Enel Shifts Investment Focus to Power Grids, Exercises Caution in Renewable Ventures

Enel begins work on Pulida

Enel, Italy’s prominent energy company, has unveiled a strategic shift in its investment strategy under the leadership of its new chief executive.

The company will prioritize investments in power grids over the next three years, adopting a more measured approach toward spending on renewable energy projects, Reuters news report.

Enel, formerly the world’s largest listed renewables developer, has outlined a plan for 35.8 billion euros ($39 billion) of gross capital expenditure until 2026. A substantial portion, nearly 19 billion euros, is earmarked to modernize and enhance the resilience of its networks, emphasizing a pivotal role for grid infrastructure.

INVESTMENT PLANS

Enel plans to allocate 49 percent of gross Capex in Italy, 25 percent in Iberia, 19 percent in Latin America and 7 percent in North America.

In Europe, Enel plans to focus its investments mainly in grids alongside strengthening its integrated business model, which includes the generation and customer segments. In Italy, Enel plans to invest approximately 49 percent of its gross capex.

In Iberia, Enel plans to invest about 25 percent of its gross capex, increasing renewable capacity while leveraging on hedged and sustainable investment returns.

In Latin America, Enel plans to invest around 19 percent of its overall gross capex, mainly focusing on networks, while positioning itself at an early stage for the progressive liberalization of the retail business.

In North America, Enel plans to invest approximately 7 percent of its overall gross capex leveraging on the partnership model as well as on cash generation guaranteed by the improvement of profitability of the existing portfolio, in order to fund the development of renewables.

In a conscious move reflecting market dynamics, Enel aims for more selective investments in renewables amidst factors such as escalating interest rates and input costs. The company intends to allocate a gross amount of 12.1 billion euros for onshore wind, solar, and battery storage projects during this period, Enel said in a news statement.

Enel’s strategy involves adding approximately 13 gigawatts (GW) of green energy capacity worldwide, leveraging partnerships with other entities to achieve this ambitious target.

However, Enel foresees a longer duration of high net debt, expected to range between 60 billion to 61 billion euros this year. This deviation from previous projections is attributed to challenges in finalizing asset sales planned by the prior management.

The Italian government’s decision to replace former CEO Francesco Starace stemmed partly from concerns regarding rising debt. New CEO Flavio Cattaneo emphasized a commitment to spending within the confines of generated cash, eschewing further debt accumulation.

Flavio Cattaneo, along with the new Chief Financial Officer Stefano De Angelis, highlighted the rationale behind prioritizing grid investments due to the predictability of returns, dictated by regulatory parameters. Cattaneo’s prior experience leading Italy’s power grid operator Terna bolsters this strategic shift.

Analysts caution that a slowdown in renewable investments might render the company less integrated and more reliant on energy suppliers, potentially impacting its overall resilience.

Enel outlined plans to reduce costs by 1.2 billion euros over three years and allocate approximately 3 billion euros to actively manage its customer portfolio, aiming to regain market share following a significant rise in customer churn rate to 20 percent.