Naturgy and Sonatrach Have Entered into an Agreement With Mubadala for the Acquisition of Its Stake in Medgaz, Which Will Become Jointly Controlled by Them Upon Completion of the Transaction

• Naturgy transforms its current 14.95% financial stake in Medgaz into a strategic stake which will allow the joint control of the Company together with Sonatrach.
• Naturgy will acquire 34.05% of Medgaz for 445 million euros through an SPV which can be opened to a financial partner.
• A highly attractive transaction for Naturgy, due to both its sound strategic rationale and the financial terms achieved, in an asset with stable, low risk and predictable long-term income and dividends.
• The strategic alliance of Naturgy with Sonatrach, and of Algeria with Spain is reinforced.

MADRID, Oct. 15, 2019 /PRNewswire/ -- Naturgy and Sonatrach have entered into an agreement with Mubadala for the acquisition of the 42.09% stake that it holds in Medgaz. Following the completion of the transaction, Medgaz will be entirely owned by Sonatrach (with a 51.0% stake) and Naturgy (with the remaining 49.0%), with a shareholder agreement that gives them joint control of the pipeline.

The transaction will allow Naturgy to transform its current 14.95% stake in Medgaz, from a financial investment with very limited governance rights, into to a strategic stake that will allow the joint control of the Company together with Sonatrach. Naturgy will acquire 34.05% of Medgaz for 445 million euros through a special purpose vehicle (SPV), which can be opened to a financial partner thus reducing Naturgy's equity contribution. The SPV will be funded with a non-recourse loan of 260 million euros to optimize its capital structure.

The transaction values 100% of Medgaz's equity at c.1,300 million euros with an Enterprise Value of approximately 1,900 million euros, equivalent to 6.9x the expected EBITDA in 2021, including the approved 2 bcm expansion program of the current pipeline, which will increase capacity by 25% to 10 bcm per year and will be fully operational in 2021 with an investment of only € 67M. Medgaz is expected to deliver dividends above 130 million euros per annum from 2021 onwards.

"Overall it is a highly attractive transaction for Naturgy, not only because it is a strategic infrastructure asset in which we notably increase our control rights, but also due to the financial terms achieved in the agreement, which represent an attractive price in exchange for stable and predictable long term dividends, meeting our shareholder value creation criteria," said Francisco Reynés, executive chairman of Naturgy.

The transaction is therefore consistent with Naturgy's 2018-2022 Strategic Plan, focusing on value-accretive investments with low risk, stable and predictable cash flows, as evidenced by the fact that 100% of the pipeline capacity is already contracted via "send or pay" agreements in EUR until 2031, with solid and reliable counterparts.

The transaction also reinforces Naturgy's strategic alliance with Sonatrach and of Algeria with Spain. The Algerian company Sonatrach is the first gas supplier to Spain by volume and is in turn the fourth largest shareholder of Naturgy with a 4% stake. In addition, the transaction does not exclude the possibility of continuing the EMPL business by renewing this concession expiring at the end of 2021.

The completion of the transaction, expected to occur prior to the end of March 2020 subject to compliance with certain conditions and approvals, will not impact the company's share buyback program commitment of its Strategic Plan, thanks to its solid cash flow generation and strong balance sheet.

About Medgaz

Medgaz is responsible for the design, construction and operation of the deep-water gas pipeline from Algeria to Europe through Spain. This is a direct and cost effective way to supply natural gas to southern Europe.

Sonatrach is the owner and operator of the gas pipeline from the Hassi R'Mel gas fields to Beni Saf on the Algerian coast, where it connects with Medgaz. The Medgaz pipeline connects in Almería to the Spanish transport network, operated by Enagas.

The project was awarded in 2006 by the Algerian State for a period of 35 years (until 2041), extendable for an additional period of 15 years.

About Naturgy

Naturgy is a leading multinational group in the energy sector, a pioneer in the integration of gas and electricity in Spain and Latin America. The company currently has more than 18 million customers worldwide, an installed capacity of 15.57 MW and a diversified mix of power generation. It is also a leader in the distribution of gas in Spain and one of the largest distributors of natural gas in Latin America. It currently has renewable energy developments in countries such as Spain, Australia, Mexico, Brazil or Chile.

The company, with a history of more than 175 years, is now working to deliver on the objectives of its 2018-2022 Strategic Plan, focused on value creation.