regards our national grids,” Gorno Tempini said.
CDP would like to invest more in Italy’s broadband network, “given the importance of infrastructure for any country,” he said.