Enel SpA, the Italian utility vying for control of Endesa SA, reported a 36 percent drop in fourth- quarter profit after the previous year's results were boosted by the sale of assets including a power transmission company.
Net income at Rome-based Enel fell to 400 million euros ($533 million) from 621 million euros in the year-earlier period, Bloomberg calculated from full-year results released today.
Enel and Acciona SA are engaged in a takeover battle for Spanish power company Endesa with Germany's E.ON AG. Success may help Enel meet its goal of doubling the amount of European generation it owns outside Italy to make up for competition rules that limit how much it can sell at home. The company is due to update investors on its strategy at a presentation in London.
``Investors will be totally focused on Enel's strategy today,'' Vincenzo Riflesso, a trader at Banca IMI in Milan said in an interview today. `The market is betting that E.ON could prevail.''
Spain's stock market regulator ruled Enel and Acciona must wait six months before going ahead with their offer of at least 23.4 billion euros for the shares of Endesa they don't already own. That may give E.ON time to complete its own offer and build a stake in Endesa.
Asset Sales
Last year's sale of telephone company Wind Telecomunicazioni SpA cut debt by 10 billion euros, while the sale of 30 percent of power-grid operator Terna SpA generated a capital gain of more than 800 million euros.
Enel today said it will pay a 49-cent full-year dividend, above the 44-cents-a-share payout in 2005.
The company said it expects to boost operating profit this year, targeting an average 6 percent annual increase in earnings before interest, tax, depreciation and amortization through 2008. Enel will pay a minimum dividend of 49 cents a share for this year and next, it said.
Enel shares reversed early losses and gained 0.8 percent to 7.91 euros as of 10:15 a.m. in Milan. The stock has risen 13 percent in the past 12 months. Shares of Acciona dropped 0.3 percent to 162.05 euros and E.ON stock was down 0.6 percent at 100.04 euros.
Full-year net income fell 22 percent to 3.04 billion euros, from 3.9 billion euros in 2005, Enel said. Profit lagged behind the 3.1 billion-euro average estimate of 32 analysts surveyed by Bloomberg.
Greater Competition
As Europe's power markets move toward full competition, Enel has expanded outside its home market by buying renewable energy sources like hydroelectric plants in Latin America and wind farms in France as well as traditional generation assets. The company completed its 840 million-euro purchase of a majority stake in Slovakia's Slovenske Elektrarne AS in April.
Chief Executive Officer Fulvio Conti plans to continue buying assets outside Italy and has earmarked as much as 15 billion euros for acquisitions and development of plants in countries like Spain, France, eastern Europe and the Americas, he said in an interview Feb. 12.
Enel, Europe's fifth-largest utility by revenue, aims to catch up with larger rivals like Suez SA, which have expanded more quickly. Enel last year lost out in a planned bid for Suez when the French government announced it would merge Suez with Gaz de France SA.
`Majority Control'
Enel and Acciona together control about 46 percent of Endesa, meaning they're ``a step away from majority control of Endesa, making E.ON's task extremely difficult,'' Armando Iobbi, an analyst with Centrosim SpA in Milan, wrote in a note to clients yesterday. Iobbi has a ``Buy'' rating on Enel shares.
E.ON, Germany's largest power company, said yesterday it secured almost 10 percent of Madrid-based Endesa in an equity- swap contract with a Spanish investor, aiming to acquire enough shares and voting power to block any rival bid. E.ON's 40-euros- a-share offer expires April 3 in Spain and April 6 in the U.S.
Enel and Acciona plan to offer at least 41 euros a share and undermine E.ON Chief Executive Officer Wulf Bernotat's yearlong effort to win control of Endesa. The takeover battle may drag on even longer, after E.ON filed complaints against Enel and Acciona with Spanish and U.S. authorities.
``The purchase of the stake in Endesa and our accord to jointly manage the company with Acciona will further boost our international growth,'' Conti said in the statement.
Endesa's 22 million customers and hundreds of power plants make the company a prize as the European Union opens the region's energy market to greater competition from July 1.
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