Enel will withdraw from Argentina and Peru: what assets are sold?

Moments ago, the Enel company presented its plan for 2023-2025, which aims to:

– Focus on the integrated value chain by pursuing sustainable electrification, increasingly needed in global energy systems, covering approximately 90% of its fixed price sales with carbon-free electricity by 2025, bringing renewable generation to around 75 % of the total, as well as reaching around 80% of the clients of the digitized network;

– Strategically reposition the businesses and geographies, with a divestment plan worth around 21,000 million euros in terms of a positive contribution to the reduction of the Group’s Net Debt. The bulk of this plan is expected to be completed by the end of 2023, leading to a more agile company focused on six core countries;

– Ensure growth and financial strength by coupling a Compound Annual Growth Rate (“CAGR”) of 10-13% in Net Revenue with an FFO/Net Debt ratio of 28% expected from 2023, together with the maintenance of a DPS of 0.43 euros for 2023-2025, compared to 0.40 euros in 2022, so the DPS of 2024 and 2025 must be considered as a sustainable minimum.

As part of the plan, the company “foresees a new rationalization of its structure, through the exit of some businesses and geographies that are no longer aligned with its strategy,” they anticipate.

And they indicate: “In Latin America, the Group hopes to leave Peru and Argentina”. In other words, in Argentina they would sell, among other things, the distributor Edesur, which supplies 2.5 million users; transportation assets; and its three generators: the Costanera and Dock Sud thermal plants, and the El Chocón hydroelectric plant.

In Peru, they will divest from Enel Distribución Perú, one of the leading distributors in the country with more than 1.3 million customers.

And Enel Generación Perú, one of the largest generators in the country with around 13% of the total power of the SEIN (National Interconnected Electric System). It has 1,682.60 MW (53.3% thermal; 46.7% hydraulic) and has seven hydroelectric plants and two thermal plants.

In renewable energy, through Enel Green Power, the company has projected an investment of almost 400 million dollars. It has awarded three mega projects for 332 MW tendered in wind (132 MW), photovoltaic (180 MWp), and hydroelectric (20 MW).

Likewise, the company “hopes to sell the assets in Ceará to increase the focus on distribution networks in megacities (Rio and São Paulo).”

On the other hand, in Latin America the company hopes to strengthen, grow and digitize the networks to allow the transition.

“The Group’s network strategy spans five of its six core countries, namely Italy, Spain, Brazil, Chile and Colombia, where it has an integrated position and where its unique expertise in the digital evolution can best be deployed, primarily focusing on large metropolitan areas”, reports the company.

Objectives

To achieve these financial objectives, the group expects to invest a total of around 37,000 million euros to carry out the following strategic actions:

  • Balancing customer demand and supply to optimize risk/return profile

By 2025, in the six main countries, the Group expects to sell around 80% of electricity volumes with fixed price contracts, which represents an increase of around 15 TWh (+7%) compared to 2022 estimates. The Group expects to reach 100% of fixed-price sales covered by own generation and long-term power purchase agreements (“PPAs”), of which around 90% are expected to be covered by carbon-free sources, ensuring further the evolution of the Group’s margins.

This will allow the Group to apply a stable and visible long-term business strategy, thus reducing the short-term risks associated with external volatility and encouraging the Group’s customers to switch to clean electricity from fossil fuels.

With this objective, the Group, taking advantage of the long-term contractual relationship with its customers, expects to accelerate the deployment of value-added services and new generation infrastructures over the next three years, more specifically

  • electric vehicle charging points (from an estimated 0.5 million in 2022 to approximately 1.4 million in 2025)
  • behind-the-meter storage (from an estimated 99 MW in 2022 to about 352 MW in 2025)
  • demand response (from an estimated 8.4 GW in 2022 to about 12.4 GW in 2025).

Decarbonisation to guarantee competitiveness, sustainability and security

By 2025, the Group expects to add around 21 GW of installed renewable capacity (of which approximately 19 GW in its core countries), on track to meet its decarbonisation targets in line with the Paris Agreement.

The Group plans to develop this renewable capacity with the support of a market-leading project pipeline, amounting to around 425 GW.

The Group also continues to apply its “Stewardship” business model, with the aim of seizing more potential opportunities in non-core countries to maximize global value creation.

The decarbonisation strategy allows the Group to once again confirm its commitment to zero emissions by 2040, with 1.5°C compliant targets set in all areas and under the validation of the Science Based Targets initiative.

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