After an intense period of mergers and acquisitions following the liberalization of the utility markets which reached peaks in 2004 and 2006, a trend of progressive decline in mergers has begun in Italy which seems to continue to this day.
From the numerous M&A operations of the last decade, some large multi-utility poles of supra-regional dimensions have emerged and consolidated: A2A and LGH for Lombardy; Iren for a vast area that embraces Piedmont, Liguria and Emilia; Ivy for Romagna and some neighboring territories; That for Lazio and Tuscany. The North East area sees the presence of medium-sized utilities (Dolomiti Energia, Veritas, AGSM Verona, Acegas Aps and Ascopiave) but none has a truly leadership position compared to the others. Despite the efforts, also at a political level, to create a large utility in the North East, no particularly significant changes are foreseen.
In the water and waste sectors, M&A operations have been recorded over the years to a lesser extent than in energy, both in terms of number and size. In recent years, the further reduction is also to be found in other determinants, connected essentially to regulatory uncertainties and to management at the local level which often favors other objectives than efficient management capable of remunerating investments. In these industrial sectors, M&A operations, often driven by operations which mainly involved the energy sectors, generally did not produce the expected results; however, especially in the North, it is possible to identify some examples of excellence such as Hera.
In the last two years, however, the first signs of a possible reversal of this certainly not positive trend have emerged. First of all, the approval of the Ronchi Decree led to some important operations involving Italian (F2i) and foreign (Eisner) investment funds. Added to this is the very recent launch of the Authority for the regulation of the water sector, even if some critical issues remain in the decree-law that governs its functioning (e.g. political appointment of the General Manager) which it is hoped will be eliminated during the conversion .
In the energy sector, in Italy as well as on the international scene, the leadership is firmly in the hands of the large energy utilities, a leadership that the liberalization processes have certainly not affected: the European market has gone from a structure characterized by national monopolies to a continental oligopoly where six companies control a large part of the offer, even indirectly. Eni and Enel can play an important role. If for the first player the international presence has been a strategic asset since its foundation, for Enel this process dates back to just a few years ago but the results have been equally important. Following an aggressive M&A policy, Enel is now present in all major European countries, in Russia and in South America. For the future, given the limited room for growth in Italy, the group intends to push its internationalization further. This is confirmed by the recent Enel Green Power 4 investment plan of €6,4 billion in capex in 2015 in Latin America, North America and Eastern Europe.
However, even among the "smaller" utilities, a certain drive towards internationalization is emerging: once the room for growth has run out in Italy, some players who have reached a certain level of critical mass are making acquisitions, albeit not of high value, even in Europe. This is the case, for example, of A2A in Montenegro and in France (EPCG, Cofatech Coriance).
With regard to future developments, the energy sector has by now defined the balance at a continental level. A balance that sees at national level the large local utilities oversee the by now large reference territories and the larger players (Enel, Eni and to a lesser extent Edison) increasingly active in the international arena. The great unknown factor remains in the South where the aggregation process has never really started, limiting itself to a few sporadic operations. Southern gas and electricity players are still distinguished by their small size, high debt position and low efficiency. However, this situation is not so much the result of the peculiarities of the utility sector as of the more general context of the area: only by improving this last aspect will it be possible to start a serious aggregation process in this area that enhances the companies, the territories and the end customers.
As regards the environmental sector, this is still excessively fragmented, with too many inefficiencies, especially in some areas of the country, and a chronic lack of liquidity for investments (water purification, leakage monitoring systems, sludge treatment plants). The Ronchi Decree, together with an efficient and independent Authority for the water sector could have an effect the creation of a large environmental player able to move in international competition. However, the recent referendum undermines one of the cornerstones of this revival. In the case of the repeal of the legislation reforming local public services, the continuation of the current situation of stagnation is to be expected for several more years.
