Enel’s biggest bet outside its native Italy is being spurred on, and in what way, by the energy crisis. The definitive takeover of Endesa by the semi-public electricity company, which culminated almost 15 years ago —a decade after the Spanish State divested itself of its shares— is proving to be especially beneficial for the interests of the transalpine country, which is receiving a real —and very welcome— shower of millions in the form of dividends.
In 2022, the harshest year of the energy crisis, in which gas and electricity reached all-time highs, almost one in three euros earned by Enel came from its business in Spain. This geography contributed to its income statement, in fact, almost as much as Italy (3,239 million euros of profit before taxes and interest —Ebit— compared to 3,251 million), and only slightly less than the entire American continent (3,640 million ). The good progress of Endesa, which between 2021 and 2022 has multiplied this metric by four, will provide a historic dividend to the parent company: it will pocket almost 1,100 million in 2023.
For Enel, with almost a quarter of public capital, this record shot from its Spanish subsidiary comes in handy: since 2014, when Endesa’s perimeter completely changed due to the transfer of its business in Latin America to its parent company, the company it did not distribute as much money to the shareholders. “Enel is very satisfied with the investment it made in its day, and we are a very important piece for them”, acknowledges the CEO of Endesa, José Bogas, in conversation with Business. The Italian giant, with a market value of almost 60,000 million euros and in which Prime Minister Giorgia Meloni has just replaced her CEO, today maintains a position of just over 70% in the capital of the second Spanish electric.
That purchase of Enel, now distant, was expensive in the eyes of many observers in the sector. However —as the company itself puffs out—, the current Endesa is worth more than that one. Everything, despite having been stripped of its Latin American business along the way, transferred to the parent company almost a decade ago. In gross numbers, the Italian paid 40,000 million for its current Spanish subsidiary, which today is worth 21,500. But to that account we must add the value of those Latin American assets —just over 8,000 million— and the juicy dividends that it has pocketed since 2008: 30,800 million.
Any time is good to receive a shower of millions in dividends, but this is especially so. For many reasons. First, because its Italian business is much more limited and is, by definition, more stable and less profitable: historically, the Rock And Roll of its income statements comes from Latin America (Chile, Colombia, Peru, Brazil…), and few expected that Endesa would now be the one to join the party. Second, because it comes at a time of certain anxiety for Enel, with the debt skyrocketing, well above most of its European competitors and -also- very far from its objectives. And that, with rising interest rates, is a heavy burden on its ambitious expansion plans.
“I always say that Enel doesn’t care if Endesa pays dividends or not,” Bogas qualifies. “70% of our profits remain within the shell of the group and, whether they are distributed or not, they are available for the purposes of their balance sheet, the reduction of their debt… For this reason, when people say that they are receiving a good dividend, they have no Bear in mind that it could receive even more powerful resources if Endesa did not distribute the profits among its shareholders”.
The accumulated liabilities are today the main headache of the Italian. To try to reduce it, it has just launched an ambitious asset sale process that, however, will only affect Endesa in a glancing way, with the release of its wholesale gas portfolio on the market. One more proof of the potential that they see in their business in Spain, in which they are investing in the order of 2,300 million a year, four times more than before Rome finally took over the controls of the former Spanish public electricity company. All clear, at the expense of what the new CEO of Enel, Flavio Catteneo, can decide.
War and energy shock aside, wind power and —above all— solar power, are the two forces that will shape Endesa’s future in the coming years. With its rise, says Bogas, the company has gone from operating “in a very mature market to operating in one that, although it is still mature, has become emerging in many assets: all coal and nuclear companies have to be closed, there are to reinforce and digitize the network… It is super attractive for us. That is why we have changed to the pace and we have invested much more”. He does it, however, with a considerable delay compared to his most direct competitors, who are several lengths ahead of him in this chapter.
In view of the large number of projects that have just received a positive environmental impact statement, the emergence of green energy in Spain in the coming years is guaranteed. “More megawatts have been approved than all we have installed in this century: if all the projects really start operating in 2025, we will have been five years ahead of the target set for 2030 and the prices [de la electricidad] they would sink”, he predicts in reference to the Spanish macro panorama. Not without some reservations: “Last year 5,000 renewable megawatts were installed and now we have to install 15,000 a year… Do we have the capacity and technical and human resources to do it?”, he asks rhetorically. “There is going to be a major bottleneck.”
Even more doubts are raised by the head of Endesa about the race for green hydrogen, in which practically all energy companies are involved, but in which the electric company is showing itself to be much more timid. “Everyone says that it will be an essential element in the future of energy, and I believe it…”, Bogas slides. “It has ways and promises, but there is a way to go for now, but technically it is still very difficult to manage and transport. We prefer to learn, with pilot projects, to see to what extent it is scalable”.
Bogas, ‘rare bird’ in the sector
The head of Endesa has become a rare bird among executives on the Spanish energy scene, at odds with the Government. With a significantly different tone, he is also the only one who has openly recognized the existence of extraordinary benefits. “What I said in the presentation of results, and I maintain, is that the good results of 2022 have not come from electricity, but from gas: our combined cycles are more modern and efficient, and in a year of very strong production it made the generation was tremendous, with 500 million euros more margin than the previous year”, he points out.
The second “strange circumstance” that seasoned its income statement —and in what way— was the huge volume of gas resulting from the low consumption of the Spanish industry, shaken by production stoppages due to high prices. “We were left hanging with a large amount [de ese combustible]which we were able to sell in a wholesale market that at that time was skyrocketing and which gave us another 500 million”, acknowledges the head of the Spanish electricity company.
Although —like the rest of the energy companies— Endesa will appeal the specific tax approved by Congress, its CEO applauds the limit of 67 euros per megawatt hour (MWh) set last year by the Government on nuclear and renewable generation. “It has made our profit have been 5,000 million instead of 11,000, but it is something that seems absolutely correct to me. It was a measure to mitigate the impact on the end customer: that was indeed a benefit that had fallen from manual heaven ”, he describes graphically. “What I do not share is that they tax my income at 1.2%,” he complains in reference to the new tax. There is unanimity there.
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