EDF Said to Weigh Options for $17 Billion Electricity GridDinesh Nair, Ruth David and Tara Patel
Electricite de France SA is considering options for its French distribution network, Reseau de Transport d’Electricite, which could include a stake sale or partial spinoff of the business as soon as this year, according to people with knowledge of the matter.
The majority state-owned utility has held meetings with advisers about the structure and timing of a possible transaction, which may value the whole of RTE at as much as 15 billion euros ($17.1 billion), the people said, asking not to be identified because talks are private. EDF, based in Paris, hasn’t made a final decision and any deal is dependent on new Chief Executive Officer Jean-Bernard Levy settling on his strategy, and the French government agreeing to the terms, the people said.
Options for RTE, which employs 8,400 people and runs more than 104,000 kilometers (65,000 miles) of electricity lines across France, may include tie-ups with other industrial companies in Europe, one of the people said. EDF will need to invest as much as 55 billion euros in the coming decade to maintain and refurbish its aging French nuclear reactors.
EDF shares rose 2.2 percent to 23.64 euros at 3:34 p.m. in Paris, outpacing gains on the benchmark CAC 40 Index, and valuing the company at 44 billion euros.
“A disposal would be in line with our bull scenario” for EDF, Oddo Securities analysts including Louis Boujard wrote in a note today, noting that the utility’s shares trade at a discount of about one-fifth compared with peers. They have a “base-case scenario” valuation of RTE of 13 billion euros this year.
While a sale process may attract large institutional investors including sovereign-wealth, pension and infrastructure funds, such potential buyers would only be allowed to bid if French laws that limit ownership of RTE to EDF or state-held entities are changed.
The company is seeking to appoint advisers in the second half of the year and a formal process to break up or dispose of parts of the unit may begin by the end of 2015, one of the people said.
A spokeswoman for EDF declined to comment.
EDF’s ratings among analysts were hurt in part because Energy Minister Segolene Royal scrapped a planned consumer power rate increase last year and replaced it with a lower one. Of the 25 analysts who rate EDF, 13 advise buying stock, seven recommend selling and five advise holding the shares.
EDF holds half of RTE in a portfolio of assets dedicated to paying for the dismantling of nuclear reactors while the other half is directly owned by the utility. To comply with European Union rules, the grid operates independently from EDF’s power production and marketing businesses.