Italy's Enel to focus on 6 countries, pursue €21B of disposals in new green plan

One of Europe's largest utilities, Italy's Enel SpA, plans to scale back its geographic footprint to just six countries and undertake €21 billion worth of disposals. The result will be what CEO Francesco Starace described on Nov. 22 as a "simpler" and "more agile" company that can better withstand energy shocks.

The Rome-headquartered group's new strategy for the 2023-2025 period is to double down on its integrated business model, investing about €37 billion in 21 GW of new renewable energy capacity, along with new grid networks, batteries and electric vehicle charging stations.

The plan — which includes exits from markets such as Romania, Peru and Argentina — is shaped by three years of industry turbulence, starting with COVID-19 and more recently due to Russia's invasion of Ukraine, Starace said during a news conference as part of Enel's capital markets day.

The drop in global energy demand during the pandemic, followed by the sharp rebound in 2021 that sent energy prices skyrocketing, "demonstrated how important it is to balance the energy systems," Starace said. Meanwhile, the trend toward electrification means a significantly reduced role for gas in the future.

"The combination of these observations shaped this strategy," Starace told reporters, adding that the last three years "will leave a mark in the electricity and energy industries of the world in a deeper sense."

In contrast, Starace said Enel's new strategy was only "marginally" influenced by energy crisis interventions such as REPowerEU, the European Commission's €300 billion strategy to end dependence on Russian gas and accelerate the EU's energy transition. The plan includes ramped-up deployment ambitions for wind and solar. Enel's total renewables pipeline stands at about 425 GW globally, most of which are early-stage projects.

"It's important to understand that REPowerEU is not yet fully ... defined in its details. It's a great program, but how is it going to be implemented?" Starace said during the news conference. "Maybe it will influence our strategy next year, but not this year."

'Where our strengths play best'

Enel's streamlined structure centers around a disposal plan worth about €21 billion in terms of positive contribution to group net debt. The bulk of disposals will be undertaken in 2023, building on a series of asset sales already agreed to or completed this year.

The geographic simplification means a new focus on six core countries — Italy, Spain, the U.S., Brazil, Chile and Colombia — where it will have 75 GW of installed renewables capacity, 50 million customers and a regulated asset base worth €41 billion.

This footprint "is a function of where our know-how in renewables and integrated margin is best coupled with our customer base, and where our technology know-how is best fitting for future electrification development," Starace said during a presentation to analysts. "So, where our strengths play best."

Enel may also pursue other types of sales in an attempt to extract value from its assets. That includes its gas portfolio in Spain and certain midsize renewables assets and could also extend in 2024 to its U.S. assets and its Enel X Way e-mobility subsidiary.

For its U.S. activities, that may mean an IPO or a partnership with an investment fund, Starace said. But rather than being driven by a negative view of the U.S. market, it is more that the company thinks investors "will need to see something to really appreciate the value" of Enel's U.S. footprint.

"This is a strange beast we are assembling there. It's probably the most innovative large animal in the U.S. market," the CEO said, pointing to its combination of renewable technologies. "Eventually, we are going to assemble a large business customer base [in the U.S.] ... It's difficult for the market probably to understand the value of that."

Enel estimates the disposal plan will help reduce group net debt to between €51 billion and €52 billion by the end of 2023, compared with €58 billion to €62 billion estimated for 2022.

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