(Reuters) - Italy's largest regional power utility A2A has signed a 1.22-billion euro ($1.3 billion) agreement with utility Enel (BIT:ENEI) subsidiary e-distribuzione to boost electricity distribution networks in Lombardy, A2A said on Saturday.
Under the deal, a newly incorporated company will be set up to which e-distribuzione will contribute its electricity distribution assets in the province of Milan and Valtrompia, A2A said, adding that it will hold 90% of this entity.
Upon completion of the sale, A2A and e-distribuzione will also enter into a shareholders’ agreement for call and put options on the remaining 10% stake, A2A said in a statement.
The deal will increase the number of A2A's installed electrical point of deliveries in 2024 by approximately 70%, from about 1.3 million in 2023 to about 2.1 million, in an area of Lombardy where the group is already active in the electrical distribution sector, the company said.
In a separate statement, Enel - the country's largest utility - said that the transaction is expected to generate a positive effect on its 2024 consolidated net debt of about 1.2 billion euros and a positive impact on the group's 2024 reported net income of about 1 billion euros.
Rising indebtedness was one of the reasons why the Italian government, which is the single biggest shareholder in Enel, decided to oust the group's previous CEO, Francesco Starace.
A2A and e-distribuzione have also signed a non-binding Memorandum of Understanding to evaluate the possible transfer to e-distribuzione of certain electricity distribution networks owned by the A2A Group outside the provinces of Milan and Brescia.
Enel said that the deal is in line with the financial objectives set out in its 2024-2026 strategic plan. Under the plan, Enel seeks to make 35.8 billion euros of gross capital expenditure to 2026.
A2A said that the agreement will help it to carry out bigger investments in the electricity distribution network of about 1.4 billion euros by 2035 and promote decarbonisation objectives.
($1 = 0.9143 euros)