Flavio Cattaneo celebrates his first year at the helm of Enel with excellent financial results. In the first quarter of 2024, the energy giant exceeded analysts' expectations, with ordinary net profit of 2,2 billion euros (+44,2%) and ordinary ebitda of 6,1 billion euros (+ 11,6%). Furthermore, Enel has essentially achieved the cash neutrality, where the growth in FFO (cash flows generated by operational management), equal to 4,4 billion euros (+19% compared to the first quarter of the previous year), substantially covered the investments of the period and the payment of dividends. Thus, Enel is advancing rapidly towards full cash flow neutrality, staying on course to achieve the objectives of debt reduction. The quarter also highlighted a strong push towards decarbonization, with more than 82% of the group's total production being zero emissions, compared to 70% recorded a year ago. The decrease in production from thermoelectric sources was also significant (-44,7%).
The results achieved were appreciated by the market. Many banks, including Goldman Sachs, are optimistic about the future of the energy giant and expect its prospects to further improve this year. After an unstable start to the year, the title Enel is showing signs of recovery: on both a yearly and monthly basis, stocks have seen an increase. Despite the decline in the last session, their price was 6,76 euros, marking an increase of 11,94% compared to the previous year and 11,75% compared to the previous month.
In the meantime, the debt-cutting plan, which not only involves the targeted sale of activities to reduce the presence or exit from markets no longer considered "strategic", but also the establishment of partnerships in the renewables sector. This dual approach aims to reduce debt and increase return on invested capital.
Enel is moving forward with its debt-cutting divestment plan
Taking into account the operations carried out after the end of 2023 and those signed but not yet finalised, the pro-forma net financial debt stands at approx 54 billion. The latest operation, finalized the day after the publication of the quarterly data, concerns Enel's electricity generation assets in Peru. In detail, this involves the sale of the shares held by Enel Peru in Enel Generación Perú and Compañía Energética Veracruz Canadian style Niagara Energy for 1,3 billion dollars. This agreement contributed to reducing Enel's debt by approximately 1,2 billion euros in 2024, which is added to the approximately 400 million euros already recognized in 2023, mainly due to the reclassification of generation assets in Peru as "held for the sale".
Also in Peru, the closing of the 2,9 billion dollar sale of is awaited Enel Distribución Peru and Enel X Peru to the Chinese group China Southern Power Grid Company. The sale of distribution assets will generate a reduction ofdebt of 3,1 billion of Euro. “All authorizations have been obtained in Peru, but the end of the process in China is awaited. We expect to close the deal in a few weeks, essentially in June,” explained Enel CFO Stefano De Angelis during the presentation of the first quarter results to analysts.
Added to the list of sales is a large-scale operation in Italy: the agreement for the sale ad A2A of 90% of the Enel's distribution activities in some territories of Lombardia in the provinces of Milan and Brescia. The operation, with a total value of 1,35 billion euros, will reduce Enel's debt by approximately 1,2 billion euros and will have a positive impact on the group's reported net profit of 1 billion. The closing is expected by the end of the year, once certain conditions precedent have been satisfied, including the issuance of the Antitrust authorization and the Golden Power authorization.
Not yet completed but about to close, the sale of 49% of the capital of Enel Libra Flexsys, the battery energy storage company, to the Sosteneo fund, affiliated with Generali Investments. The operation, once finalized, will have a positive effect on the group's debt equal to the entire consideration, of approximately 1,1 billion. Although the sale of 80% was originally envisaged, as indicated in the divestment plan of the previous management, the operation was transformed into a partnership, allowing the group to maintain control of Enel Libra Flexsys and to use less capital without impacting the debt, thus increasing the return on the investment.
With these operations, Enel is strengthening its financial position, moving ever closer to the goal of 54 billion euros of debt, no longer just "pro forma".
Dividends and prospects for 2024 confirmed
All these results have allowed Enel to confirm its dividend policy, guaranteeing a minimum coupon of 0,43 euros per share for the period 2024-2026, with the possibility of distributing up to 70% of ordinary net profit in the event of cash flow neutrality. “The excellent performance of the first quarter also provides us with ample visibility on the confirmation of the shareholder remuneration policy presented at the Capital Markets Day in November 2023”, commented De Angelis, therefore also confirming the forecasts for the year: an ordinary EBITDA of between 22,1 and 22,8 billion euros and an ordinary net profit of between 6,6 and 6,8 billion euros.
To the test of accounts there Cattaneo's strategy, focused on both financial and environmental sustainability with a greater focus on costs and debt and a more prudent selection of investments, is therefore starting to bear fruit.
