Enel incorporates Enel Green Power, pushes on the new ultra-broadband business and looks to the next four years "accelerate on efficiency and growth". Francesco Starace, CEO of the Enel group, summed up the long presentation of the new business plan 2016-2019 “robust and sustainable” to the financial community here in London. The CFO Alberto De Paoli and the heads of division (Gallo, Viale, Marchetti and the CEO of EGP Francesco Venturini) are deployed in the City alongside Starace. An all-round presentation that did not, however, fully convince the market: Enel shares are down by 2,5% to 4,1 euros and Egp is gradually falling on the values of the redemption price offered to minority shareholders at 1,95 share 2,7 euros (-0,77%) when the FtseMib lost 14,50% at XNUMX.
PLAN
The evolution of'Ebitda cumulative confirms the target of 64 billion at the end of the period with a 4% annual growth and a 2015 figure settled at 15 billion. The figure includes 1,6 billion disposals, however, excluding Slovenske Elekrarne, moved to the first quarter of 2016, Ebitda 2016 will drop to 14,7 billion (also due to the purchase of minority interests) and then go back up to 15,5 billion in 2017. Ordinary net income it is set at 3 billion this year, 3,1 billion in 2016 and 3,4 billion the following year (+10% annually in the period). Dividend policy confirmed at 16 cents in 2015 and 18 cents in 2016 with payout rising to 60% in 2017.
To achieve its objectives, the group will invest 2,7 billion more on growth (17 billion as of 2019). Half will go to renewables (53% against the previous 49%), 34% to networks (with 28 million digital meters, of which 21 million second generation in Italy). Geographically, the distribution between countries is rebalanced: 41% Latam, 21% Italy, 25% in the rest of the world including Germany where the focus is on geothermal energy. Active portfolio management rises from 5 to 6 billion (over 2 billion in acquisitions up to 2 billion in minorities buy outs).
The other pillar is the cost cutting of 1,8 billion in the four-year period. In particular, the improvement in efficiency will be played out on two fronts: a 1 billion euro cut in operating costs (an improvement of 18% is expected in renewables) and a 800 million euro cut in maintenance. Enel also expects to reduce its workforce worldwide by 14% at the end of the period, with 9.200 early retirements over the plan period, of which 6.000 will be in Italy. the world of which 4.500 in Italy.
SIMPLIFICATION AND FUSION EGP
The other strategic front on which management moves is organizational simplification. Enel is playing its cards on the reorganization that has already begun and is being implemented in Latin America e on the incorporation of Enel Green Power launched by the boards of the two companies yesterday here in London and announced this morning. The exchange ratio has been set at 0,486 Enel shares for each EGP share and will result in a dilution of the equity investments such that Treasury ministry will drop Enel from current 25,54% to 23,569%, down 2 percent from today.
The EGP operation in Enel was submitted to the scrutiny of the respective shareholders' meetings on 11 January 2016 but above all it is conditional on the fact that the minority shareholders who opt for the right of withdrawal (at 1,780 euros for each EGP share) do not lead to a cost for Enel more than 300 million. Practically the Treasury could fall even less than 2% if the withdrawal is exercised. If all goes as planned by the management, the operation will be completed by the end of 2016.
ULTRA WIDE BAND
It is a key point of the new plan. “We can wire the country with optical fiber by directly entering 40% of homes, i.e. those where the meters are located today” Francesco Starace underlined “with a cost advantage of 30-50% compared to telephone operators. For the remaining 60% we would instead stop at the condominium area where the meters are installed. The advantage, continued the CEO, “is that the electricity network is 4 to 5 times more branched than the telephone network. The operation will be large and on a national scale. We then want to replicate this business in the world”.
Enel has not disclosed elements of the fiber business plan but only a few details. "The company will own the infrastructure and will sell the connection to anyone who requests it, but we won't be a telephone operator," Starace insisted. However, it is too early to say whether the new company will be subject to regulation by Agcom (model Terna or Snam, for example) or whether it will operate on the free market: "The Authority will decide it", he specified. And again: “We have a business plan but we want to share it with other interested parties and until we create an ad hoc company we cannot discuss it. In three months we will probably have it. I don't think it will have an impact on 2016 results. For now it's just a start-up”. Hence the caution in spreading more details.
“I am certain – commented from Italy the Undersecretary for Development Antonello Giacomelli – that Enel's role will contribute to raising the ambitious objectives of the Government plan on ultra-broadband and will reduce costs”.
After the decision of Enel's Board of Directors to set up the Newco, Vodafone Italia and Wind immediately announced their intention to participate while Metroweb is reportedly evaluating its possible entry. Telecom Italia has so far called itself out but “we are open to discussion with everyone – underlined Starace – and the constitution of the Newco serves precisely to confirm our interest in proceeding. If Telecom enters it will be very positive”. Otherwise? “We can survive without – is the answer – but I think it is a very strong business theme for Telecom: I think it would be difficult to refuse to wire at reduced costs and support the need to do it at higher prices”. Tommaso Pompei arrives at the head of the Newco, who in his time was the protagonist of the launch of Wind.
