UPDATE 1-Enel to curb Spanish investments if energy reform not changed

Thu Aug 1, 2013 1:53pm EDT

Related Topics

* CEO calls for big changes to Spanish energy reform

* Reform could impact Enel 2013 EBITDA by 275 mln euros

* H1 EBITDA beats market forecast (Recasts with management comments)

By Stephen Jewkes

MILAN, Aug 1 (Reuters) - Italy's biggest utility Enel said on Thursday its future investments in regulated businesses in Spain were at risk unless an energy reform there was amended.

Enel, which owns 92 percent of Spanish utility Endesa , generated around half of its total production in Italy and Spain in the first half of 2013 and regulatory risk in these countries is a key concern for investors.

"In the absence of substantial amendments (to the Spanish reform) there will be an impact on our results and a risk to future investments in regulated businesses," CEO Fulvio Conti said on a conference call about first-half results.

Conti said a preliminary estimate indicated the reform plans of the Spanish government could impact his group's core earnings by around 275 million euros ($364 million) in 2013 and 400 million euros in 2014.

Spain, plagued by recession and one of the euro zone's biggest public deficits, has a 26 billion euro power tariff shortfall. The government recently announced a major overhaul of the sector to reduce a gap between regulated power prices and generation costs by 2.7 billion euros a year.

On Wednesday Enel Green Power, which is controlled by Enel, said it was mulling taking legal action against the energy reforms planned in Spain.

"We're investing money in the distribution network (in Spain) ... We'll stop investing immediately," Conti said.

GENERATING WEAKNESS

Enel, Europe's No 2 utility in terms of installed capacity, said on Thursday its core earnings in the first half fell on ongoing weakness in its traditional power generation business.

Earnings before interest, tax, depreciation and amortisation (EBITDA) dipped 0.3 percent to 8.29 billion euros, beating the average forecast of 8.11 billion euros provided by the company and based on 16 analysts.

Weakness in power generation in its core markets of Italy and Spain was offset by strong growth in renewable energy activities.

The economic crisis continues to take its toll on utilities across Europe as falling power demand, weaker electricity prices and increased competition from renewable energy squeeze the margins of traditional generators.

Earlier on Thursday, France's GDF Suez posted a 25 percent drop in first-half net profit and said it saw no sign of improvement in Europe's power generation market.

In July S&P downgraded Enel and Endesa on weakening economic and industry prospects in core markets which it said were set to erode the group's profitability.

But Enel, one of Europe's most indebted utilities, said cost cutting and debt reduction programmes meant it was able to confirm its full year targets.

($1 = 0.7557 euros) (Editing by Mark Potter)

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