Francesco Starace, Enel Green Power
Five years ago, when I embarked on my journey with Enel Green Power (EGP), it didn’t take long to realise the potential of a renewables company operating several technologies in a diverse range of countries.
In those days, EGP was a much smaller player, about half the size it is today. Since then, we have listed the company through a successful initial public offering (IPO) on the Milan and Madrid stock exchanges in late 2010, we have conquered new markets, constructed new power plants and signed power-purchase agreements, while boosting R&D.
Against a backdrop in which many renewables companies are stagnating or losing market share, we have reached 8GW of installed capacity, generating more than 25 terawatt hours last year from wind, hydropower, solar, geothermal and biomass — enough to meet the needs of ten million households and avoid the emission of more than 18 million tonnes of CO2.
The company’s strength lies principally in wind (4.3GW by last December), hydro (2.6GW), geothermal (almost 800MW) and solar (nearly 200MW).
That’s not all. EGP is a global player. We operate in 16 countries across Europe, from the Atlantic to the Black Sea, and in the Americas, from Canada to central Chile, and we’re planning to expand further.
We believe that this combination of geographic and technological diversification offers strength and stability.
In 2012, all our main financial indicators grew on the previous year. We posted revenues of about €2.7bn ($3.46bn) — an increase of 6.4% — and earnings before interest, taxes, depreciation and amortisation of nearly €1.7bn, up by 6%.
The business plan for 2013-17 ensures further diversification by reshuffling the relative weights of our existing markets in terms of their contribution to results, by developing new technologies and adding fresh countries to our portfolio.
During this period, we are targeting an extra 4.4GW of renewables, with 43% of our portfolio in emerging countries. Brazil and Chile will lead the way, with 15% and 10% respectively.
Of the €6.1bn we are investing in 2013-17, €5.5bn will be allocated to growth, with €3.8bn aimed at developing markets such as South Africa, Morocco, Peru and Colombia, as well as Brazil and Chile.
It is a different story closer to our home market. Italy, Iberia and other European markets have undergone a rebalancing, due to the declining growth cycle on the continent. In the 2013-17 plan they represent slightly more than 20% of our portfolio, as opposed to almost 70% at the time of the IPO.
EGP will focus on increasing wind capacity while still growing steadily in the remaining technologies.
This will lead to a portfolio comprising 58% of wind by 2017 (as opposed to 54% today) and 42% spread between geothermal, hydro, solar and other sources.
This diversified growth is financed mainly through our own resources. Since the IPO, we have generated cash flows from our assets that have enabled us to cover capital expenditure. EGP has always been keen to retain central control of capital allocation. As a consequence, the overall capital structure remains conservative and has been stable over time.
On top of this, we have been able to improve diversification of our funding by tapping market niches specifically oriented to financing renewables projects, including export credit agencies, multi-regional development banks and tax-equity agreements.
To maximise cash generation, EGP has chosen to extract the greatest value from all O&M activities, to reinforce its leadership in the sector. The rise of overall O&M costs, driven by higher installed capacity, will be partly offset by reducing unit costs in this area by 10%.
Growth in emerging countries, implementation of best O&M practice and forward selling of electricity selling to hedge risks will allow us to generate €8.4bn by 2017.
This means we will be able to fully fund our investment plan, make interest payments to our creditors and distribute dividends to shareholders, while making limited recourse to corporate debt.
This is the future for a company whose uniqueness has been its core strength.
Francesco Starace is chief executive of Enel Green Power
This piece was published as part of the Thought Leaders series. Recharge’s Thought Leaders’ Club brings together leading thinkers and participants from the renewable-energy sector to examine the key challenges facing our industry