Enel SpA, Italy’s largest utility, will steer investments into Latin America and renewable energy as recession damps electricity demand in its biggest market.
“Growth has to come from renewables and from Latin America, as well as Eastern Europe and Russia,” Luigi Ferraris, chief financial Officer, said in an interview in London. Enel, based in Rome, is planning to add about 4.5 gigawatts of renewable capacity to 2016 through its Enel Green Power unit, he said.
Enel is seeking growth outside its biggest markets, Italy and Spain, where it expects subdued demand this year as the European debt crisis forces governments to curtail spending. The company cut its dividend target by a third to reduce debt as recessions weighed on revenue and increased solar-panel installations worsened overcapacity.
Enel Green Power is planning to spend 6.1 billion euros ($8 billion) on renewables globally from 2012 through 2016. The company will target wind energy in Latin America where auctions for long-term energy contracts, such as those in Brazil, give visibility on returns, said Ferraris, who’s also the chairman of Enel Green Power.
“Since we kept the same level of capex, we continue to reallocate funds from mature markets to the emerging ones such as North America, Latin America and Romania,” he said of the unit’s spending plans. Overall investments in Latin America for the Enel group will be 5.4 billion euros to 2016, according to the company.
Enel plans to reach about 500 megawatts of wind by 2016 in Romania, where wind producers receive incentives through the green certificate program and sites are pummeled by strong winds, Ferraris said. Enel’s spending on Romanian wind farms rose more than fourfold to 330 million euros last year.
Enel will invest in Romania as the Spanish wind market nears maturity, Ferraris said. “Wind is nearly fully exploited in Spain and the renewable energy market there could be considered mature,” he said.
Spain halted subsidies for new renewable energy projects this year to help curb its budget deficit.
Enel Green Power unit would be a “strategic pillar of growth” for the Enel group alongside the distribution business, he said.