Galp to Sell Gas Distribution Arm

Portuguese energy group Galp Energia has struck a deal to sell most of its interest in its gas distribution arm to Germany's Allianz Capital Partners (ACP) for €368mn ($435mn), it announced October 27.

The transaction is due to close in the first quarter of 2021 once customary regulatory and third-party consents are secured. It will see Galp transfer 75% of Galp Gas Natural Distribuicao (GGND) to Allianz, leaving it with a share of less than 2.5%. Galp said the deal valued GGND at 13 times its projected core earnings (Ebitda) in 2020.

GGND controls nine regional gas distribution firms in Portugal with a combined network spanning over 13,000 km that serves around 1.1mn households. Bloomberg reported in March that Galp was looking to divest from the company, having sold a 22.5% stake back in 2016 to Japan's Marubeni and Toho Gas in 2016 for €138mn.

Galp managed to narrow its losses in the third quarter to €23mn, from €52mn in the second quarter. But this contrasted with a €101mn profit in Q3 2019. Galp's weakest performance was in the refining and midstream business. 

In its own statement, ACP noted that almost 95% of GGND's network could be used for distributing hydrogen, synthetic gas or biomethane.

"We are pleased to be investing in GGND, which is our first direct infrastructure investment in Portugal," ACP CEO Christian Fingerle said. "We look forward to supporting jointly with GGND and our partners this critical infrastructure which contributes to the decarbonisation plan of the Portuguese economy and can become an important enabler for the energy transition towards renewable gases while delivering long-term, risk adjusted returns for our insurance customers and investors."