Enel presented an aggressive business plan for 2019-2021. More growth, more renewables, more investments, more dividends and stable debts, with a slightly decreasing cost of debt. After the active portfolio management effort, which made it possible to reuse around 8 billion for acquisitions (the latest being Elettropaulo), now growth will be organic. On Open Fiber, the single network for TLCs, the agreement with Telecom Italia, Enel replies: "Let's await the outcome of Telecom's infinite saga, all the rest is speculation". Then a significant confirmation: "We will never leave Open Fiber, we see great business opportunities for fiber convergence, even in South America". Finally the summary: "We are not against anything that helps the fiber plan for Italians". On the other hand, "fiction finance" was rejected. This is essentially the message sent from Milan to the market that welcomed it with a stock jump on the stock exchange.
The group therefore confirms and accelerates the strengths already outlined in the previous plan: moving forward with decarbonization and digitization but also greater attention to customer services (4,8 billion investments). And it aims to reach a strong improvement in Ebitda (+3,2 billion) driven by renewables (+1 billion) against investments in green energy that grew by 1 billion to 10,6 billion in the period. Debt stable at 41,8 billion in 2021. Net ordinary income is forecast at 4,1 billion in 2018 and 5,6 billion in 20121. Profit distribution will benefit from this with the minimum dividend per share confirmed at 0,28 .2018 euro for 0,36 but up to 9 euro (+70%) at the end of the period. The novelty is that Enel has fixed the growth of the coupon year by year, now confirming the payout at XNUMX% for the next three years.
INCREASING DIVIDEND
“We have great confidence in the achievement of our objectives” and “our business model allows us to give this certainty”. This is how Francesco Starace replied to those who asked him about the reasons for the news announced with the decision to ensure a minimum dividend per share for the entire period of the plan. "It is the first time that we have given a certainty of this type over a three-year time horizon, thanks to a sustainable and robust system" commented Starace who sees the picture of activities in the world as more stable and can count on 72% of Ebitda guaranteed by stable and long-term contracts.
The minimum coupon indicated at 0,28 euro for 2018 will pass to €0,32 in 2019, €0,34 in 2020 and €0,36 in 2021 with weighted annual growth of around 9 per cent. “Why do we give this guarantee? We also knew in previous years what our growth trajectory would be but now we've cleared out a lot of the risk areas, we have 2 countries in negotiations for distribution regulation, we feel very strong for the next few years. Exchange rate fluctuations will occur but we have already experienced a significant negative impact on exchange rates over the years”.
EBITDA AND CAPEX
Enel expects total gross investments of 27,5 billion over the three-year period (Francesco Starace's mandate will expire in 2020). The expected growth of Ebitda is 20%. That is, it will pass from 16,2 billion in 2018 to 19,4 billion in 2021. Together with the grids and services to customers, renewables are still the driving force since from here a 1 billion more margin should arrive: in 2021 62% of the energy produced by Enel in the world will be zero-emissions against the 48% expected for end of the year.
OPEN FIBER, THE NETWORK AND TELECOM ITALIA
It is a hot topic and analysts have asked how the project for a single Open Fiber-Telecom Italia network will impact the expected equity for OF. On the table at the moment are the amendment requested by the government in Parliament and the hypothesis of a Rab (Regulated asset base) model remuneration in line with the activities regulated by the sector Authorities. Francesco Starace's response was less drastic than in the past (when he spoke of a "corporate huddle"): "Open Fiber is a company whose mission is to cable the entire country in the non-competitive AB, market, and CD areas . And it has to do it at a remarkable speed. Anything that makes this mission faster we like. The rest we don't know we have to wait for the results of this eternal saga of Telecom Italia, we hope you find peace and there is an agreement between the partners. All the rest is speculation and considering that we are talking about listed companies, empty talk is not useful”. However, he later added Enel's number one, "we will never leave Open Fiber because it's not in our ropes to do it. In the convergence with fiber we see great business opportunities, also in South America”. Despite the deluge of questions, Starace goes no further. However, he asks that the work that Of is carrying out expeditiously be recognized, "we are very satisfied with the performance that exceeds our expectations".
In the new Enel business plan, Open Fiber – which we recall is 50% controlled together with Cdp – is expected to reach an Ebitda of approximately 350 million euros by 2021 with coverage of 19-20 million properties by 2023.
ACQUISITIONS AND BUY BACKS
Enel does not focus on large M&A operations but focuses on smaller operations, explained Francesco Starace. “We believe that medium-sized acquisitions – he specified – could become a potential, of the order of Elettropaolo in size and we see the buyback as potential. We do not believe that large mergers or acquisitions will make sense in the future”. And he added: “Over the next three years, we will acquire more than we sell. The relationship will not be so balanced”. Finally Endesa: "It's a great company and we're happy, we're not changing our view".
INVESTMENTS AND ITALY
"It is totally neutral" whether Enel's shareholder is the Ministry of the Economy or the CDP, said Francesco Starace to those who asked him for an opinion regarding the possible transfer of the share into the hands of the State. However, he recalled, there are unbundling rules which in 2006 required the opposite step, i.e. the transfer to the MEF of the share of CDP (also owner of Terna) in the electricity group. Having said that, the theme of investments in Italy remains current after the "control room" with which Palazzo Chigi asked for help from public spas a few months ago. "During that meeting - recalled the CEO of Enel in response to a question - we were asked what the investment plans were, not to speed them up in Italy".
And the plans envisage, clarified the CFO Alberto De Paoli "7,7 billion euros by 2021 and around 300 million euros on the efficiency of condominiums, therefore we will invest about 8 billion which are in line with the 2018-2020 plan, there are no changes". The novelty mainly concerns the energy efficiency process of condominiums which, however, requires further technical and legislative specifications. At the moment the idea is to offer energy efficiency services by proposing themselves as buyers of tax credits (the bonuses recognized by the State). However, Starace appreciated the fact that CDP has shifted the focus of its plan to the industrial side instead of the more strictly financial one.
RENEWABLES, NETWORKS AND ELECTRIC MOBILITY
The growth of renewables will absorb 42% of investments (10,6 billion) and will be concentrated 70% on wind power and 28% on solar energy. Most of this sum will be invested in North and South America (67% in total) while 6% of the investments will go to Italy and 14% to Spain-Portugal. “The impact of renewables in Italy and Spain will be slower in terms of prices. There are no long-term 15 or 20-year PPA (Power Purchase Agreement) contracts in Italy, which is why we are more conservative,” explained Starace.
Another 40% of the capex will go to digitization of distribution networks (11,1 billion). Here Italy and Spain will play an important role as Italy will absorb 44% of the planned expenditure and Spain 17%.
The other significant chapter is that of electric mobility: with Enel X the charging stations that Enel plans to install around the world will go from 48.000 to 455.000 (39% Italy, 27% South America and 21% Iberia).
