E.ON Makes 3i Favorite for Italian Gas Grid

MILAN/FRANKFURT (Reuters) – E.ON, the world’s largest utility, selected a consortium of private equity fund 3i and local Italian gas supplier Erogasmet as favorites to buy their Italian gas grid, two people with knowledge of the matter said.

E.ON needs to sell the 9,400 kilometers of gas lines in order to reach its target of completing 10 billion euros of divestments by end of 2010.

“Yes, there are exclusive talks for two months,” said one person with knowledge of the matter. E.ON and 3i declined to comment.

E.ON had three binding offers for the grid, in addition to the 3i group also from Italian infrastructure fund F2i with Axa Private Equity and Snam Rete Gas (SRG.MI), four people with knowledge of the matter told Reuters in October.

The consortium of F2i and Axa is not in the process anylonger while Snam Rete Gas, which had confirmed in October it made a binding offer, remains in the auction but is not in a leading position to buy the grid, one person told Reuters.

The people declined to be identified as the sales process is confidential.

E.ON Italia Chief Executive Klaus Schaefer told Reuters in December that the regulatory asset base of the grid was 307 million euros ($421.5 million) and that he expected the sale to close in the first quarter of 2010.

The regulatory asset base of the grid is the value of assets the regulator is overseeing. Investors can expect a return only on the regulatory asset base.

(Reporting by Stephen Jewkes, Ian Simpson in Milan and Peter Dinkloh in Frankfurt; Writing by Peter Dinkloh)