Enel Americas_Investor Day Feedback_ Focusing on Grids and Taking a Breather on Generation

Summary of Enel Americas Investor Day Feedback Company Overview - Company: Enel Americas (ENELAM) - Date of Report: November 22, 2024 - Analyst: Victor Burke, J.P. Morgan Key Points Strategic Focus - Enel Americas is focusing on grid investments, with a 61% increase in CAPEX for grids compared to the previous strategic plan, totaling $7.5 billion for the period 2025-2027 [3][4] - The company aims to improve quality and increase the Regulatory Asset Base (RAB) [3] Financial Guidance - Enel Americas expects $4.5 billion in EBITDA for 2025 and $5.3 billion for 2027, which is 11% above J.P. Morgan estimates and 9% above consensus [4] - The guidance assumes a BRL/USD exchange rate of 5.2 for 2025 and 5.1 for 2027, which is lower than J.P. Morgan's estimates of 5.7 and 5.9 respectively [4] - Adjusting for current FX rates, the three-year EBITDA could be $350 million lower [4] CAPEX Allocation - 82% of the CAPEX is directed towards grids, particularly in Brazil, with $4.6 billion allocated to Brazil, broken down as follows: - $2.4 billion in São Paulo - $1.2 billion in Ceará - $1.0 billion in Rio de Janeiro [4] Generation Capacity - The company is pausing capacity expansion, anticipating a recovery in hydrological conditions in Colombia and Brazil [4] - Enel Americas holds a 16GW pipeline in renewables but faces challenges with power prices not exceeding the WACC + 300bps hurdle rate for new projects [4] - Growth in capacity is limited to approximately 600MW of solar assets in Colombia, offset by the decommissioning of a coal-fired plant [4] Cash Flow and Leverage - Enel Americas has concluded its asset disposal program, with only some Gx assets in Peru remaining for sale [4] - The company plans to pay $1.8 billion in dividends over the next three years, resulting in a projected 0.7x Net Debt/EBITDA by the end of 2027, which is considered suboptimal for a utility company [6] - Management indicated that if no good opportunities arise for capital allocation, cash generation will flow to dividends [6] Market Rating - J.P. Morgan maintains a Neutral rating on Enel Americas [3][5] Additional Insights - The company is adapting to regulatory improvements in Argentina, which has contributed $400 million to the EBITDA guidance [4] - The focus on grids is a response to recent storm events in São Paulo, indicating a proactive approach to infrastructure resilience [4] Conclusion Enel Americas is strategically positioning itself for growth in grid infrastructure while managing financial expectations amid currency fluctuations and market conditions. The focus on dividends and maintaining a low leverage ratio reflects a cautious yet opportunistic approach to capital allocation.