First Reserve in €1.2bn power play

Energy-focused buyout firm First Reserve has taken a minority stake in Ansaldo Energia, a power plant division of aerospace and defense conglomerate Finmeccanica.

Under the agreement Finmeccanica will sell its power plant unit Ansaldo Energia to a holding company for just north of €1 billion. First Reserve will take a 45 percent stake in the new company, with Finmeccanica holding the majority balance.

First Reserve will provide €225 million of equity for its stake in Ansaldo Energia, a maker of steam- and gas-driven power plants. Parent company Finmeccanica, a provider of high-tech products and vehicles used in the global aerospace and defence industry, will contribute €275 million of equity financing.

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Banca Imi, BNP Paribas and Unicredit will act as lead underwriters for up to €650 million in debt for the transaction—which will later be syndicated to other credit providers.

The deal values Ansaldo up to €1.23 billion as Finmeccanica will receive a €65 million dividend and additionally be paid €95 million for licensing rights over the “Ansaldo” trademark.

Italy-based Finmeccanica was reportedly looking for a minority stakeholder in the company before an eventual listing in 2010 as a way of slashing debt, a plan later scrapped due to shaky markets. The partnership with First Reserve allowed the company to “realise a significant share of the value created by [Ansaldo] while maintaining ownership and operational control”, Finmeccanica said in a statement.

The listing of Ansaldo is still being considered provided favourable market conditions, according to the statement.

“A key investment theme for First Reserve is the opportunities that exist for gas fired generation on the back of the abundance of supply and the energy demand,” said Francesco Giuliani, director of First Reserve, in an interview with PEI.

The deal is expected to close before the end of June.