Enel, the Italian electricity group, outlined plans on Thursday for a €13bn ($17.7bn) flotation of its renewable energy business.
The initial public offer of a minority stake in Enel Green Power is likely to be the largest in Europe since the financial crisis broke in the summer of 2008.
Fulvio Conti, Enel’s chief executive, said that in the next few weeks the company would be holding a “beauty parade” to choose advisers, and planned to issue a prospectus in April, in order to complete the sale by the end of the year. The company would be dual listed in Italy and Spain.
However, Enel also remains in talks with “strategic investors”, including sovereign wealth funds and government-backed companies from North Africa and the Gulf, about taking a stake to support the IPO.
Mr Conti said he hoped to have agreement on a deal by June. He was speaking as Enel halved its dividend and set out a programme of cuts in capital spending to bring down its borrowings.
Enel which geared up to buy Endesa of Spain during 2007-09, had net debt of €51bn at the end of last year, up almost €1bn during the year.
In its annual strategy presentation in London, it set out plans to bring that down to €39bn by 2014, forecasting four years of shrinking capital spending, from €7bn this year to €4.8bn.
It has also cut the dividend from €0.49 per share for 2008 to €0.25 for 2009.
After €3.2bn of disposals completed last year, Enel plans an additional €7bn in 2010, including the sale of a stake in EGP.
Other European energy companies have floated off parts of their renewables businesses in recent years to benefit from the higher stock market ratings enjoyed by fast-growing “green” technologies, particularly wind power.
Analysts believe EGP, which had earnings before interest, tax, depreciation and amortisation of €1.2bn last year, is likely to have an enterprise value including debt of about €13bn.
That would represent a slightly lower multiple than for the wind power companies Iberdrola Renovables of Spain and EDP Renovaveis of Portugal, which are both valued at about 13 times ebitda.
About half of EGP’s generation capacity of 4,800 megawatts is in hydro-electric power, mainly in Italy, Latin America and the US, which has slower growth than wind.
Mr Conti said he believed that investors would support an IPO for a company with the right prospects. “Each time I go around the market, I sense everyone is eager to jump on this bandwagon,” he said.
He added that the strategic investor in EGP would ideally be an industrial partner with “land and sun”, to allow co-operation on concentrated solar power generation.
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