Enel shifts 2020 growth focus to Europe and North America

The utility’s 2018-20 strategy, unveiled on Tuesday, is expected to add an extra €1.9bn to profits before interest, tax, depreciation and amortisation (Ebitda), driven by capex of €24.6bn ($28.9bn) over the period — a €500m increase on the figure under its last three-year plan. Roughly a third of this will be spent on adding 7.8GW of renewables capacity to its existing 37.1GW consolidated renewables portfolio.

“Our [business] model is optimally positioned for the energy transition and it’s providing ample opportunities for continued, robust growth,” Starace told investors at the company's Global Markets Day in London.

Of the new renewables capacity, 63% is expected to come from wind, 34% from solar, 2% hydro and 1% “other”, including geothermal. Enel has a further 21GW of renewables in its pipeline.

Antonio Cammisecra, head of Enel’s Global Renewable Energies division and chief executive of Enel Green Power, said that renewables were “the growth engine of the group”.

He said that the company foresees LCOE (levelised cost of energy) reductions in its wind and solar projects of 19% and 34% respectively between 2016 and 2020 — compared to the 11% and 22% LCOE reductions expected across the industry. Enel’s extra cost savings will come from its digitalization and remote condition-monitoring programme as well as other areas such as the increased use of robots and ‘highly automated processes’ in plant construction. In total, the renewable division’s cost savings in 2018020 will amount to €100m, and increase Ebitda by 12%.

The company has also begun to sign renewables power-purchase agreements (PPAs) directly to corporate players.

“Corporate PPAs are emerging as a business opportunity wherever a supportive regulatory framework is available,” said Cammisecra, pointing in particular to the US, Mexico, Colombia and Australia.

In a “significant change”, the Italian group said it will now channel 80% of its total growth capex to mature markets, up from the 60% previously foreseen “with the effect of reducing its risk profile”.

That means spending 40% more than previously expected in North and Central America — an investment that will be “driven by renewables”.

There will be a 35% boost in capex in Iberia — Spain and Portugal — partly to accommodate the “restart of renewables growth”, and more investment in networks in Enel’s domestic Italian market.

But South America will see a 26% lower capex level than under the last three-year plan, with the majority of that going to renewables, Enel said.

Enel has emerged as a key player in the renewables markets of the US and Mexico, where as recently as last week it emerged as the biggest winner in the latest round of clean-energy auctions.

The Italian group’s latest strategy update also features an increased financial commitment to digitalisation — a growing focus for all major utilities that CEO Francesco Starace said is now central to every part of Enel’s business plan — from networks to its retail businesses.

Enel will also create a new business line devoted to e-services, under the brand name Enel X, which Starace described as the “core of our long-term strategy”. That will focus on providing a range of energy services to the residential, business and governmental sectors, including PV and storage systems, electric vehicle charging, fibre-optic cables, demand response, smart lighting and home appliance repair.

The company said this will “address new customer needs stemming from the transition from a centralised to a distributed energy model”.

By 2020, Enel says it will have sold 10.7GW of demand response, 600MW of storage capacity and installed 313,000 EV charging stations.

Over the 2018-20 period, Enel is also planning to reduce its global coal-fired capacity from 16.2GW to 9.3GW, and its oil & gas thermal generation from 16.1GW to 11.6GW. Starace added that the company did not yet have a strategy of how to meet Italy’s target of having zero coal-fired electricity generation by 2025.

“It’s theoretically possible [to divest from coal] in seven years,” Starace said. “How — that’s something we need to know from the next government.” He later explained to journalists that it was unclear how so many gigawatts of baseload grid capacity could be replaced in such a short space of time.