Spanish Natural Gas Oks Gas Natural

By Robert Hetz and Jonathan Gleave

MADRID, Feb 12 (Reuters) - Spanish competition authority CNC has approved Gas Natural's (GAS.MC: Quote, Profile, Research) 16.7 billion euro ($21.6 billion) bid for utility Union Fenosa (UNF.MC: Quote, Profile, Research) with conditions proposed by the gas company, the regulator said on Thursday.

Gas Natural will not be obliged to sell Fenosa's 50 percent stake in the gas business the power company runs jointly with Italy's ENI (ENI.MI: Quote, Profile, Research), but must guarantee the autonomy of Union Fenosa Gas in supplying third parties in Spain.

Gas Natural said on Tuesday that it would not consent to the sale of the gas business, whose 6.4 billion cubic metres (BCM) of gas would put the company well on its way to achieving targets to boost its own portfolio by 9 BCM in 2012.

The CNC said that Gas Natural must sell 600,000 gas supply points, equal to 9 percent of its total in Spain, dispose of 600,000 small gas clients and sell 2,000 megawatts of installed capacity at combined cycle plants.

The CNC also said Gas Natural is committed to selling its stake in Enagas (ENAG.MC: Quote, Profile, Research) and reduce its links to Cepsa (CEP.MC: Quote, Profile, Research) by standing down from the oil group's board to avoid competition issues with Repsol (REP.MC: Quote, Profile, Research).

"The proposed divestments do not affect the reasoning behind the operation or the model of gas and electricity integration," Gas Natural said in a press note following the announcement.
Gas Natural shares closed down 1.35 percent at 16.79 euros, while Union Fenosa was up 0.63 percent at 17.66. Madrid's IBEX35 share index .IBEX closed down 1.85 percent.

Once the economy ministry has approved the bid conditions, which could happen after Friday's cabinet meeting, Gas Natural will buy the 35 percent of Fenosa still owned by ACS (ACS.MC: Quote, Profile, Research).

The acquisition will take its stake in Fenosa to 50 percent, and trigger a mandatory full bid for the power company at 18.05 euros per share, which Gas Natural has said it hopes to complete in April.

The gas company will meanwhile ask shareholders on March 10 for financial backing for the deal in the form of a 3.5 billion euro rights issue, which core shareholders oil company Repsol (REP.MC: Quote, Profile, Research) and savings bank La Caixa have fully underwritten.

Gas Natural also plans to part-finance the deal from 3 billion euros of asset sales, including any disposals mandated by the CNC.

The asset sale and rights issue should help to reduce Gas Natural's dependence on the 18.5 billion euro credit line it secured for the Fenosa purchase. Its total debt stood at 4.9 billion euros in December 2008.

(Reporting by Jonathan Gleave and Robert Hetz; additional reporting by Paul Day; editing Bernard Orr)