Enel self-help plan has one known unknown
MILAN, March 17 (Reuters Breakingviews) - Enel (ENEI.MI) Chief Executive Francesco Starace’s slim-down plan is not getting enough attention. Last year, the $57 billion utility’s shares suffered as its net debt rose to 70 billion euros, and soaring interest rates and its base in a high-debt Italy battling spiralling energy costs spooked investors. That prompted the group to start aggressively selling assets in places like Chile, Argentina and Romania to cut debt by 21 billion euros.
Enel’s plan is on track. As of Thursday, it had clinched sales equivalent to around 8 billion euros, while net debt had fallen to 60 billion euros. That and the prospect of an 8% dividend return, higher than the average 5% for peers, should help the stock narrow a 30% valuation gap to rivals on a price to earnings multiple basis.
Starace’s possible exit at the end of his third mandate in May is, however, a worry. Since taking the helm in 2014, the 67-year-old Italian executive has set the state-controlled power company on a clear green energy trajectory, with one of the biggest green generation pipelines. Under his watch Enel’s renewable power capacity, increasingly a cheaper source of energy than fossil fuels, nearly doubled from 36 gigawatts in 2013 to 59 gigawatts in 2022. Despite a 35% share slide since 2021, Enel shares have still generated a total return of 100% during his tenure, less than Spanish rival Iberdrola (IBE.MC) but ahead of Germany’s RWE (RWEG.DE) and E.ON (EONGn.DE). Yet Prime Minister Giorgia Meloni is not inclined to renew Starace’s mandate, Italian media reported this week. If Enel replaces its green champion with someone less competent, investors may stay jittery. (By Lisa Jucca)
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