Spanish Government to block CVC acquisition?

CVC's purchase of the power transmission network of Iberdrola, which was set to be Spain’s largest private equity transaction in 2002, could be blocked as the government considers an overhaul of the country’s electricity network.

The Spanish government is considering plans to restructure the country’s electricity transmission network in a move that could jeopardise CVC Capital Partners recent agreement to acquire Iberdrola’s energy transmission assets.

CVC agreed to pay E577m to acquire 4700km of high voltage power lines in July from Iberdrola, Spain’s second largest utility. At the time it was stated that the deal was subject to approval by the Spanish Ministry of Finance. This week the government has intimated that it favours a unification of Spain’s energy transmission network, which would result in a rejection of CVC’s offer.

The government is considering plans to back a deal that would see Red Electrica de España (REE) take over the entire network, acquiring Iberdrola’s high voltage lines in addition to those controlled by Endesa, Hidrocantábrico and Union Fenosa. The government, which holds a 28.5 per cent stake in REE, believes that a unified network would reduce costs and enable improved investment in new lines, which it believes will amount to E2.7bn over the next ten years. It has also hinted that a fragmented network would pose greater safety concerns.

REE already owns 60 per cent of the Spanish high-tension electric network. Iberdrola accounts for another 12 per cent, with Union Fenosa, Hidrocantábrico and Endesa controlling the remainder. The CVC deal saw Iberdrola continuing to operate and maintain the network until 2037.

Iberdrola, which is looking to sell the assets as part of a disposal programme to focus on power generation and distribution, has defended the transaction, saying that it will have no impact on Spain’s energy network. A decision on the deal was originally scheduled for October 25, three months after the deal was announced, although the government has delayed a decision on the deal to obtain further details from CVC and Iberdrola.

A spokeperson at CVC's Madrid offices declined to comment on the government announcement.