Enel Approves Green Merger

Italian utility Enel on Wednesday approved a merger with its renewable energy subsidiary Enel Green Power to help boost growth as it cut its core earnings forecast for the next two years.

Enel, which owns 69 percent of its green subsidiary, said it would issue up to 770.589 million new shares to offer Enel Green Power (EGP) minorities at an exchange ratio of 0.486 Enel shares for each EGP share tendered. The merger is expected to be completed by the first quarter of next year, it said.

"Bringing the (green) business under 100 percent ownership of the group will allow us to accelerate both EGP's growth and that of the other business lines," Enel CEO Francesco Starace said.

Starace, a former EGP head, is betting on green energy, emerging markets and digital power grids to help drive growth.

Weak demand, low wholesale power prices and surging renewable power generation is weighing on operators of fossil-fuel fired plants across Europe and Enel has said it will close 23 power stations in Italy.

In its 2016-2019 plan unveiled on Wednesday, Enel said it expected recurrent core earnings to stand at around 14.7 billion euros ($15.7 billion) next year and at around 15.5 billion euros in 2017.

In a plan presented in March, Enel had pegged 2016 recurrent earnings before interest, tax, depreciation and amortisation (EBITDA) at 15 billion euros and at 15.6 billion euros in 2017.

Europe's second-largest utility by capacity confirmed its forecast for ordinary net profit in the next two years and its dividend policy, while increasing its 2014-2019 savings target to 1.8 billion euros.

An asset sale programme of 5 billion euros in the previous plan was raised to about 6 billion euros, it added.

Enel shares were down 1.3 percent, while the European utility index was 0.6 percent lower.

Reporting by Stephen Jewkes