Italian utility ENEL buys majority share in Spanish utility Unión Fenosa

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Italian utility ENEL is buying 80% of the renewables and cogeneration division of Spain's third ranking utility, Unión Fenosa. The EUR 168 million deal for Unión Fenosa Energías Especiales (UFEE) comes on the heels of ENEL's acquisition last year of Spain's fifth utility, Viesgo. It appears ENEL is intent on securing a role as the third largest operator of renewables and combined cycle gas plant in Spain. Its first attempt to enter Spanish renewables failed last year when it lost to utility Iberdrola in its bid to buy nearly 1000 MW of wind capacity from Gamesa Energía. The UFEE deal commits ENEL to spending a further EUR 10 million on development of another 300 MW to 2007, most of it wind. UFEE operates 281 MW of renewables, mainly wind, is building 150 MW of wind plant, and has a wind project pipeline of around 300 MW for 2004-2007. It expects to process over 854 MW for 2008-2012. Unión Fenosa claims "the objective of this deal is to give power to UFEE's target of reaching approximately 1000 MW by 2007." Since announcing in November that UFEE was up for sale, Unión Fenosa has repeatedly reiterated its commitment to renewables and says the sale is just part of its asset shedding to bring down its EUR 7.7 billion debt to below EUR 6.5 billion this year. A vital part of the ENEL agreement, says Unión Fenosa, is an option to gain equal executive control of UFEE with ENEL by buying back 30% of it by end-year 2007. Observers are unconvinced by the utility's efforts to reassure the market it is pro-renewable, especially after the sale of its 30% share in the Altos de Voltoya wind complex (above). Furthermore, Unión Fenosa shone by its absence at last month's European Wind Energy Conference on its doorstep in Madrid.

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