To keep up with the changing times, the Portuguese government is not only implementing new laws to regulate gas and electricity, it’s looking to reshape the national energy sector completely. As a result, Rede Eléctrica Nacional (REN), the company authorized to oversee the national electricity transmission grid, is preparing for its shift to public ownership through privatization and an initial public offering (IPO).

REN is currently 70 percent owned by the state and 30 percent owned by Energias de Portugal (EDP). However, European Union regulators are putting into effect new regulations to alter its shareholder structure, forcing EDP to renounce 25 percent of its shares before the IPO. New criteria will allow companies from the sector to have 5 percent at the most, while other businesses cannot have more than 10 percent.

Scheduled at the end of 2006 or the beginning of 2007, the IPO will take place after the transfer of assets from Transgas is completed, which is likely to happen this year, and also after a new set of regulatory statutes are established to support the privatization process. Four banks are set to be involved in the offering, whose goal is to enable the high-pressure natural gas network and the related reservoirs, caves and terminals to be integrated into REN. The value of the new enterprise is still pending.

According to its president, José Penedos, “It will be a good product for institutional investors because it is a predictable and reliable share and the revenue is stable. Our regulations are considered stable all over Europe.” Of course other energy companies will be interested in obtaining shares. Mr. Penedos adds, “This is a way for them to be a part of an enlarged board and to know the activities, inside information and plans for the sector.”