Enel plans to spend more on modernizing mature markets

MILAN – 21 November 2017: Italy’s biggest utility Enel (ENEI.MI) pledged to spend more upgrading its networks in mature markets, including the United States, to prepare for an era when home appliances will be hooked up to the Internet as well as on clean energy technology.

In its 2018-2020 business plan, the group said it would spend 80 percent of its growth budget in Italy, Iberia and North-Central America while cutting its investment in South America, which it said could face more risks.

Much of the 17 billion euros ($20 billion) it plans to spend in the next two years in its established markets will go to grids and renewable energy, installing so-called smart meters in homes to take advantage of the “Internet of things”, where appliances such as washing machines and refrigerators are online.

Like other utilities across Europe, Enel is reshaping its business to cope with falling margins on the traditional generation business and is looking to offer new services to better meet customer demand and capture clients.

The boom in green energy with its intermittent output and the fall in traditional more centralized thermal production has prompted energy companies to invest more in digital technology and storage systems.

Such investments command fatter returns, fueling earnings and dividend payments.

“We can leverage the trends of urbanization and electrification of demand... to capture the opportunities presented by the major disruption of the entire energy sector,” CEO Francesco Starace said in a statement.

Enel’s Open Fiber unit and Telecom Italia (TLIT.MI) are rolling out separate ultrafast broadband networks in a country with among the lowest internet speeds in Europe, raising concerns that it could lead to a mutually damaging war where both companies lose money and infrastructure is duplicated.

Enel, which controls Spanish utility Endesa (ELE.MC), confirmed most of the financial targets from its previous plan but said it would pay a minimum dividend per share next year of 0.28 euros from 0.21 euros this year.

Europe’s biggest utility in terms of customers said it would be selling 3.2 billion euros of assets in the three years to 2020, mostly in thermal electric generation.

It said it had earmarked 2.3 billion euros to buy back minority shareholders and 2 billion euros to buy grids and e-solution businesses while committing 400 million euros to equity partnerships.