State Grid Corp of China in frame for stake in Italy's energy grids

China's state power grid is one of two bidders for a large stake in Italy's energy grids, but such a link could create problems because the Chinese and Italians both aim to buy assets around Europe, sources said.

As part of a privatisation drive to cut public debt, Italian state lender Cassa Depositi e Prestiti (CDP) is trying to sell up to 49 per cent of CDP Reti - the vehicle that controls gas grid Snam and soon power grid Terna.

Sources said State Grid Corp of China and Australia's Industry Funds Management (IFM) were the only suitors interested in buying a significant stake, although they did add CDP was also seeking investment funds to buy smaller stakes.

Failure to find a deal with potential investors on governance of the grid vehicle could put such a sale at risk.

"Terna initially was not over the moon. An operator like that can't be happy about having an industrial rival in its shareholder base, since potential conflicts of interest could crimp overseas ambitions," a source close to the matter said.

CDP and State Grid declined to comment, while officials at IFM could not be reached for comment.