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Enel green power fails to light up Milan, Madrid bourses

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By Environmental Finance | Madrid, Nov 4 2010

Enel Green Power (EGP) made a less than stellar debut on the Milan and Madrid bourses today, following a sluggish EUR2.6 billion ($3.7 billion) initial public offering (IPO) in which parent company Italian utility giant Enel was forced to drop the price to entice reluctant institutional investors.

The stock slipped 2.5% to EUR1.56 against a debut price of EUR1.6 in the first few hours of trading in Milan.

Unfazed by the slow IPO and share price dip, Enel CEO Fulvio Conti told reporters at the launch: "The opening hasn´t gone badly. There is enough liquidity to cover these early sales. This stock has the potential to grow." 

The flotation of a 30% stake in EGP, Europe´s biggest IPO since 2007 and Italy´s for a decade, had been seen as a key test of investor sentiment for the embattled clean energy sector.

Peer companies such as Spain's Iberdrola Renovables and Portugal's EDP Renovaveis have seen their share price tumble over the past couple of years amid the global financial crisis and related uncertainty over regulated renewable energy tariffs and state backing for clean energy.

Enel had hoped EGP´s diverse mix of clean energy technologies, headed by hydropower and including geothermal sources, its broad geographical footprint in some 600 locations worldwide, and sweeteners such as a pledge to pay out 30% of its profits in dividend would set the stock apart. 

But having set the IPO price range at EUR1.90 to EUR2.10, the company was forced to cut the bottom of the range twice to EUR1.80 and then EUR1.60 to shift the stock. The operation netted Enel just over EUR2.6 billion against a projected EUR3.0 billion.

"We didn´t buy it. We felt it was too expensive. Having said that, at EUR1.60 it was getting down to levels which we thought would have attracted purchasers," said Edward Guinness, who co-manages two alternative energy funds at Guinness Asset Management in London.

"At the moment, the market will not pay for some of the valuations it has historically paid up for - it´s a sector which to some degree is out of favour," said Charlie Thomas, a fund manager at Jupiter Asset Management in London.

"If Enel Green Power had come to the market even last year or before it would have probably achieved nearly double what it did now," Thomas added.
According to an Enel breakdown of the final allocation, retail investors took 1.263 billion shares, some 77% of the 1.625 billion shares available, while institutions accounted for just 23% of the uptake with 361.6 million shares.

"The broader implications are that you are seeing pretty good price discrimination - conventional pricing mechanisms are being applied to value," commented Guinness. "I think it is excellent that four large-scale national utilities are now listed. It creates a good benchmark for the smaller companies to be priced off."    

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