The Memorandum of Understanding (MoU) will see Dolomiti Energia taking a 51% majority holding in the new venture in return for an upfront payment of Euro561M (US$830M) to Enel Produzione.

Under the deal, Enel will transfer 14 concessions and 22 hydro plants with combined annual output of 3.6TWh. In addition, the new venture will also receive seven mini-hydro plants of 14MW total capacity and annual output of approximately 46GWh.

In a statement, Enel chief executive officer, Fulvio Conti, said the deal would ‘help enhance the development of an invaluable source of renewable hydroelectric energy, which the province of Trento has in abundance’.

Further asset transfers from the Enel group include its ownership, via Enel Rete, of the local gas distributor Avisio Energia.

The establishment of the new company and accompanying asset transfers are subject to regulatory approvals and extensions of at least 10 years to the hydropower concessions, Enel said. The concessions are due to expire at the end of 2010. The deal also provides for Dolomiti Energia to acquire a greater holding in the new venture through a call option, by 2020, on the stake held by Enel Produzione.

The owners of Dolomiti Energia are Tecnofin Trentina (28.07%), Trentino Serviz (24.16%), FT Energia (22%), Fonazione Cassa di Risparmio di Trento e Rovereto (10%) plus local utilities and private industrial shareholders.