Enel’s 2022 Net Income Exceeds Guidance

We don’t expect to materially change our EUR 7.20 fair value estimate after no-moat Enel ENEL released final 2022 results including net income, which exceeded guidance. Otherwise, there was no surprise in this print since EBITDA and net debt had been released at preliminary results on Feb. 13. As expected, the dividend on 2022 results will amount to EUR 0.4; this is 4% above the year before and implies a 7.5% yield reflecting undervaluation of the shares.

Ordinary EBITDA in 2022 increased 2.6% to EUR 19.7 billion, bang in line with our estimate. Enel’s 2022 EBITDA, excluding capital gains, grew 9% to EUR 18.9 billion and by 34% during the fourth quarter, largely improving from the third quarter’s 3% growth thanks to all business lines. Conventional generation and global trading’s fourth-quarter ordinary EBITDA was EUR 1.6 billion versus break-even in the year-ago quarter. Over the year, its EBITDA surged 3.6 times to EUR 6.1 billion, likely thanks to higher combined cycle gas turbine volumes and clean spark spreads. Retail’s EBITDA plunged 64% over the year, chiefly because of a large short position in Italy stemming from drought, low churn, and higher consumption due to the hot summer while spot power prices were skyrocketing. In the fourth quarter, retail’s EBITDA increased 15% likely due to repricing and a reduction of the short position in the wake of mild weather. Renewables’ EBITDA decreased 21% across the year and by 8% in the fourth quarter as a drought in Spain and Italy more than offset 5.2 gigawatts of capacity additions—the highest among peers—including 3.1 GW in the fourth quarter.

Ordinary net income for 2022 was EUR 5.4 billion, above the EUR 5 billion-EUR 5.3 billion guidance. It decreased by 3.5% versus 2021 as EBITDA growth was dwarfed by higher depreciation expenses due to high investments and adverse foreign-exchange effect and higher minorities due to the fast growth of businesses with a high minority rate, that is subsidiaries in Latin America.