Goldman Funds Get Endesa Assets - Analyst Blog

Two infrastructure funds managed by Goldman Sachs Group Inc. (GS) have agreed to buy 80% of the Madrid-based Endesa's natural gas distribution assets for €800 million ($1.1 billion).

The assets include a distribution network covering a stretch of 3,800 kilometers, a transport network of 600 kilometers and 355,000 access points. It covers seven of the seventeen autonomous regions of Spain.

The deal is a strategic fit for both the parties. The Spanish power utility Endesa SA, which is 92% owned by Italy's Enel SpA, would be able to reduce its debt position with the proceeds. The deal would benefit Endesa's pre-tax profits by €450 million. Enel became Europe's most debt ridden utility following the acquisition of Endesa.

On the other hand, investments in infrastructural assets are becoming increasingly attractive to private equity firms due to the strong and somewhat stable and predictable return from them. Last year, part of gas distribution tubes and transport pipelines from Gas Natural, the Spanish energy group, were sold to Morgan Stanley Infrastructure fund of Morgan Stanley (MS) and Galp Energia of Portugal.

Goldman's unit Goldman Sachs Infrastructure Partners outbid the competitive infrastructure funds of AXA Private Equity and the Macquarie group of Australia to win the deal. This unit of Goldman has around $10 billion of assets under management, which have been invested in established and developed infrastructure assets in order to generate a return of around 10% to 15% for its several pension fund investors.

Currently, Goldman carries a Zacks #3 Rank (Hold), implying no clear directional pressure on the stock over the next one to three months.