Enel Green Power (EGP) Biggest European Renewable Energy IPO struggles despite strong markets

Heavily Indebted Utility Enel looks to shed Debt through Renewable Arm IPO

Enel Green Power the Renewable Energy Arm of Italian Utility Enel which is coming out with the Biggest European IPO in 2010 with 3 Billion Euros being raised giving a total valuation of 9-10.5 Billion Euros.Enel Green Power is going to be the 4th of its class of Giant Green European Utilities to be listed on the Stock Exchange.Spanish Iberdola and EDP and French EDF had also listed their Green Subsidiaries.Note the Green Utility listing trend has caught in Asia as well with Chinese Utility Longyuan Group listing its Renewable Energy Assets in Hong Kong in 2009 December.India’s Orient Green Power also managed to become the first pure play Renewable Utility to list in September 2010.If successful it would be the biggest IPO in Europe since  Iberdrola raised 4.1 billion euros from listing its renewable unit in December 2007.

The company is pricing its shares at 1.8-2.1 Euros and will be listed on the Milan and Madrid Stock Exchanges.Note the pricing of the issue has been reduced by 15% from its initial price band and the shares should start trading on November 4.15% of the Issue will be reserved for retail investors and a 5% share bonus would be given if shares are held for more than 12 months.The dividend payout should be around 30% which is higher than its Green European Peers.

Enel Green Power faces investor apathy

EGP is the 4th company of its kind to supply paper to European investors so the demand is not high.Despite EGP having 44% Hydro Assets and 13% Geothermal Assets which is more than its European  competitors dependent on Wind Energy,investors are not convinced.Even the lower band of pricing has seen only 60% demand which means that EGP may have to lower it further.Spain and Italy the home countries of Enel are reducing Feed in Tariffs for Green Energy Sources due to Budgetary Problems.Despite removing the most draconian cuts on Renewable Subsidies,the sword of uncertainty continues to hang over the Green Producers.Investors are also looking for a discount on existing companies in order to make commitments to a new issue.EGP has been trying to do an IPO sine last year and the current bullish market environment in Europe might be the best time for it to clinch the deal.

Enel Green Power Struggles to Lure Buyers to ‘Rich’ IPO Price  – Bloomberg

Enel hasn’t received orders for all the stock on sale, two people with knowledge of the transaction said. The company has buyers for about 60 percent of the stock amid weak demand from institutional investors, said one of the people, who declined to be identified because the talks are private. The shares are on sale to fund managers and individual investors for 1.80 euros to 2.10 euros until Oct. 29.

At the bottom of the price range, EGP’s enterprise value would be about 9.7 times the company’s earnings before interest, tax, depreciation and amortization, or Ebitda. That’s in line with Spain’s Iberdrola Renovables SA and below EDP Renovaveis SA, MF Global analysts including Ashley Thomas said in a report to clients yesterday. The range “should be cut to offer upside,” the analysts said.