Tags: Enel | Raise | unit | IPO

Enel Said to Raise About $3.1 Billion in Unit's IPO

Friday, 29 Oct 2010 04:22 PM


Enel SpA, Italy’s biggest utility, raised about 2.26 billion euros ($3.1 billion), less than its target, in an initial public offering of its renewable energy unit, according to two people familiar with the IPO.

Enel sold about 1.42 billion shares of Enel Green Power SpA at 1.6 euros apiece, valuing the company at about 8 billion euros, said the people, who declined to be identified because the matter is private. Enel on Oct. 28 cut the range used to market the stock to investors to a minimum of 1.60 euros each, compared with an initial range of 1.80 euros to 2.10 euros.

Enel Chief Executive Officer Fulvio Conti last month said he planned to raise at least 3 billion euros from selling shares in the operator of wind, solar and hydro-electric power plants to help cut the utility’s 54 billion euros of debt. Investors initially shunned the offering because it valued EGP at about the same as rivals such as Spain’s Iberdrola Renovables SA.

“There wasn’t enough of an incentive to switch between stocks at a higher price,” said Dublin-based Alexandra Vanhuyse from KBC Asset Management, which oversees 163 billion euros and ordered shares. “A company has to offer a lot more than rivals to be as expensive as them in an IPO because it doesn’t have a track record.”

Relative Value

At 1.6 euros a share, EGP has an enterprise value of 8.1 times estimated earnings before interest, tax, depreciation and amortization, or Ebitda, MF Global analysts said in a note to clients on Oct. 29. That’s less than Spain’s Iberdrola Renovables, which trades at 9 times enterprise value/Ebitda, the analysts said. EDP Renovaveis SA trades at 8.3 times.

Iberdrola Renovables has dropped 54 percent since its IPO in December 2007, while EDP Renovaveis has tumbled 48 percent since going public in June 2008.

Investors ordered about 1.75 billion shares, one of the people familiar with the sale said. Companies typically seek to draw orders for more stock than they’re selling in an IPO. Investors that receive less stock than they ordered then buy shares on the market, helping to pushing the share price up.

Bank of America Corp., Intesa Sanpaolo SpA’s Banca IMI SpA, Barclays Plc, Credit Suisse Group AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Mediobanca SpA, Morgan Stanley, UniCredit SpA and Banco Bilbao Vizcaya Argentaria SA are managing the IPO. The banks can increase the offering by 210 million shares by exercising the so-called overallotment option.

Dividend Payout

EGP will return 30 percent of net income to investors through dividends, more than its rivals. Unlike Iberdrola Renovables and other competitors that rely on wind power, EGP has 44 percent of its power capacity at hydroelectric plants. About 41 percent of its capacity comes from wind and 13 percent from geothermal.

Managers at EGP and Enel had planned to buy shares in the IPO, according to company statements. EGP Chairman Luigi Ferraris and Chief Executive Officer Francesco Starace reserved 80,000 shares each, while Enel Chairman Piero Gnudi and Conti ordered 100,000 shares each.

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