Enel bets a token of 4,7 billion investments on digital: networks, smart meters, online invoices, cloud. And it makes it one of the driving forces for growth in the coming years. Customers, business or retail, will be the active part of this change from which the group expects an improvement of 1,6 billion in Ebitda between 2017 and 2019. So much so that theordinary net profit it is expected to grow to 4,7 billion at the end of the period (+14%).
But it's not just the data Strategic Plan updated in the investor spotlight in London. The analysts' questions also concern political issues such as the consequences of the Italian constitutional referendum, the impact of the US elections, the greater liberalization of the electricity market in Italy (if the law is approved) for mid-2018 and South America.
To respond and relaunch its own strategies that made the stock fly to Piazza Affari, the CEO Francesco Starace, joined in the City by the Cfo Albert DePaoli, has deployed all the top managers of the divisions. Strong focus on Latin America (Luca D'Agnese) and on Italy (Charles Drums).
Referendum and Trump
"What will happen if the 'No' vote prevails in the referendum and the 5 Star Movement strengthens its position?", he asked. "Nothing substantial, we don't foresee an earthquake on the regulatory framework following the referendum, whatever the outcome," replied Starace. Seen from the Strategy Markets Presentation, the fear is that the rules of the energy sector could change. But Starace does not expect any repercussions “relating to the energy sector. The regulatory changes have already been introduced, the distribution tariffs have already been renegotiated with the Authority. And an agreement has been reached on the remuneration of smart meters and a solution for the transition to the free market. The detailed rules for the transition after June 2018 and other pending aspects such as those on the capacity payment remain to be established”, added Starace.
“Endesa it is not for sale” confirmed the CEO again while for the Russia “we can confirm – he added – that there has been interest from many quarters for the Reftinskaya plant and there have been unsolicited offers for the entire perimeter of Enel Russia but we have not yet decided to leave Russia, we are waiting to see how's the race going?
As for the change of the US administration with Donald Trump, also in this case “we don't expect revolutions. We are present with investments in Republican-majority states and we do not expect shocks: the USA has tackled the transition to a low-carbon system in a very valid way and we are curious to see how the Trump administration will move now”. As for the liberalization, the Enel group expects to acquire 11 million more customers on the free market as a result of the end of the regulated market in Italy and the progress of the opening in Latin America. Of these, the bulk is in Italy where the focus is on 9 million more free customers by mid-2018, thus maintaining the overall stable market share of 50% already acquired today. The consequence will be an increase in electricity sales from 213 to 293 billion kilowatt hours.
Finally the gossip about nominated: if someone credits Starace in running for ENI, "I'm not interested in other companies" replies the person concerned.
Minimum payout and dividend
With these premises, the Enel group announced in London a payout increase from 55 to 65% in 2017 and from 65 to 70% in 2018 and 19, with minimum dividend at 21 cents starting next year. "Our strategy is solid, we have met and exceeded our previous targets and this allows us to improve the return for shareholders," said Starace.
The new coupon compares with 18 cents this year and with 16 cents in 2015. But shareholder remuneration also comes from a new buyback of treasury shares worth 2 billion. The option will be presented at Enel's annual shareholders' meeting in 2017. The other innovations announced concern the increase from 6 to 8 billion in active portfolio management with new disposals for 3 billion. The group intends reinvest profits of 4,5 billion euro with a program that favors on the one hand the repurchase of minorities in Latin America (2 billion including the possible buyback to be submitted to the shareholders), and on the other hand the acquisitions of small companies in the networks (another 2 billion). The remaining 500 million are intended to finance new investments for growth.
From digital savings to investments
The acceleration on digital (70% of electricity production will be digitalised) will bring 500 million in additional overall savings, mainly through a reduction in operating costs. From online invoicing alone, specified Carlo Tamburi, director of Country Italia, a 13% drop in costs and 200 million in savings is expected. Italian Ebitda is expected to grow by 14%.
The overall investment plan is 20,9 billion between 2017 and 2019, in line with the previous plan. Enel will invest 26% more in networks while investments in renewables fall to 5,2 billion, down 29%. This is despite the planned construction of an additional 6,7 GW of capacity over the next three years using the less capital intensive 'build, sell and operate' (BSO) model.
But it is with the new digital services, traditional and on demand, that the group expects a strong increase in Ebitda in the global retail segment of 3 billion (+20%).
Targets already achieved
Confirmed the Ebitda for 2016, “90% of that relating to 2017 has already been achieved. Disposals amounting to 4 billion were carried out in 2 years, with a payout that rose from 40% to 60% and a dividend per share up by around 30% compared to 2014”. Francesco Starace defined the results as "extraordinary" and thus explained the upward revision of the new targets. Stocks approve and shares are up 3% within an hour of closing.
