Enel Repurchase of Green Power Unit Spurred by Need for Funding

Enel CEO: 2016 in Europe Will Be Better Than People Think
  • Clean energy unit to invest 7.7 billion euros by 2019
  • Enel says it can fund the capital needs of Enel Green Power

Enel SpA moved to buy back its renewables unit for 3.1 billion euros ($3.3 billion) in stock because the affiliate that develops power plants couldn’t raise enough funds on its own to keep up with growth plans.

Enel Green Power SpA, which the parent company sold in a public offering in 2010, was expanding 40 percent in terms of earnings before interest, tax, depreciation and amortization, according to Alberto De Paoli, chief financial officer of Enel. The subsidiary plans to install an additional 7.1 gigawatts of power by 2019. Renewables will consume 7.7 billion euros of Enel’s 17 billion-euro capital spending budget by then.

“It was growing 1 1/2 times faster, but could not fund this growth on its own,” Chief Executive Officer Francesco Starace. “Enel can fund this growth.”

The comments explain why Enel is reversing the sale of its renewables developer, joining Electricite de France SA and Iberdrola SA that made similar moves in previous years. Terra Firma Capital Partners also recently bought back the shares it didn’t own in U.K. clean power firm Infinis Energy Plc two years after listing it.

“Renewables are the growth engine of the energy sector, there is no doubt about that,” said Francesco Venturini, CEO of Enel Green Power, in a strategy presentation on Wednesday.

The company is increasing its capital expenditure by 2.7 billion euros to 17 billion euros for the 2016 to 2019 period, it said in a strategic plan released in London on Wednesday.

Enel raised about 2.26 billion euros in November 2010 when it first sold stock in the builder of wind and solar plants. On Wednesday, it offered to exchange each Enel Green shares for 0.486 Enel shares to repurchase the 30 percent of the unit it doesn’t already own.

The deal allows Enel to tap the quicker growth of its green power unit at a time when the stock market performance for renewables companies has been lackluster. Enel Green’s revenue rose 8 percent to 2.2 billion euros in the first nine months of the year as installations in Latin America surged. Its total return of 7.2 percent in the past year lagged the 14 percent growth of the Euro Stoxx 50 Index of leading European shares.

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