Friday, 13 November 2015 18:53
MILAN: Italy’s biggest utility, Enel , posted a 12 percent rise in core earnings for the third quarter on Friday and beat forecasts, as it prepares to merge with renewable energy subsidiary Enel Green Power.
Improved business in Latin America, Spain and Eastern Europe in the third quarter offset a decline in Italy and a drop in renewable operations mainly due to lower hydroelectric production, the state-controlled company said.
A combination of weak demand, low wholesale power prices and surging renewable power generation has weighed on operators of fossil-fuel fired plants across Europe, prompting companies like Germany’s E.ON to change business models.
Enel — which on Friday announced impairment losses in the first nine months of 1.605 billion euros ($ 1.7 bln) on Russian, Romanian and Slovakian assets — has said it will close 23 power stations in its core Italian market.
“Further closures are possible,” Enel CFO Alberto De Paoli told analysts in a conference call on Friday.
Enel CEO Francesco Starace, a former head of Enel Green Power (EGP), is working on plans to acquire the 31 percent of the green subsidiary Enel does not already own in an effort to boost growth and raise cash generation.
On Friday, EGP said it had swung to a net loss of 97 million euros in the third quarter, hurt by impairment charges on Romanian assets.
“You’ll get all the details in London next week,” De Paoli said of the merger plans, without elaborating. Enel is scheduled to present an update to its business plan in London next Wednesday.
Europe’s No 2 utility beat expectations with a 4.9 percent rise in core earnings for the first nine months of 2015 to percent to 12.2 billion euros, above an 11.5 billion euro consensus. In the third quarter core earnings rose 12 percent from a year earlier to 4.2 billion euros.
Corporate transactions under way and cash generation enabled the company to reaffirm its dividend policy and its targets for 2015, it said.
Enel, which is committed to a 5 billion euro disposal plan, has previously said it expects recurring core earnings this year to be around 15 billion euros, down from the previous year.
“Enel reported a good set of nine-month results this morning, and full-year targets seem largely within reach,” broker Raymond James said.
GOING GREENER
With traditional power generation suffering, Enel is betting on digital power grids, emerging markets, and renewable energy to drive future growth.
Around half of the 18 billion euros Enel has earmarked for growth to 2019 is destined for green activity while, geographically, half will be spent in Latin America.
Enel has said it will not launch a public bid to buy out the minorities of EGP which was listed just five years ago at 1.6 euros per share.
Sources familiar with the matter have said Enel could launch a capital increase dedicated to the minorities.
Enel is also looking to increase revenue by playing a role in the Italian government’s plans to build out a broadband telecom network to help businesses across the country.
It will roll out new smart meters to around 33 million households in the next four years and has said it is ready to allow the infrastructure to be used to host telecom cables.
On Thursday the utility’s board gave the green light to set up a company “to build a fibre optic network accessible to all telecommunications operators”.
At 1155 GMT Enel shares were up 0.7 percent while Enel Green Power shares were up 1.7 percent. The European utility index was down 0.6 percent.
