Enel , Italy’s largest power company, posted a small drop in first-quarter profit as the European debt crisis dampened electricity demand in Italy and Spain.
Group net income for Enel, which also owns Spain’s Endesa, was €1.18bn, a 1.4 per cent drop from last year. Revenues were up 8.5 per cent at €1.2bn.
Chief executive Fulvio Conti said the “negative economic trend” experienced since last year continued into the first quarter, with lower demand in Italy and Spain, its largest markets, partially offset by growth in Latin America, Russia and eastern Europe.
A company presentation to investors showed electricity demand in Italy had dropped nearly 2 per cent in the quarter, while in Latin America it grew by almost 6 per cent.
Mr Conti said against that backdrop the company’s results were “ahead of our expectations and essentially in line with 2011 results”.
Enel said it would achieve its 2012 financial targets despite the negative effects of regulatory measures introduced in Spain. In March, Spain said it would raise power prices by 7 per cent as part of a plan to trim the “tariff deficit”, formed by utilities selling electricity below nominal costs. The deficit reduction plan will lead to a €1.7bn drop in revenues for utilities like Iberdrola, Endesa and Gas Natural.
Europe’s most heavily indebted utility, Enel announced a plan in March to slash its dividend payouts and investments over the next five years in an effort to reduce its debt and maintain its credit rating. At the end of the first quarter, Enel’s net debt was up 2.2 per cent from a year ago at €45.6bn.
The company said in March it would pay at least 40 per cent of ordinary net profit in dividends, down from 60 per cent earlier, and implement cost-cutting measures intended to raise about €5.9bn of additional cash flow in 2015 compared with 2008.