March 19, 2015 / 9:11 AM / 4 years ago

UPDATE 3-Italy's Enel looks to emerging markets and renewables

* To invest 18 bln euros over next five years

* Lifts dividends as profits seen growing 10 pct

* To sell 5 billion euros of assets

* Net profit down 84 percent in 2014 on writedowns (Adds management comments, shares)

By Stephen Jewkes and Sarah McFarlane

MILAN/LONDON, March 19 (Reuters) - Italy’s biggest utility Enel is banking on emerging markets, green energy and digital power grids to boost profits and dividends over the next five years, after joining rivals by cleaning up its finances with writedowns on ailing plants.

Under the first business plan of CEO Francesco Starace, Enel said it would invest 18 billion euros ($19 billion), more than half in emerging markets such as Latin America and Africa, while doubling capacity at its green power division.

The company, which controls Spanish power group Endesa , said it would focus on a larger number of smaller projects rather than big traditional plants to curb risk.

Europe’s power sector has been hit by weak energy demand in a sluggish economy, low wholesale power prices and a surge in demand for cleaner renewable energy which is replacing gas and coal-fired power plants.

That has prompted some companies to change. Germany’s top utility E.ON, which also booked hefty writedowns on 2014 results, has decided to focus on renewable energy and power grids, spinning off its thermal power plants.

“We have decided to reduce capacity in Italy and will close plants taking off about 13,000 megawatts of capacity,” Starace said. “We might do something similar elsewhere.”

But Starace, a nuclear engineer by training who formerly headed Enel Green Power, said Europe still presented opportunities, with the roll-out of “smart” power grids that can automatically monitor energy flows and adjust to changes in supply and demand.

DIVIDEND CHEER

After hiking its 2014 dividend, Enel pledged to raise its payout to 65 percent of earnings in 2018 from the current 40 percent while also offering a minimum dividend per share in 2015 and 2016 of 0.16 and 0.18 euros respectively.

The move cheered analysts.

UBS said the dividend, plans to sell an extra 3 billion euros of assets, and the 18 billion euros of investment were “all ahead of even the bulls’ expectations”.

Enel, one of Europe’s most indebted utilities, said it aimed to sell 5 billion euros of assets in total over five years.

It is in talks to sell its 66 percent stake in Slovak power generator Slovenske Elektrarne and is close to selling U.S. renewable energy assets.

“In the United States we see potential beyond renewables like gas generation and distribution,” Starace said, answering a question about buying assets.

He said 2 billion euros of the new planned asset sales would be in Europe. In February, the group placed on hold plans to sell assets in Romania.

At 1400 GMT Enel shares were up 2.3 percent within a European utility index up 0.4 percent.

Europe’s second-largest utility by installed capacity said it expected net ordinary profit of 3 billion euros this year after an 84 percent fall in 2014 net earnings to 517 million euros due to heavy writedowns in Italy and Slovakia.

Profits are expected to rise on average 10 percent per year to 2019, it said.

$1 = 0.9387 euros Editing by Keith Weir and Mark Potter

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