Enel SpA reports great growth of fourth-quarter profit after buying Spain's Endesa SA, adding customers and power plants on four continents.
Enel is Italy’s largest power company, and Europe’s third-largest listed utility by market capitalization. Listed on the Milan and New York stock exchanges since 1999, Enel has the largest number of shareholders of any European company, at some 2.3 million. It has a market capitalisation of about EUR 50 billion at current prices.
Endesa, S.A. is the largest electric utility company in Spain. It has 10 million customers in Spain, with domestic annual generation of over 97,600 GWh from nuclear, fossil-fueled, hydroelectric, and renewable resource power plants. Internationally, it serves another 10 million customers and provides over 80,100 GWh annually. It also markets energy in Europe. The company has additional interests in Spanish natural gas and telecommunications companies.
Net income rose to 1.3 billion euros ($2 billion) from 396 million euros.
The Rome-based utility and a partner bought Endesa in October, bolstering Enel in markets where electricity demand is increasing faster than in Italy, which caps growth by law. The company said it will invest a total of 37.2 billion euros over the next five years to help boost earnings further.
"The results are good, based on the Endesa purchase, and the profit targets seem positive,'' an analyst at IlNuovoMercato in Rome, said today. "The only thing that may be disappointing is the flat dividend outlook.''
Enel slipped 1.8 percent to 6.97 euros at 12:53 p.m. in Milan trading. Italy's benchmark S&P MIB index lost 2.5 percent.
The Endesa deal, which valued Spain's largest utility at 42.5 billion euros, was "necessary'' to ensure Italy's former monopoly could compete in the European market, Chief Executive Officer Fulvio Conti said in an interview on Italian state television in November. As well as adding generation and 25 million Endesa customers, Enel's expansion abroad will help it cut reliance on Italy, where power prices fell 5 percent in 2007.
Enel will pay a dividend of 49 cents a share for 2007, equal to the payout on 2006 earnings. The utility said the dividend will remain "stable'' in the five years through 2012.
The company may save as much as 1 billion euros at its Spanish and Latin American units by 2012 after integrating Endesa, according to a presentation in London today. Enel's five-year investment plan will help boost earnings before interest, tax, depreciation and amortization to 13.8 billion euros next year and 16.6 billion euros in 2012, according to the presentation.
Earnings per share are expected to rise by an average 10 percent a year through 2012, Enel said. Per-share profit will climb to 62.3 cents next year and 83 cents by 2012, it said.
The utility almost doubled fourth-quarter Ebitda to 3.3 billion euros on sales that rose 50 percent to 14.9 billion euros. Debt climbed to 55.8 billion euros from 11.7 billion euros at the end of 2006 after Enel borrowed to pay for Endesa.
Conti is briefing investors in London on plans to sell assets to cut borrowings and on potential savings from the Endesa deal. It's a "priority'' of the asset sales to maintain Enel's A credit rating, he said.
The company, which will gain generation capacity in Central and South America, Europe and North Africa, intends to sell assets including high-voltage power lines and plants Endesa owns in Italy. Enel aims to raise as much as 15 billion euros from asset sales by 2012. The utility will create a separate division for most of its renewable-energy assets and may sell a minority stake in that business.
Conti is also seeking growth in Russia, where Enel controls electricity company OAO OGK-5 and bought stakes in natural-gas fields with partner Eni SpA. He has led Enel in expanding generation and distribution in eastern Europe and in buying renewable-power assets in Latin America and the U.S.
Enel may be able to cut debt by as much as 12 billion euros a year by 2012 after the asset sales. That would allow the company to reduce borrowings to as little as 45 billion euros that year, Enel said.
The company is in "advanced'' talks to sell as much as 7 percent of OGK-5 to the European Bank for Reconstruction and Development and the International Finance Corp., it said. The sale would cut Enel's holding in the Russian company to about 53 percent.
The potential buyers are set to pay about 4.4275 rubles (19 cents) a share for the stake, Enel said.
Enel is an Italian energy provider and the third largest energy provider in the world. Formerly a state-owned monopoly, it is now partially privatized with Italian government control. Annual revenue is €38.153 billion.
Its stock is traded on the Milan Stock Exchange under the symbol 'Enel' and on the New York Stock Exchange under the symbol 'EN'.