Enel Looks to Emerging Markets for Growth

Annual net profit down 84 percent on writedowns; sees profit growing average 10 pct per year to 2019.

Enel aims to raise profits and dividends over the next five years by focusing on emerging markets and green energy after Italy's biggest utility reported an 84 percent fall in 2014 net profit on Thursday due to writedowns.

Under the first business plan of CEO Francesco Starace, Enel said it would spend 18 billion euros ($19.2 billion) on growth, more than half in emerging markets like Latin America and Africa while doubling the capacity of its green power division.

The company, which is also counting on its smart metre and smart grid technology to expand its business, said it would focus on a larger number of smaller projects rather than big traditional plants.

Similarly, Germany's top utility E.ON has decided to to focus on renewable energy and power grids, spinning off its traditional thermal power plants.

Europe's power sector has been hit by weak energy demand in a sluggish economy, low wholesale power prices and a surge in demand for cleaner renewable energy which is replacing gas and coal-fired power plants.

State-controlled Enel, which pledged to raise its dividend payout to 65 percent in 2018 from the current 40 percent, also plans to sell assets to raise 5 billion euros over the period, including 2 billion euros already under way.

Enel, one of Europe's most indebted utilities, is in talks to sell its 66 percent stake in Slovak power generator Slovenske Elektrarne.

The plans from Starace, who took over last year and has a background in renewable energy, were well received.

"The key is boosting 2018 payout policy to 65 percent... an additional 3 billion euros worth of disposals, 18 billion euros growth capex plan... all ahead of even the bulls' expectations," UBS said in a note sent to traders.

At 0905 GMT Enel shares were up 2.4 percent while the European utility index was up 0.8 percent.

Europe's second largest utility in terms of installed capacity said it expected net ordinary profit of 3 billion euros this year after it posted an 84 percent fall in net earnings to 517 million euros last year because of writedowns on assets in Italy and Slovakia.

Profits are expected to rise on average 10 percent per year to 2019, it said.

"The net profit target is particularly positive in a context of slow growth in its home markets," a Milan trader said.

By Stephen Jewkes