Enel marks push into renewables with Enel Green Energy repurchase


Utilities are increasingly turning to renewables as sources of growth. Italy’s largest utility Enel Group is the latest to do so, repurchasing Enel Green Energy in its entirety through issuing €3.1 billion (US$3.3 billion) in shares.

For each EGP share, investors will receive 0.486 Enel Group shares under the deal. Bloomberg notes that the deal will see Enel Group repurchase the 30% of EGP that it does not already own. Bloomberg reports that the Italian Utility raised €2.26 billion (US$2.41 billion) when it sold Enel Green Power in 2010.

EGP and its foreign subsidiaries will become fully owned subsidiaries of Enel Group. EGP will be delisted as a result.

In a statement announcing the deal, EGP reported that the move will “increase the investment capacity of Enel Green Power,” enabling it to grow its project pipeline; allow “closer integration” of renewables and the distribution and retail businesses; and result in “commercial and financial synergies” between the two companies.

Speaking to the Financial Times, Enel Group’s Starace noted that EGP had been exceeding its capabilities as a standalone businesses and that the timing is right for the repurchase given the emergence of renewables from being subsidiary driven to economically competitive generation sources.

“The third phase [of renewable development] is of maturity and industrial growth,” Starace told the Financial Times.

Not all EGP shareholders are likely to be pleased by the move. The Financial Times notes that Ecofin Ltd portfolio manager Deidre Cooper described the repurchase as demonstrating, “the dismal track record of treatment of minority shareholders in renewable subsidiary buy-ins in Europe.”

“Not only has Enel not paid fair value to [Enel Green Power] shareholders, more importantly those shareholders have been given no choice but to accept this offer,” said Cooper. ?

EGP is one of the largest producers of thin film PV modules globally. It owns and operates the 3Sun amorphous silicon factory in Sicily. 3Sun reports that it will produce 250 MW of a-Si modules in 2015.

While a-Si technology, with its low conversion efficiency when compared to both crystalline, cadmium telluride and CIGS rivals, is not thought to be economically competitive on global markets on a module-sales basis, EGP has deployed 3Sun’s modules in PV power plant projects in emerging markets, particularly those close to the equator. In hot climates 3Sun’s a-Si technology is generally understood to exhibit a superior temperature co-efficient when compared to rival technologies.

The deal is set to be approved at an extraordinary shareholders meeting of both firms on January 11, 2016.