Enel pushes ahead with big EGP renewable unit IPO

By Stephen Jewkes

MILAN (BestGrowthStock) – Italian utility Enel is confident investors will back the spinoff of Enel Green Power as management slaps a value on the renewables unit of up to 12.6 billion euros ($17.6 billion) in Europe’s biggest IPO this year.

Enel, Europe’s most indebted utility, hopes to raise at least 3 billion euros from selling up to a third of Enel Green Power (EGP) with a view to cutting debt and extracting full value from the fastest-growing part of its business.

A poll of about 300 potential investors carried out by Enel in the pre-marketing phase pointed to investor confidence in an EGP valuation of around 10.5 billion euros or 2.1 euros a share, a source familiar with the matter told Reuters on Thursday.

Enel, which won regulatory approval for its unit’s IPO late on Wednesday, is pushing ahead with its plans to list it despite lagging investor appeal for the renewable energy sector in the face of reduced subsidies for green energy.

EGP will be valued in line with peers at around 10 to 12 times core earnings, Enel Chief Executive Fulvio Conti said on Thursday in a newspaper interview. This would imply a valuation of up to 12.6 billion euros taking out debt based on 2009 pro forma core earnings of 1.3 billion euros.

Enel will sell up to a third of its shares in EGP, Enel Chairman Piero Gnudi said on Thursday.

Conti, the man behind the internationalization of Enel which controls 92 percent of Spanish utility Endesa, once said he expected to raise 4 billion euros from the sale but has since said he aims for at least 3 billion euros.

EGP, which has debt of around 3 billion euros, sees its EBIDTA growing to 1.4 billion euros in 2011.

SECTOR UNDERPERFORMING

Shares in EGP’s main listed rivals — Spain’s Iberdrola Renovables SA, Portugal’s EDP Renewables and France’s EDF Energies Nouvelles — have underperformed in the past 12 months, hit by cuts to green energy incentives in Europe and uncertainty over the U.S. climate change bill.

While competitors focus on one or two main technologies, EGP has a more diversified mix and geographical footprint.

Sources had told Reuters on Tuesday that Enel would keep firm control of the unit. Under Italian law companies need two-thirds support of shareholders to approve extraordinary measures such as mergers and acquisitions.

A source said this month Enel had set a pre-marketing price range between 1.9 and 2.4 euros per share for the offering, adding EGP had 5 billion shares overall.

One source said banks were due to meet Enel management on Thursday to set the final price range in the IPO, the biggest in Europe since Iberdrola listed its renewable unit in 2007.

At 1000 GMT, Enel shares were up 0.6 percent at 3.98 euros while the STOXX Europe 600 Utility index was up 0.9 percent.

(Additional reporting by Giuseppe Fonte in Rome; Editing by Michael Shields)

Enel pushes ahead with big EGP renewable unit IPO