UPDATE 1-Italgas boosts spending to prepare gas grid for green energy drive

(Recasts, adds analyst, shares, detail)

MILAN, June 15 (Reuters) - Italgas pledged to spend more on its gas distribution network to prepare it for hydrogen and renewable gas and cut leakages as a transition to cleaner fuels gathers pace.

Italy’s biggest gas distributor said on Tuesday it would spend 7.9 billion euros ($9.6 billion) up to 2027 to upgrade and grow its core network, promising to cut greenhouse gas emissions by 30%.

“The largest number of investments is allocated for the repurposing of the 73,000-km (45,360-mile) network and its further extension to unreached territories,” Chief Executive Paolo Gallo said.

Gas network operators across Europe are increasingly looking at ways to blend natural gas with cleaner gases such as hydrogen as the transition to cleaner fuels speeds up.

The group, which earmarked 2 billion euros for new gas distribution tenders, said it would consider acquisitions to extend its grid and boost new business lines, such as energy efficiency and water.

Core earnings, seen at about 1 billion euros this year, are expected to rise to some 1.6 billion euros in 2027, after gas distribution tendering is complete.

“These indications are higher than our expectations, mainly thanks to higher capex, driven by the digitalization of the network, necessary also to foster the development of green gas,” Milan broker Equita said.

Italgas, whose main shareholder is state lender CDP, confirmed its policy of offering shareholders a 4% annual increase in dividends to 2023 or 65% of adjusted earnings per share, whichever is the highest.

By 0755 GMT, Italgas shares were up 0.82%. ($1=0.8247 euros) (Reporting by Stephen Jewkes; Editing by Louise Heavens and Clarence Fernandez)