Operational Efficiency

The new strategic plan envisages operational efficiency improvement to the tune of an 8% reduction in nominal terms in “cash costs” - the sum of opex and maintenance capex. By leveraging the new organizational structure and improved global integration, Enel Group will drive technology best practices to optimize capital allocation away from maintenance capex, with a careful reduction of 1.5 billion euros versus the previous plan. As has been seen at the Group's Renewables Business Unit in recent years, this planned reduction in maintenance capex will lead to a correlated reduction in opex, which together with procurement and technological levers, will allow the Group to reduce its opex by 7% between 2014-2019.

Industrial Growth

The plan envisages growth in EBITDA by 2.4 billion euros by 2019, or an additional 6.7 billion euros of EBITDA cumulatively over the plan period. This growth will be driven by a capex plan which envisages Gross Capex for the period of 34.0 billion euros, up from 29.7 [1]billion euros in the previous plan, an increase of 14%; and the shift of capital expenditure towards growth initiatives, will bring about additional Growth Capex of around 6 billion euros, an increase of 49% compared with the previous capex plan. Almost 90% of the new Growth Capex will be devoted to driving revenue growth in low risk businesses, such as networks, renewables, non-merchant conventional generation and retail, targeting average project returns higher than a minimum spread of 200 bps over the Weighted Average Cost of Capital (WACC). Around 60% of total capex will be invested in emerging markets.

Additionally, by pursuing a larger number of smaller projects in different regions and technologies, the Group will reduce execution risk, enjoy greater flexibility and optionality as well as an ability to adapt to changing scenarios and evolving country, currency or regulatory risk profiles. This is expected to translate into more linear EBITDA growth going forward.

Specifically by business, growth drivers are as follows:

  • Networks – Global Distribution accounts for around 7 billion euros of EBITDA and runs a customer base of 61 million end-users. The Group plans to invest around 5.4 billion euros of Growth Capex across the period in the network business, driving organic growth in emerging countries and new technological solutions, such as digital meters and smart grids, across all geographies. Linear as well as predictable cash flows can be secured through stable regulatory frameworks with long term concession regimes in the countries in which the Group operates.
  • Retail – Growth in retail is mostly driven by customer base increase and innovation of new product and service offerings. The Group targets an increase in free market customers in Italy and Iberia to 26 million by 2019, up from around 22 million in 2014. New energy-related services are expected to deliver double digit growth over the plan period, also driven by EU legislation on energy efficiency.
  • Renewables – Enel Green Power (“EGP”) is best positioned to continue leveraging on global growth prospects thanks to its diversified mix of technologies and geographies. The new plan envisages a 50% increase in the total additional capacity (reaching 7.1 GW) to be added over the five year period versus the previous plan, mostly in Latin America, North America and Africa. Approximately half of the investments of EGP for the period aimed at growth will be deployed in Chile, Mexico and Brazil, countries where EGP already has 30% of the planned additional capacity under execution.
  • Conventional Generation – The growth strategy in conventional generation is based on the principle of being the lowest-cost generator in attractive regions with strong growth prospects and low regulatory risk. Priority will be given to projects with low execution risk and higher levels of stakeholders acceptance, and to this extent the Group is also running a complete review of its project pipeline. No merchant exposure will be taken in the development of projects so as to mitigate the exposure to commodity price fluctuations.

1Equates to 25.7 billion euros Net Capex, as in the previous business plan presentation. It also includes perimeter effects. The difference between Gross and Net Capex is accounted for by connection fees.

Active portfolio management

The Group has placed all assets under a review to identify those that may be appropriate for potential divestiture, assessed against criteria of an optimal strategic fit with the Group's strategic plan. Already under execution is approximately 2 billion euros worth of disposals, while an additional 3 billion euros of disposals are expected to be realized during the plan period. In this way, the Group expects to recycle up to 5 billion euros of capital, redeploying it towards the reorganization of its Latin American operations and further growth opportunities. The overall plan is expected to be cash neutral during this cycle, while driving net income accretion, net of disposals, of around 200 million euros by  2019.

Shareholder Remuneration

A new dividend policy providing certainty in the short term, and significant upside potential in the medium term, has been introduced for the 2015 – 2019 period. For 2015, the payout ratio will be increased to 50%, and it will increase by 5 percentage points every year to reach a payout ratio of 65% in 2018. If the net ordinary income for either of 2015 or 2016 is below Group guidance, then a minimum DPS of 0.16 and 0.18 euro per share will be paid, respectively for 2015 and 2016.