Sources say that EDF is considering preferred equity as a way to attract buyers to Edison shares

Three sources with knowledge of the situation said that France's EDF was considering a preferred equity structure in order to attract investors for its upcoming sale of a minority stake in Italian utility Edison, after Iran war LNG disruptions impacted its IPO options.

Edison, the state-owned French nuclear company, has been evaluating IPO options as a way to raise money to build new reactors and maintain their aging domestic fleet.

Edison, however, has a long term liquefied gas supply contract with QatarEnergy. QatarEnergy has been canceling its gas deliveries due to the closure of the Strait of Hormuz since April.

This has hampered the potential initial share sale or IPO, forcing EDF to delay. EDF wants to keep a majority stake at Edison.

Sources, who declined to be identified as the discussions are not public, said that EDF will reassess its situation by the end of September. A preferred equity structure is increasingly being considered as the best option.

A preferred equity agreement would give buyers, most likely large investment funds, contractual rights that would allow them to receive cashflows before other shareholders based on an agreed-upon return on investment.

One of the sources stated that such a structure would protect new investors and allow a sale to proceed while limiting the impact on Edison's value due to volatility caused by the LNG supply disruptions.

If the transaction goes ahead, a deal could be signed by year-end

EDF's spokesperson responded that Chief Financial Officer Claude Laruelle had stated in July, the company is continuing preliminary work towards a partial sale and will launch a process when it has a better understanding of the business.

Edison has declined to comment.

Sources said that if EDF launches a transaction later this month and decides to proceed, a deal could be completed by the end of the year or early in 2027.

Two sources said that Edison's value could range between EUR7 Billion and EUR10 Billion ($8 Billion and $11.5B) last year.

Edison's contract for QatarEnergy covers 6.4 billion cubic metres of gas each year. This is equivalent to 10% of Italy's annual gas consumption.

In July,?Edison lowered its earnings guidance for full-year after gas supply disruptions hit its first-half result.

(source: Reuters)