Enel Green Power SpA (EGPW.MI) shares fell Thursday on their first day of trading following Europe's biggest initial public offering since the financial crisis began, as investors distance themselves from the renewables sector.
Enel Green Power SpA (EGPW.MI) shares fell Thursday on their first day
of trading following
Europe
's biggest initial public
offering since the financial crisis began, as investors distance themselves
from the renewables sector.
Institutional investors turned their back on the offering because the sector is
facing cutbacks from governments running out of money to subsidize it and
because they were unconvinced by an IPO where all the proceeds are pocketed by
the majority shareholder to trim its debt pile.
At 1257 GMT, Enel Green Power shares were down EUR0.07, or 4.4%, at EUR1.53,
compared with an IPO price of EUR1.60. At the same time,
Italy
's
benchmark FTSE MIb Index was up 1.6%.
Enel SpA (ENEL.MI) had hoped to raise EUR3 billion from the sale of a 32.5%
stake in its renewables unit as part of a drive to slash net debt and avert a
downgrade from credit agencies, but had to settle for EUR2.60 billion after
cutting the IPO price.
Investors remain concerned the IPO proceeds will all be pocketed by Enel to
reduce its debt pile, but Enel's strategy is in line with that of European
utilities keen to slash debt built up in recent years on the back of economic
prosperity.
At a press conference in Milan Thursday, Enel Chief Executive Fulvio Conti
confirmed that net debt at the end of 2010 will drop to EUR45 billion, compared
with EUR53.89 billion at the end of June. Conti also reiterated plans to sell
the Maritza III coal plant in
Bulgaria
by
the end of the year to raise further cash.
Enel Green Power executives remained upbeat about the company.
"Our fundamentals are good," Chairman Luigi Ferraris said Thursday at
a press conference in
Madrid
. "It's
the first time investors have in the market a renewable energy company present
in four technologies [wind, solar, hydro and geothermal]."
Enel Green Power shares are listed in
Italy
and
Spain
.
Last week the Rome-based utility lowered its IPO price range to between EUR1.60
to EUR2.10 from EUR1.80 to EUR2.10 in order to attract more interest.
The IPO, which ended Friday, was the biggest in
Europe
in
terms of money raised since Iberdrola Renovables SA (IBR.MC) in 2007, which
raised EUR4.1 billion.
But it took place amid a climate of weak stock market performances by Iberian
wind power companies, with the renewable energy sector roiled by subsidy
cutbacks in newly fiscally austere
Europe
.
The low percentage of Enel Green Power's free float held by institutional
investors also limits liquidity, considering retail investors tend to hold on
to shares for a longer period.
"The share drop was expected considering so much [of the IPO] went to
retail investors," said Gianpaolo Rivano, a fund manager with Gesti-Re SGR
SpA in
Milan
. "The
fact that few institutional investors hold the shares makes it less
interesting."
Enel has said around 340,000 individuals in
Italy
and
Spain
placed orders for more than two thirds of the shares, while institutional
investors ordered less than a third.
Enel Green Power's current market capitalization of EUR7.70 billion would make
it the 13th biggest company in
Italy
.
In fact, Societe Generale said in a note Thursday that considering its free
float, Enel Green Power could be a fast addition to the MSCI indexes by Nov.
17, as part of the MSCI review.
Enel Green Power has broad hydroelectric and geothermal assets that don't rely
on subsidies and an unusually international reach, but the bulk of its planned
growth is in wind power, where subsidies are important but increasingly
uncertain.
The company expects to spend EUR5.2 billion in the coming years to boost its
installed capacity of more than 5,700 megawatts by a further 3,500MW by 2014.
"The stock has the strength and capacity to grow and satisfy all
investors," Conti said at the
Milan
conference.
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