Shares in Italy's biggest utility by market value Enel SpA (ENEL.MI) Friday fell more than 7% after it said it is considering a capital increase to slash its massive debt pile.
Enel said in a statement that the "hypothesis is one of the possible options currently being studied to sustain international growth after the acquisition of Endesa (ELE.MC)."
Enel made the comments after Italian daily newspaper Il Sole 24 reported earlier Friday that Enel is studying a capital increase of between EUR5 billion and EUR7 billion, without citing its source.
Enel said in its statement that its board hasn't taken a decision on the possible share sale.
However, a person familiar with the matter said the company's board will review the option when it meets on March 11 to discuss 2008 results and new strategy plan.
Enel's shares tumbled following its statement and at 1102 GMT, the stock traded down 7.35%, or EUR0.31 lower, at EUR3.94, strongly underperforming the 1.58% drop Italy's benchmark S&PMib Index.
Last week, Enel agreed to buy the 25% stake in Endesa held by Acciona SA (ANA.MC) for EUR11.1 billion, allowing it to boost its holding to 92% in the Spanish utility and control it.
Enel has said its has net debt of about EUR50 billion at the end of 2008, or about EUR6 billion less than the year before after having had to borrow billions to buy a majority stake in Endesa in 2007.
The company's current market capitalization is around EUR26.1 billion.
The utility plans to slash its debt by selling assets, such as its Italian natural gas network or a stake in its renewable energy company.
Italy's government owns a stake of about 32% in Enel, according to securities regulator Consob's Web site. Enel was Italy's former electricity monopoly.
The share price of Italian utility Enel doesn't reflect the "real value" of the company, said Industry Minister Claudio Scajola on Friday. He didn't comment the possible capital hike.
Enel is slated to present its final 2008 results and new strategy plan on March 12.