Reuters | By: Andrés González and Arno Schuetze | Tue Jul 4, 2017 | 1:18pm EDT:
Spanish power company Gas Natural (GAS.MC) has fired the starting gun in what is expected to be the biggest upheaval among European utility companies for a decade.
Chairman Isidre Faine has contacted his counterpart at Portuguese rival Energias de Portugal (EDP) about a 35 billion euro ($40 billion) deal to create Europe’s fourth biggest utility firm by market value, according to sources.
While the companies denied on Tuesday there were talks, bankers and analysts say a new Iberian power champion would threaten the dominance of France’s EDF (EDF.PA) and Italy’s Enel (ENEI.MI) and could unleash a wave of European mergers and acquisitions (M&A) in a sector ripe for consolidation.
The impetus for change is partly coming from the growing shift to green energy sources.
Supplies of ever-cheaper wind and solar power are surging in Europe, forcing down wholesale electricity prices and posing a threat to the traditional model of centralized power generation and distribution from large coal, gas and nuclear plants.
Utility companies are fighting back by joining the shift to renewables, as well as offering customers digital devices to keep closer tabs on their power consumption. As one banker puts it, power companies need to develop a “Utility 2.0 strategy”, focused on renewables, networks and retail customers.
Getting bigger through acquisitions would help utilities manage the transition better, and the impending loss of public subsidies and preferential access to power networks that have cushioned utility revenues is also spurring consolidation.
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