(Adds presentation, CEO comments, shares)
By Stephen Jewkes and Giancarlo Navach
MILAN, May 31 (Reuters) - Italy's biggest gas distributor Italgas will bid for the Italian assets of Spain's Gas Natural and buy other smaller companies to help it boost its market share by a third, its chief executive said on Wednesday.
Italgas, ranked the third largest gas distributor in Europe, aims to increase its share of the Italian market to about 40 percent from 30 percent.
The Italian gas distribution sector is highly fragmented with more than 220 operators. New rules were introduced to streamline the industry by cutting concession areas to 177 from almost 7,000, but awards of concession areas have been delayed.
"Gas Natural issued an information memorandum last Friday. We'll be participating in the bid," Italgas Chief Executive Paolo Gallo told analysts in a call on the group's 2017-2023 plans, adding that his firm was only interested in the Spanish firm's distribution assets.
Sources have said the Gas Natural's Italian distribution assets could be worth up to 550 million euros ($618 million).
"Non-binding bids are expected by June 23, binding bids in September," Gallo said.
The CEO said the group would also consider buying smaller players in the industry to add about 200,000 users by 2018-2019.
More mergers and acquisitions (M&As) were needed to help offset delays in Italy's new tendering process for distribution concession areas, Gallo said, adding he now expected that reforms to concessions areas would not be completed until 2021.
"There are a lot of M&A opportunities since many operators can't meet the new conditions and investment requirements for bidding but we just don't know when," he said.
To help build market share in Italy, Italgas plans to invest 5 billion euros in the next seven years, with 3 billion euros to upgrade and digitise its network and a further 2 billion euros to fund the tender bids.
The company, spun off last year from gas transport group Snam, said it would increase its dividend by 4 percent a year to 2019 from 0.20 euros per year on 2016 results. It previously targeted annual dividend growth of 2-3 percent.
"The targets are slightly better than our expectations ... we will increase our estimates," local broker Equita said.
Core earnings this year are forecast in a range of between 720 million euros and 740 million euros, against 685 million euros in 2016.
Italgas shares, which have risen 23 percent since the start of the year compared to a 12 percent rise for the European utility sector, ended up 2.1 percent.
$1 = 0.8900 euros Reporting by Stephen Jewkes; Editing by David Goodman and Edmund Blair