The new Enel that Francesco Starace is proposing to investors and small savers is a "more efficient, more agile" group, easier to understand. These are the final words used by the managing director of the electricity group during the presentation of the 2014 data and the 2015-2019 business plan in London. A long and detailed presentation that has the sense of "full stop" that is a strong sign of change compared to previous managements.
The growth drivers on renewables, on the grid business and on innovative customer services were confirmed.
Efficiency improvements were also confirmed with a nominal cost cut of 8%; the will to allocate more investments to business growth (+6 billion compared to the previous plan) to 18 billion and less to plant maintenance (-1,6 billion).
Basically a turnaround of the strategy ultimately aimed at the profitability growth in order to support a debt that will grow again this year (39,2 billion expected) to finance development and then drop to 36,3 billion at the end of the period: a high but sustainable level for a group aiming to generate 17 billion Ebitda at the end of the period against the current 15,4.
In this frame, sales slow down the pace which saw Enel put 4 billion of assets up for sale in 2014, reducing its debt to 37,9 billion, an improvement that exceeded expectations. For the future, the logic is rather that of an asset rotation in line with technological progress. Coming to the figures, the first 2 billion are already in the pipeline with the sale of Slovenske Elektrarne now in the finishing straight: “The binding offers for Sloveske Elektrarne are arriving – specified Starace – the deadline for presentation is 9 May”. Other assets for around 2 billion intended for sale have already been "identified", another billion is expected over the course of the plan in order to reach a total of 5 billion.
THE ACCOUNTS 2014
In last year's Ebitda, there was a decrease in contributions from Latin America (-352 million) and an increase from Italy (+215 million) compared to 2013. 70% of Ebitda came from regulated or semi- adjust. Profitability was affected not only by the 6,4 billion euro write-downs which mainly concerned thermoelectric generation assets in Italy (with 1,4 billion, considering the plan to shut down 23 obsolete plants) and Slovakia (2,1 billion), but also the increase in taxes (+850 million) paid as a result of the extra-dividend from Endesa. A cleaning-up operation which now allows, in the management's intentions, to restart from more solid foundations, freeing depreciations from the balance sheet that are no longer justifiable and thus freeing up resources for greater profits in the future.
THE 2015-19 PLAN
The plan as a whole brings it into play 34 billion of operating flow. Of these, 18 billion will go to investments e 15,5 billion will correspond to the generation of cash flow. From a financial point of view, the strong point is the strengthening of the dividend. Not only will a coupon of 14 cents be paid on 2014 (it was 13 in 2013) but the payout will be progressively increased from the current 40% to 65% at the end of the plan, in steps of 5% more the year. However, Starace explained, to demonstrate to investors "the determination in implementing the plan we propose, in the transitional period we guarantee a minimum dividend threshold that can be raised if profits turn out to be higher than current forecasts". So it's 16 cents for 2015 and 18 cents for 2016.
The vision of Enel's management is increasingly global, given the presence of the group in Africa, North and South America and Europe, with the intention of broadening the horizon to Asia as well. The first of the five pillars of the new strategy, illustrated by Starace, concerns the greater efficiency of working capital: a rebalancing is envisaged between the portion earmarked for maintenance (from 3,6 to 3 billion) and that earmarked for growth. Furthermore, other savings will come from the organizational simplification already underway (spending falls from 9,9 to 9,2 billion) with an overall cost cut of a nominal 8% (from 13,5 to 12,2 billion) at the end of the period.
Ebitda growth (+6,7 billion in the period) it is driven by investments that increase to 18 billion with 54% destined for growth and the remainder for asset maintenance (the percentages were reversed in the previous plan: 58% maintenance, the rest for growth).
They will be thereand activities in renewables to take the lion's share, benefiting from the 48% increase in Capex (+8,8 billion for an additional 7.100 megawatts), 30% will go to networks that is, the other major driver on which Enel is aiming. 49% of the investments will be concentrated in Latin America where the need for infrastructure is greatest, Starace clarified.
As for customers, Enel focuses on free market where it intends to take the share of customers in Italy and Iberia at 26 million of consumers between electricity and gas.
Using these levers, Enel expects to bring net profit to 4,1 billion in 2019, to reduce the cost of debt by 20%. Free cash flow is forecast at 15,5 billion, up at the end of the period by 1,5 billion, after paying 18 billion in investments and 14 billion in dividends.
The title Enel rises by 2,6% on the Stock Exchange at the end of the morning.
