Enel will sell operations in Peru and Argentina to reduce record level of debt

Next year will be key for the sale of various Enel operations in South America and Europe: the Italian utility company confirmed its plans to sell its operations in Peru, as it had transpired last week, and the exit process is added in Argentina, with the aim of reducing the record levels of debt in the midst of a complex context of higher costs and energy transition.

The company’s executives pointed out in the presentation of the update of its 2023-2025 strategy that the process to exit the Argentine and Peruvian markets is added to the sale of assets in Romania, Europe, and most of this sale plan It should be ready by the end of 2023.

In Argentina, the Italian company will put up for sale its Edesur operation, the electricity distributor for the south of the City of Buenos Aires and Greater Buenos Aires.

As reported by Bloomberg News, Enel is struggling with mounting debt after a wave of acquisitions to boost renewable energy production. The company’s objectives are to focus its transition towards cleaner energies in six countries that constitute its main markets to date: Italy, Spain, the United States, Brazil, Chile and Colombia.

Francesco Starace, CEO of Enel, stressed that these divestments planned in Argentina and Peru are part of his comprehensive plan for the remodeling of the group, seeking to “maximize value for our shareholders.” “2023 we expect to be the year where we execute the rationalization strategy,” Starace said.

Enel has already announced divestments with an expected impact on net debt of around €4 billion by the end of the year.

The executive also emphasized that the decision to leave the Argentine and Peruvian markets in South America does not correspond to a judgment against the regulatory framework, nor the policies implemented by the countries.

Enel is one of the world’s largest green energy groups, with operations in electricity generation and distribution. The company’s premise is to sell assets for up to €21 billion, a figure that is equivalent to about US$22 billion, and thus advance the reduction of its debt to €58-62 billion at the end of December.

Enel had already anticipated divestments with an expected impact on its net debt of close to €4 billion euros at the end of 2022, with the sale of the total participation of its unit in Russia, and that of its assets in Brazil and Chile. In Brazil, the sale of the Ceará assets is expected to be completed by the end of this year.

ENEL’S RATIONALIZATION STRATEGY

The Italian-owned company has been hurt by rising costs amid the energy crisis, in addition to other events such as droughts that have reduced hydroelectric power production and lower demand due to the pandemic.

The objective at the end of 2023 is for Enel’s debt to be reduced between €51 and €52 billion with the planned divestment processes.

According to Bloomberg News, the Peruvian assets that Enel will put up for sale would be valued at around US$5 billion, while a person with knowledge of the matter said that these have already attracted the interest of potential strategic bidders and investment funds.

Although Enel executives see turbulence that will continue in the following years due to global uncertainty, fears of recession and high inflation, Alberto De Paoli, CFO of the energy company, explained that the company preferred to opt “for a conservative option to our numbers.” “We could end 2023 in a much better position,” the executive explained.

It should be noted that after the presentation of the strategic plans for 2025, Enel shares rose up to 2.9% in Milan to their highest level since July 11, according to Bloomberg.

With information from Bloomberg Línea