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. Last Updated: 07/27/2016

Privatization of Utility Biggest IPO of 1999

MILAN, Italy -- Italy has kicked off the long-delayed privatization of state electricity utility ENEL, announcing it will sell off a fifth of the company in what it said was the world's biggest initial public offering this year.

The treasury set an indicative price range Monday of 3.4 euros ($3.62) to 4.3 euros for the sale of an initial 2.425 billion shares, or around 20 percent of ENEL's share capital.

Depending on demand, it may sell up to 15 percent more shares in a "greenshoe" or over-allotment offering, bringing the total value of the stake sale to a maximum of 12 billion euros ($12.7 billion).

That would more than cover Italy's target for privatization revenues this year of $8 billion.

Forty percent of the initial offer, or 970 million shares, will be reserved for a public share offering that will take place from Oct. 25 to 29. The shares will start trading in Milan and New York on Nov. 2.

The treasury will retain a so-called golden share in ENEL for five years after its privatization.

The whole of ENEL, which produced 73 percent of the electricity generated in Italy last year and supplied 93 percent of the electricity used, was valued at between 80 trillion and 101 trillion lire ($55.41 billion). The company forecasts a reduction in tariffs of 10 percent in 2000 due to the deregulation of the sector earlier this year, and that will cut sales by 1.3 million euros, ENEL CEO Franco Tato said.

However, he said that would be offset by cost-cutting and by great volume of sales.

ENEL estimates that starting from a base of 1998 levels, some 25,000 jobs or 30 percent of staff will be cut by 2004.