Tackling debt, Enel to sell assets and focus on six markets
By Francesca Landini and Keith Weir
MILAN (Reuters) -Enel plans asset sales worth 21 billion euros ($21.5 billion) to cut its debt pile and focus its transition to cleaner energy on six main markets in Europe and the Americas.
The process to exit from Argentina and Peru and sell assets in Romania is already under way and the bulk of the disposal plan should be achieved by the end of next year, executives said on Tuesday as they presented the 2023-25 strategy update.
The state-controlled group intends to invest around 37 billion euros in the next three years in its core markets of Italy, Spain, the United States, Brazil, Chile and Colombia.
Enel’s debt had climbed to 69 billion euros at the end of September and the group aims to lower it to 51-52 billion euros by the end of next year.
The energy sector endured three tough years, marked first by swings in demand due to the pandemic and then volatility in prices triggered by the war in Ukraine, Enel CEO Francesco Starace said.
Integrated groups, which cover a range of businesses from the production of energy to its distribution and its sale, are more robust, he said.
“In order to cope with volatility we need to have an integrated position. Where do we have it? In these six countries… so let’s focus on these and get out of the others,” Starace told reporters.
One of the world’s biggest green energy groups, Enel also confirmed its plans to become carbon-free by 2040 as it shifts away from fossil fuels towards greater use of renewables.
Starace, who is 67 and has led Enel since 2014, indicated he would like to stay on when his current term expires next year.
“I like this work, it is a great job,” he told analysts, adding it was up to shareholders including the state to decide on whether he stayed.
Out of gas
Shares in Enel, which have lost around a quarter of their value this year as higher costs weighed on profits, were up 0.6% in afternoon trade, paring earlier gains.
Analysts welcomed the strategy update but questioned executives on how the company could grow core profit while slimming down the business.
Higher sales volumes, higher prices in renewed long-term contracts and an effort to substitute gas bought from others with its own renewable production would be the levers for driving growth, CFO Alberto De Paoli said.
De Paoli said Enel had currently 10 billion euro liquidity locked in deposits to guarantee derivative trades on energy. The group has asked state-owned agency SACE for a financial umbrella to be activated in case of it needs to increase guarantee deposits, he said, confirming a Reuters report.
A deal to exit Enel’s gas business in Chile could be done by the end of this year, Starace said, adding that would trigger the sale of its Spanish gas portfolio owned through its subsidiary Endesa.
“Let’s get out of gas because that is going to be less and less important going forward,” Starace said.
Russia’s invasion of Ukraine has underlined the importance of energy independence, Starace added.
He cited the expansion of a solar panel plant in Sicily as an example of this and added that a similar project was being evaluated in the United States.
Enel pledged to pay investors a 0.43 euro dividend per year for the 2023-2025 period, up from 0.40 euros in 2022.
($1 = 0.9761 euros)
(Reporting by Francesca Landini; writing by Keith Weir; editing by Jason Neely and Jon Boyle)