MILAN (Reuters) – Credit ratings agency S&P cut its outlook for Enel, citing execution risks around a 21-billion euro ($22.18 billion) asset disposal plan the Italian utility announced last month.
At the same time, the agency affirmed its ‘BBB+/A-2’ long- and short-term issuer ratings for the Rome-based group, and its ratings on the company’s debt.
Europe’s second-biggest utility in November pledged to focus on six core countries and sell assets both in Europe and Latin America to lower its net debt to 51-52 billion euros by the end of next year from 69 billion euros at end-September.
“The negative outlook reflects that the company’s large asset rotation plan is subject to execution risk while high capital expenditure and sizable shareholder remuneration are weighing on the group’s financial risk profile,” S&P said.
According to S&P calculations, which also take into account Enel’s margin call requirements on energy derivative contracts, the group’s adjusted net debt could peak in 2022 at about 82 billion euros.
Government actions in Italy and Spain to shield households and companies from soaring energy bills created cash flow strains for Enel, which reported negative working capital of 5 billion euros at the end of September.
“We forecast that Enel will continue to generate significant negative discretionary cash flow of about 4 billion euro in 2023, following 12.5 billion euro in investment, and dividends of around 5.5 billion euros – based on Enel’s commitment to increase its dividend to 0.43 euros (per share),” S&P said.
The credit rating agency said that 2023 will be a pivotal year for the state-controlled utility.
“Financial and operational performance in 2023, together with an adequate liquidity buffer, will be critical for maintaining the rating.”
($1 = 0.9469 euros)
(Reporting by Francesca Landini, editing by Alvise Armellini and Kirsten Donovan)
