The Strategist

Enel will devote profits to minority shareholders

11/22/2016 - 13:46

Italian Enel is planning to invest additional revenue to increase dividends, repurchase shares from minority shareholders and, possibly, to hold a buyback. New strategy of the company implies that share of dividends in profits will amount to 65-70 % in the next three years. € 2 billion obtained from sale of assets, will be used to buy shares from minority shareholders. Buyback is also considered as one of solutions.

Enel Group may channel up to € 2 billion to repurchase shares from minority shareholders and hold a buyback program, as follows from the group’s strategy for 2017-2019 years. The question of the buyback will be submitted to the AGM in 2017.

As explained by CEO of Enel Francesco Starace, redemption of shares from minority shareholders will be priority as long as terms are reasonable. "We consider purchase of own shares as an alternative", - he explained.

The company plans to spend € 4,5 billion received from sale of assets to carry out buyback. The sum includes € 3 billion from objective revenue obtained from selling assets in 2017-2019 years. Recall that Enel is selling assets in the thermal generation and renewable energy industries, as well as smaller assets in Latin America. Above buyback, other € 2 billion will be spent on to acquire medium-sized, primarily energy assets with a view to their integration. In addition, € 0,5 billion more will be spent to finance the investment program.

"To buy back shares from minority shareholders in Latin America is priority for us" - said Enel’s CEO Francesco Starace. He told The Financial Times that decision on buyback can be explained by the company's desire to share additional revenue with shareholders. Mr. Starace is sure that the revenue "could go to acceleration of growth, or to increase dividends, or both, and we intend to prove that it is possible to combine both". Enel's net profit in January-September increased by 32% to € 2.76 Bln.

Within its new strategy, the group has changed its dividend policy. Enel aims to increase share of net profit from core activities, paid as dividends, from 60% to 65% in 2017, and 70% - in 2018-2019 with a minimum level of payments to 21 euro cents per share. In 2016, the company will pay 18 cents per share, or 55% of profits.

Net profit of the Italian energy concern for 9 months of 2016 increased by 32% compared to the same period last year, and amounted to 2.757 billion euros, as follows from interim financial results of the company.

Enel Group’s revenue from the first 9 months of 2016 amounted to 51.459 billion euros, down 8.1% year on year. The company explained the fall by decrease in revenues from electricity sales in developed markets, sluggish sales of generated electricity, low trading activity and negative exchange-rate dynamics.

EBITDA also decreased by 1.2% to EUR 12.01 billion. Enel's net financial debt for the period decreased by 1.9% and amounted to 36, 821 billion euros.