Enel in a handbasket

9 Mar 2012 By Kevin Allison

Big cuts to the debt-laden Italian utility’s earnings and payout guidance suggest years of tough going in Spain and Italy. The shares are 40 pct off their 2011 highs, but windfall taxes, slack demand and the sector’s lowest dividend yield mean investors’ pain may not be over yet.

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Shares in Enel, the heavily-indebted Italian utility, have fallen more than 7 percent since it lowered earnings guidance and slashed its dividend and investment plans in a strategy update on March 8. The slide capped a 40 percent fall in the share price since last May.
Enel, which also has a big presence in Spain and Latin America, said it expected core earnings this year to fall to 16.5 billion euros, well below Reuters consensus estimates of 17.5 billion euros.
The company said it would pay a minimum of 40 percent of ordinary net profit in dividends through 2016, down from a previous 60 percent payout. It also announced plans for new cost-cutting measures, part of a programme to cut a third off its 44.6 billion euro debt burden by 2016.
Standard & Poor’s cut Enel’s credit rating to BBB+, from A-.

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