* Latam shakeup to simplify control chain, cash flows
* Could add 70-80 mln euros to Enel net income
* Transaction is no panacea for group's debt - analyst
(Recasts lead, adds manager comments)
By Stephen Jewkes
MILAN, July 31 Europe's most indebted utility,
Enel, plans to simplify its operations in Spain and
Latin America to ensure more cash flows into its coffers, and
may reduce its stake in Spanish unit Endesa as a
The reorganisation is focused on stripping out Endesa's
Latin American assets to give Enel more direct control over them
as it tries to reduce debts that stood at 43.1 billion euros
($57.7 billion) at the end of June, up 8.5 percent from the end
"The reorganisation is to reduce complexity and also
increase the focus on growth areas," Enel Chief Executive
Francesco Starace said on a conference call on first-half
Under the plan, Enel will buy from Endesa a 60.62 percent
stake in Enersis, the parent company for the group's
Latin America operations. Endesa will then pay a special
dividend to its shareholders equal to at least the value of the
"We have not decided what to do with Endesa after the
operation... One of the options we have is to sell further
Endesa shares," Starace said.
Latin America and Iberia accounted for around 40 percent of
the group's core earnings of 16 billion euros last year.
Enel, which is Italy's biggest utility, intends to grow
further in South America while creating a stable and
well-defined dividend policy at Endesa.
The reorganisation, which is expected to be completed in the
last quarter of this year, could help boost Enel's group net
income by around 70-80 million euros, CFO Luigi Ferraris said.
"It's fine and a smart way of getting more control in Latin
America while decreasing its presence in Spain and raising a bit
of cash. But it's not a panacea for the debt and fundamentals
are still going down the toilet," a London-based analyst said.
State-controlled Enel, like other big utilities across
Europe, has seen its traditional generation business threatened
by a mix of low wholesale power prices, weak demand due to the
economic crisis and a boom in rival renewable energy.
In March it cut its dividend for 2013 and said it would
mothball 8 gigawatts of capacity in its home market and Spain.
Enel's core earnings fell 3.3 percent in the first six
months of 2014 as regulatory changes in Spain and a weaker
performance in Latin America and its renewable energy business
took their toll.
Earnings before interest, tax, depreciation and amortisation
in the period were 7.88 billion euros, above a consensus analyst
estimate of 7.74 billion from 14 brokers provided by the
Enel said it would continue to focus on debt reduction under
Starace, the former head of Enel's renewable unit Enel Green
Power who took over from Fulvio Conti as Enel CEO in
Starace said the company would try to sell assets in
Slovakia and Romania to help raise around 4 billion euros this
It would identify a pool of assets worth around 8-9 billion
euros that could be sold to reach the 4-billion target. But he
said Enel's OGK-5 generating company in Russia was not
one of those assets.
"It is not wise to sell assets in Russia at this moment,"
Starace said. Russia is the target of sanctions by the U.S. and
Europe over its role in the Ukraine crisis.
Starace said the disposals target could be increased if
needed for investment purposes.
He said Enel was still targeting net debt of about 37
billion euros this year and core earnings of about 15.5 billion.
($1 = 0.7465 Euros)
(1 US dollar = 0.7473 euro)
(Reporting by Stephen Jewkes; editing by David Holmes and Tom