Enel to get up to $4.8 billion via EPG IPO: sources

By Stephen Jewkes and Alberto Sisto

MILAN (BestGrowthStock) – Enel will list up to 32.6 percent of its Green Power unit, three sources said, implying Enel will get to 3.4 billion euros ($4.8 billion) in cash for what will be Europe’s biggest IPO in three years.

Enel, Europe’s most indebted utility, has said it hopes to raise at least 3 billion euros to help cut debt and protect credit ratings via the initial public offering of Enel Green Power (EGP), active in hydroelectric, wind and solar power.

“Enel will list up to 32.6 percent of the unit including a greenshoe option of 15 percent,” a source with access to the EGP IPO prospectus said on Friday.

Two banking sources said the basic offer will be 1.415 billion EGP shares, equivalent to a free float of about 28.3 percent. This would rise to around 32.5 percent if the greenshoe overallotment option is exercised, they said.

Enel earlier on Friday set the price for its green energy arm’s listing at 1.8-2.1 euros a share, below a previously indicated range, valuing EGP at up to 10.5 billion euros.

Reuters had reported that range on Thursday, citing sources close to the deal who said Enel had narrowed and lowered the band from the previous 1.9-2.4 euros per share.

The IPO will include an offer to retail investors of at least 15 percent of the total — 12.5 percent in Italy and 2.5 percent in Spain, the source with access to the prospectus said.

He said there will be a bonus share for IPO investors of one free share for every 20 shares kept for at least 12 months.

Enel declined to comment.

INVESTOR CONCERN

Enel has said it is committed to cutting group debt to 45 billion euros by the end of 2010 from 53.9 billion in June.

Investors have welcomed EGP’s diversified energy mix, strong cash flow and broad geographic footprint but expressed concern about the slower growth compared with peers and still fragile markets, clamoring for a discount.

Investors also worry that cash-strapped states could slash crucial support for green energy.

“Regulatory changes are a big problem when countries are worried about their budgets and at this stage the sector can only grow through subsidies,” said Benita Barretto, an analyst at Berenberg, adding investors were unwilling to overpay.

In a newspaper interview on Thursday, Enel Chief Executive Fulvio Conti said EGP would be valued in line with peers at around 10 to 12 times core earnings, implying a valuation of up to 12.6 billion euros.

The shares of EGP’s main 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.

Selling EPG shares at the top end of the range would value it just about in line with peers, with an enterprise value of just over 10 times core earnings, Thomson Reuters data show.

At 1.8 euros a share, EPG’s enterprise value would drop to 9 times EBITDA, well below its peers. Enterprise value is the value of a company’s shares plus its net debt.

Enel is scheduled to kick off the IPO roadshow on Monday.

Shares will debut on the Milan and Madrid stock markets at the beginning of November, sources said.

Enel shares eased 0.3 percent to 3.96 euros by 1042 GMT while the STOXX Europe 600 Utility index was up 0.2 percent.

The deal comes on the heels of a pick-up in European equity issuance which had seen a sluggish first half, with investors driving increasingly hard bargains and a run of IPOs that were postponed or had their targets cut.

Danish jeweler Pandora wrapped up a $2 billion IPO while Renault’s sale of 15 percent of its stake in Swedish truckmaker Volvo also indicate growing investor appetite.

Other deals in the pipeline include an $844 million listing by Norwegian oil and gas group Statoil of its retail arm while British online gaming company is bookbuilding for an IPO due to conclude on October 22.

(Additional reporting by Chris Vellacott in London and Giselda Vagnoni in Rome, Editing by David Cowell and Michael Shields)

Enel to get up to $4.8 billion via EPG IPO: sources