The decision by Florentino Pérez, president of ACS, to put up for sale the 45.3% stake held in Unión Fenosa, Spain's third-largest electricity utility, is seen by many energy lawyers as the starting point for the next phase in the reorganisation of the Spanish energy sector.

Pérez has decided that Fenosa is too small to be an effective competitor against the leading domestic players, Iberdrola and Endesa, and that his 12.7% direct and indirect holdings in Iberdrola will be ineffective unless he stimulates a fundamental restructuring of the whole industry.

However the way ahead is not clear. While the market initially assumed that ACS would sell its Fenosa stake to France's EDF, it now seems that it is looking for a bidding war to drive prices up beyond the €16/share price that commentators say ACS had pre-agreed with EdF.

Other companies now said to be interested include Gas Natural, E.ON, RWE, Gazprom and GdF-Suez, which already has an 11% stake in Gas Natural. Any bidder would however, under stock exchange rules, have to make a full bid for Fenosa – which would mean finding around €11bn to do so.

The Spanish government would still prefer a merger between Iberdrola and Gas Natural, lawyers say, in order to build a stronger national champion. It will have to move carefully though, as the European Court of Justice recently ruled that Spain illegally defied EU demands to drop restrictions imposed when E.ON tried to acquire Endesa last year.

In any event, Pérez may have a considerable amount of persuading to do if his project is to win favour with the financing banks. He could receive €6bn from the sale of the Fenosa stake and release a further €3bn in funds if he sold his 30% stake in German constructor Hochtief, and 26% holding in infrastructure group Abertis. Such moves might then enable him to potentially buy another 21% stake in Iberdrola, say analysts.

However, ACS has €3.1bn of its outstanding €18.1bn debt due to be serviced this year. Unless the banks see, for example, EDF agreeing to a joint bid with ACS for Iberdrola and perhaps a later merger with Gas Natural they may find it difficult to see existing debt used to fund any further expansion into Iberdrola's share structure.

Nonetheless energy lawyers are inevitably on standby. “It is important to have lawyers onside and prepared for any big strategic moves,” says Manuel Garcia Cobaleda Head of Group Legal Services at Gas Natural. “Companies have in the recent past readily used conflict of interest issues as a tactical legal weapon by instructing a wide range of law firms to advise them on a single transaction.”

Gas Natural retained Freshfields for the 2006 initial bid for Endesa (advised by Clifford Chance) while Iberdrola is now using Uría Menéndez, Linklaters, Allen & Overy, CMS Albiñana and Latham & Watkins to discourage EDF– which itself is advised by Gómez-Acebo & Pombo and Jones Day. ACS has previously used inhouse counsel for stake building in both Iberdrola and Unión Fenosa.

Any new sector consolidation may though inevitably see a repeat of the conflict issues experienced when Gas Natural first launched its bid for Endesa. Consequently many of Spain's mid-size firms will be hoping to emulate the success of Pérez-Llorca's representation of E.On in the same deal, and get a significant share of whatever deals do occur.