Enel Jumps Most Since June on Share Buyback, Strategic Plan

  • Enel increases 2017 dividend to 65 percent of net income
  • Utility proposes 3 billion-euro share buyback in 2017-19 plan

Enel Spa plans to buy back shares, sell assets and cut costs as it unveiled a strategic plan focused on network digitization and boosting its retail business. Shares rose the most since June.

Europe’s largest utility plans to make about 3 billion euros ($3.2 billion) of disposals in the next three years, including thermal generation assets, renewables and in Latin America, the Rome-based company said Tuesday in a strategy statement. It’s proposing a share buyback option for as much as 2 billion euros, and plans to boost its 2017 dividend to 65 percent from 60 percent of net income previously.

Chief Executive Officer Francesco Starace is scaling back on large power stations to focus on green energy and power distribution. The utility, which reintegrated its renewable-energy spinoff Enel Green Power earlier this year, plans to cut its fossil fuel-fired generation capacity 39 percent by 2019 from 2014. It’s investing 4.7 billion euros in smart meters and improved connectivity to reduce cost and boost customer numbers.

“We are trying to find value hidden in these services,” Starace told investors in London on Tuesday. “By leveraging our customer base into these services we will succeed.”

Big Gainer

Enel rose as much as 4.2 percent, the most since June 29, to 3.802 euros. The stock closed at 3.762 euros in Milan. The utility has fallen 3.3 percent this year, compared with a 23 percent drop in the nation’s benchmark.

Enel plans capital expenditure of 20.9 billion euros between 2017-2019, including its investment in digitization. While the utility is boosting investment in grids, it’s scaling back spending on renewables by using a less capital-intensive strategy of building, selling and operating assets, according to the statement.

Net income is forecast to grow 14 percent a year on average to about 4.7 billion euros by 2019. Earnings before interest, tax, depreciation and amortization is expected to rise by 5 percent a year to 17.2 billion euros.

Enel is still to decide whether to sell it Russian power stations, Starace said at Enel’s investor day in London. The company is evaluating an offer from an unspecified bidder.

Earnings from its retail business is forecast to increase 20 percent to 3 billion euros in 2019 as the number of free-market customers almost doubles in Italy when the country’s regulated market structure ends.

Italy’s Dec. 4 referendum on constitutional reform isn’t expected to result in any major policy changes that would impact Enel’s business, Starace said.

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