Evaluating investment in a major European energy utility

Evaluating investment in a major European energy utility

In 2018, Ardian (a private investment house) sold its minority stake in the European utility Encevo S.A.  Encevo which operates across the energy supply chain through two subsidiaries – Creos, and Enovos.  

We were asked by a bidder to provide key advice on the regulatory model and market risks, across all of Encevo’s activity areas i.e. generation, networks, and retail.  We focused on the key operating geographies of Germany and Luxembourg, but also provided advice on other countries in which Encevo had smaller operations (e.g. France).      

Navigating network regulation and renewable support schemes

In relation to networks, we provided a full due diligence assessment of the key revenue drivers and risks associated with network regulation in Germany and Luxembourg, helping the bidder to understand the critical drivers of value.  We also used our understanding of trends in regulatory economics and practice across Europe to advise on how regulation might evolve in future – including projecting scenarios for the allowed cost of capital and other revenue parameters.  

In relation to renewable generation, we provided advice on trends and expectations for renewable support schemes, both at the European level and in the specific geographies in which Encevo held assets. 

 Drawing on our geographical presence

Frontier operates across Europe and across all parts of the supply chain.  We therefore had direct experience and knowledge of all of the markets in which Encevo operated.  Our team for the project was drawn from staff based across our European offices, collectively bringing the full benefit of our direct experience with utilities and regulatory frameworks. Our detailed analysis allowed the bidder to establish a price it was willing to offer and helped the bidder to fully understand the risks associated with the transaction.