Enel Green Power Sees Africa as ‘Next Big Place’ for Renewables

Apr 08, 2014 3:30 am ET

April 8 (Bloomberg) -- Enel Green Power SpA, the clean energy company majority owned by Italy’s largest utility, sees Africa as “the next big place” for renewables as it seeks to expand in markets with faster growth in power demand.

“We said, what is the next big region of the world where renewables can come, can grow, and where we can play a role similar to the one we are playing today in Latin America?” Chief Executive Officer Francesco Starace said in an interview at his company’s Rome headquarters yesterday. Latin America accounted for 28 percent of the company’s added capacity last year.

The operator of about 8.9 gigawatts of hydroelectric, solar, wind and alternative energy power plants is focusing on places where governments are seeking to expand electricity access as developed nations wind down subsidies for renewable power. The company, which has operations in 16 countries, is expanding its reach in South Africa and Morocco and plans to enter Kenya and Egypt, among other nations, in the next five years.

About 57 percent of Africa’s population doesn’t have access to electricity, according to the International Energy Agency. The number of people without power is forecast to rise 7.5 percent by 2030, to 645 million from 600 million.

Enel Green Power plans to spend about 73 percent of the 5.4 billion euros ($7.42 billion) it has set aside for growth during the next five years in emerging markets, according to the 2014-2018 business plan presented April 3.

Rift Valley

In South Africa, the company is planning geothermal and wind projects. Biomass might be the next type of renewable investment in the country, Starace said.

The Rift Valley, which stretches across Kenya, Uganda and Tanzania, has “a huge geothermal potential and for us geothermal is very important,” Starace said.

“The worst is past us,” Starace said of policy changes that affected renewable energy in mature markets such as Spain and Italy. The company is on on track to meet production targets in 2014, he said.

Starace said he doesn’t deny that the company’s forecast to increase total installed capacity to about 13.4 gigawatts in 2018 is “cautious.”

The company is forecasting earnings before interest, tax, depreciation and amortization of about 1.9 billion euros this year, in line with 18 analysts’ estimates compiled by Bloomberg.

The company sees Ebitda rising to about 2.6 billion euros in 2018, with net income around 800 million euros. Net debt is expected to remain at 5.4 billion euros through the period as investments are financed through cash flow, Starace said last week.

Dividend Policy

Starace said the company will decide how to use profits toward the end of this year when investments in Chile, Mexico and Brazil will be more advanced.

“Then we will have clarity that we can push down the pedal and accelerate growth,” he said.

Asked about the company’s dividend policy, he said the payouts should be raised if there’s no better alternative.

Enel SpA owns 69 percent of Enel Green Power’s outstanding shares, according to data compiled by Bloomberg.