Seeding Energies, the importance of creating value

Published on Monday, 27 November 2017

“The contribution of our business is not only linked to economic results but also, and ever more often, to our capacity to generate solutions and to positive returns on the long-term economic and social growth of the communities with which we interact”

– Seeding Energies – Sustainability Budget 2016

Positive results and ambitious objectives

In 2016 the total economic value generated by our Group was 70,592 million euros; after accounting for economic value distributed (consisting of operating costs, personnel costs and benefits, and payments to governments and capital financiers) equivalent to 59,969 million euros, the economic value obtained was 10,623 million euros. In addition, the initial data from 2017 indicate further growth.

The economic-financial results demonstrate a regular EBITDA for 2016 equivalent to 15.2 billion euros, an increase for the first time since 2013. The regular net profit, from which the dividend is calculated, was 3.2 billion euros as compared to 2.9 billion euros the previous year, and amounts to an increase of 12%. For the 2017-2019 period, the ambitious but realistic objective is 4 billion euros of EBITDA growth.

The relationship between operating cash flow (FFO - Funds from Operations) and net debt, which indicates the level of financial strength, reached 26% thereby surpassing the objective our Group had set itself and demonstrating an increase over the 25% of the previous year. Net debt remained substantially stable at 37.6 billion euros in spite of the significant increase of investments earmarked for growth, which saw an increase of 1.5 billion euros compared to 2015.

Growth investments

Investments are precisely one of the decisive elements in Enel’s strategy. In particular, for the 2017-2019 period we are above all concentrating on growth investments that, in line with the objectives of the Sustainability Plan, should total 12.4 billion euros, equivalent to 60% of all investments.

“The plan of total investments in the 2017-2019 period is equivalent to 20.9 billion euros, of which 60% is represented by growth investments”

– Seeding Energies – Sustainability Budget 2016

The investments, and the economic value derived from them, will be directed along a double track that depends on the geographical and social context: in mature markets – characterised by an ever greater presence of renewable sources and distributed generation – a key element will be the development of a modern distribution network open to multiple uses and services. In emerging markets, the challenge is that of satisfying the demand for electric energy in economies where economic development, increasing populations, and urbanisation are driving growth.

Optimising costs

The creation of economic value is also obtained through the optimisation of cost efficiency, beginning with a reduction of costs. In 2016 the cash cost – that is, the sum of fixed costs and service investments – was equivalent to 11,428 million euros: 7.8% less than at the same time the previous year (12,397 million euros); after deducting the relevant variations of perimeter in calendar year 2016 (including the Group’s leaving the Slovak and French markets), it is a loss of 7%. For the 2017-2019 period, the fixed objective in the Sustainability Plan is an additional decrease of circa 7%.

In terms of savings, the Strategic Plan 2017-2019 has fixed a target of 1 billion euros for 2019 as compared to 2016, with an increase of 500 million euros compared to the previous plan, principally through a reduction of operating costs. The primary instrument making this target possible is digitalisation, a process Enel is promoting enthusiastically.

“Energy is a door to the future, and the Strategic Plan 2017- 2019 represents the instrument to reach that future. This new Plan, alongside the existing fundamental pillars of the strategy, envisages digitalisation and a customer focus, broken down from both the industrial and Environmental, Social and Governance (ESG) viewpoints”

– Seeding Energies - Sustainability Report 2016

Shareholder trust

The positive results are reflected in the performance of Enel shares, which saw an increase of circa 8% in 2016 (12% if one considers those dividends distributed throughout the fiscal year). As far as shareholder remuneration is concerned, the objectives of the Strategic Plan are a minimum dividend of 0.21 euros per share on the results of calendar year 2017, an increase of pay-out at 65% of the ordinary net earnings consolidated in calendar year 2017 and 70% of ordinary net earnings consolidated in calendar years 2018 and 2019.

The composition of Enel’s shareholding demonstrates some of the principal characteristics of the Group: 68% are institutional long-term investors, a testament to the appreciation of a sustainable business model over time; in addition, present in Enel capital are 150 Socially Responsible Investors who retain approximately 8% of all shares in circulation.

On 9 January 2017, Enel Finance International successfully placed its first green bond on the European market, intended for institutional investors and backed by a guarantee issued by Enel SpA. The transaction raised around 3 billion euros, with a significant participation of so-called Socially Responsible Investors ("SRI"), thus allowing the Enel Group to further diversify its investor base.

The transaction is in line with our financial strategy outlined in the 2017-2019 Strategic Plan, which provides for the refinancing of €12.4 billion euros including through the issuance of green bonds as instruments for financing projects instrumental to decarbonising the production mix. In this regard, we have prepared and published a "Green Bond Framework" to improve the transparency and quality of green bonds issued.

At Enel, Economic value and sustainability go hand in hand.