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Sep 23 2004

Enel SpA (EN) Chief Executive Paolo Scaroni said Friday that the Italian power giant aims to cut its stake in electricity grid company Terna SpA (TRN.MI) to 5% from 50% by the end of 2005.

A big chunk of the stock could be bought by state-controlled lender Cassa Depositi e Prestiti, which has expressed an interest in such deal, Scaroni revealed.

"We received a letter of interest from CDP to buy a controlling stake in Terna," Scaroni told an analyst meeting. Sources familiar with the matter said CDP could buy a stake close to 30%.

The sale of Terna shares is part of Enel's wider strategy to focus the company on power generation by selling non-core assets.

Enel floated Terna in June, selling 50% of the company's stock to institutional and retail investors and raising EUR1.7 billion.

Scaroni also reiterated that Enel will sell telecom company Wind SpA (WIF.YY) as part of the same strategy. "We will exit Wind in 24 months," he told the analyst meeting. The company had initially planned to sell Wind in early 2005, subject to market conditions.

Scaroni said an initial public offering is his preferred option for Wind, which will be cash-positive by end-2004.

Enel said it will pass on to shareholders any net gains from asset disposal in the form of extraordinary dividends.

Scaroni said Enel will pay shareholders at least EUR0.36 per share in 2005, matching this year's dividend.

Any additional gain made on the sale of 45% of Terna will be transferred to shareholders, Scaroni said.

The executive said he also wants to reduce Enel's exposure to Terna because Italian legislation on energy liberalization will soon freeze Enel voting rights in the company running the grid at 5% by October 2005.

Terna is set to merge with Italy's grid operator GRTN by October next year. When the deal will be completed, Enel, which is Italy's dominant power company, must reduce its influence in the merged entity.