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Enel seeks to sell stake in Green Power

December 5, 2008

Published on the Financial Times on December 5 2008

Enel, Italy’s energy utility, is aiming to reduce its debt burden by selling a minority stake of up to 40 per cent in Enel Green Power, its new renewables division, by the end of next year for between €2bn ($2.6bn) and €2.5bn. Sales of Enel’s Italian gas pipeline network and high voltage grid are planned to bring total disposals next year to €5bn.

Despite the poor market performance of similar divisions hived off by Enel’s competitors, Francesco Starace, the nuclear engineer who now heads Enel Green Power, says funds have already expressed an informal interest.

“There is still an appetite for investments of this kind,” he told the Financial Times.

Mr Starace says he is not pursuing a strategy of chasing the next government subsidy for renewable energy, but building a cost-driven mature industry that will wean itself off state aid.

The division has €1bn of earnings before interest, tax, depreciation and amortisation (ebitda) in 2008.

Enel Green Power has nearly 4,300MW of installed capacity, enough to meet the needs of 6.5m households and avoid an annual emission of 13m tonnes of CO2 greenhouse gas.

One third of that is Italy’s hydroelectric contribution, but nearly half comes from elsewhere in Europe and the Americas.

Enel says it is on track to reduce its debt below €50bn by the end of this year.

However, in 2010, Acciona, a Spanish construction company, is expected to exercise its option to sell to Enel its remaining stake in Spain’s Endesa for €11bn.

Enel also has some €14bn of debt maturing that year.

Enel is telling analysts it can achieve this through a mix of available liquidity, cash flow, the projected €5bn of disposals, and a €3bn rolling credit line.

The liquidity available to Enel with complete control of Endesa would finance Acciona’s sale.

The 2010 target, assuming Acciona exercises its option, would leave Enel with €55bn of debt and €18bn of ebitda.

The launch of Enel Green Power on Monday was overshadowed by sharp falls in Enel’s share price following the Italian government’s statement last Friday that it would cap utility bills in the decree setting out its fiscal stimulus package.

Amid considerable confusion, the Treasury reversed itself and said on Tuesday there would not be a freeze on tariffs.

The next day, Giulio Tremonti, finance minister, told a parliamentary commission that energy bills would fall next year because of “mechanisms” indicated in the decree and falling oil prices.

Fulvio Conti, Enel chief executive, dismissed as “excessive” some analysts’ estimates that the decree would cost Enel up to 10 per cent of earnings.

Mr Starace said the situation was confusing but that the decree was “not as bad as people thought”.

Green Power also controls Enel.si, which has a 35 per cent share of the photovoltaic and solar thermal power market in Italy.

Enel is testing what it says is the world’s first combined-cycle solar thermal gas plant in Sicily.

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