An expected initial public offering (IPO) of shares in the renewable energy arm of Italian utility Enel is one sign that market sentiment has improved markedly from a year ago. The Enel Green Power IPO could be the largest in Europe this year and an important litmus test for other renewables firms planning stock offerings. The offer is also expected to rank as the largest IPO in Europe since Spanish renewable energy giant Iberdrola Renovables came to the market in 2007.
Enel was to file for an IPO by April for its wholly owned Enel Green Power unit - although it has not excluded a direct sale of a stake to industrial or strategic investors, either to supplement or in place of the IPO. In any case, Enel will retain a majority stake in Enel Green Power. Enel CEO Fulvio Conti said in March that an IPO was seen as the best way to maximise the value of the utility's renewable subsidiary. If it goes ahead, the plan is for a listing on both the Milan and Madrid stock exchanges.
Analysts generally expect 100% of the company, including debt, could be valued at around EUR13 billion. An offering could take place this June or in early autumn, Conti also said, noting that Enel hopes to raise about EUR4 billion from the sale of an Enel Green Power minority stake. The sale of that stake is the main element in Enel's planned disposal of a total of about EUR7 billion in non-strategic assets this year, as the utility seeks to reduce group debt from EUR51 billion to EUR45 billion at the end of 2009.
At the end of 2009, Enel Green Power's total installed renewables capacity was 5.7GW. Its renewable energy plants produced 20.7TWh of electricity that year. The total was composed of 2.3GW from wind plants, 2.5GW from small-scale hydroelectric power, over 700MW from geothermal power and about 200MW from other sources, such as solar and biomass power. These figures include the Spanish and Portuguese renewables assets of Enel subsidiary Endesa, which were integrated with Enel Green Power's existing activities in these two countries in March.
The aim is for Enel Green Power to push total installed capacity up 3.5GW to 9.2GW by 2014, an ambitious objective but also one which would seem to be comfortably in reach. In March, Enel noted that an additional 547MW in renewable energy plants were already under construction, while it felt highly confident on another 1.7GW. Its total renewable energy pipeline amounted to 30.6GW at the end of 2009. As it grows, the company expects its earnings before interest, tax, depreciation and amortisation (EBITDA) could rise to EUR2.1 billion in 2014, from a forecast EUR1.4 billion in 2011 and EUR1.2 billion in 2009.
Between 2010 and 2014, Enel Green Power investments are expected to amount to EUR5.1 billion and be mainly funded through cash generation.
Francesco Starace, Enel Green Power president, says there are three essential ingredients for any investment the company makes. "The countries on which we focus have a lot of sun or a lot of wind or other renewable energy resources," he explains. "They also have big markets with important prospects and a comprehensive and stable (renewable energy) legislation."
Enel Green Power's home market remains key to its future growth plans, with an aim of increasing total installed capacity from 2.6GW to 3.4GW by the end of 2009. Starace says he expects that, in absolute terms, wind energy should account for the largest growth in 2010 and 2011 as well. Recently, the company announced it had acquired two authorised wind projects in the region of Calabria with combined capacity of 64MW, which it expects to become operational this year. Also on the agenda in Italy is the construction of a 100MW wind farm in Portoscuso on the island region of Sardinia. Construction is expected to begin this year.
From 2012, however, Enel Green Power's new domestic wind capacity will likely be matched by that from its solar business, Starace expects. Even though Italy is known for plentiful sun, the solar photovoltaic sector is one which really only took off in the country last year. Enel Green Power is present in this market with both large and medium-sized installations and smaller distributed capacity. Enel Green Power also foresees gradual growth in its Italian geothermal business, which represents the lion's share of its global geothermal capacity.
Spain and Portugal form the second pilaster of Enel Green Power's renewables business. Total renewable energy capacity in these two countries amounted to 1.4GW at the end of 2009 and is forecast to rise to 2.6GW by 2014. Enel Green Power is looking at solar photovoltaic and solar thermal opportunities across the peninsula. In the wind business, Spain now represents a mature market and Starace notes future growth in this sector will increasingly come from Portugal.
Starace says that Enel's involvement in a mature renewable energy market like Spain has provided useful insight for its Italian operations. "We are quite relaxed on the issue of grid connections in Italy because six years ago, in Spain, there were similar concerns (about the grid's ability to absorb wind and other renewable energy)," he notes. "But there was no collapse even though Spain's grid is in many ways inferior to that in Italy."
Enel recently reorganised its renewables operations on the Iberian peninsula, combining Enel Green Power's assets in Portugal and Spain - owned through the 50:50 Enel Union Fenosa Renovables (EUFER) joint venture with Gas Natural - with those of Endesa in March. Enel Green Power now owns 60% in the company, controlling those assets with Endesa holding the remainder.
Enel Green Power has not been idle farther afield either. The group plans to roughly double its installed capacity in countries besides Italy, Spain and Portugal by 2014, to roughly 3.2GW compared to 1.7GW in 2009.
To that end, Enel Green Power's North American subsidiary announced in January that it had acquired Padoma Wind Energy, a California-based company developing about 4GW of potential projects in the state. That followed an acquisition of a minority stake and a strategic partnership with Minnesota-based Geronimo Wind Energy last November. Enel Green Power and Geronimo will develop a pipeline in excess of 4GW in the upper Midwest and, potentially, other regions of the US. Enel Green Power will have the priority right to acquire, own and operate wind projects developed by Geronimo.
In Central and South America, where current operating capacity is dominated by hydroelectric plants, there are also important plans for developing wind power. Enel Green Power signed project development agreements last year with local affiliates of German developer SoWiTec International for the development of wind farms with capacity up to 1GW in Mexico and 850MW in Chile.
The company also reached an agreement with Mexican firm Energias Renovables Termica e Hidraulica de Mexico (Enerthi) for the potential development of a further 1GW in Mexican wind capacity.
Growth in wind and solar
Closer to home, Enel Green Power brought new renewables capacity online last year in France, Greece and Bulgaria. In France, the company now has 68MW of wind farms operating and is eyeing growth in both wind and solar power. In Greece, the firm has 133MW of installed capacity, mainly made up of wind farms but also including a small amount of mini-hydro. Enel Green Power's first Bulgarian wind farm, the 21MW Kamen Briag project, was inaugurated last year. And in Romania, where Enel is also present in electricity distribution, its first 70MW of wind capacity is expected to come online this year. In 2009, the Romanian subsidiary of Enel Green Power reached an agreement with Spanish turbine manufacturer Gamesa for the supply of up to 242MW in turbines for that market.
Although Enel Green Power has broad geographical targets for capacity, it may also adjust these objectives if it makes good business sense. "Flexibility is quite high," notes Starace. "We don't favour so much a country but, rather, the profitability of a project. We see the whole world as a country - and regulatory changes might mean that certain projects move forward and others don't."