Enel’s Endesa Deal Will Focus Growth Strategy on Latin America

Enel SpA's 11.1 billion-euro ($14.2 billion) bid to increase its stake in Endesa SA, Spain's largest hydropower generator, will help the Italian utility to expand in South America, where economies are growing as Europe contracts, Bloomberg reported.

Enel, Italy's biggest utility, agreed to buy 25 percent of Endesa from Spanish builder Acciona SA on Feb. 21, boosting its stake to 92 percent. Endesa is Latin America's largest private power producer, with half of its 23 million customers in Argentina, Chile, Colombia, Peru and Brazil.

As regulation squeezes profits in Europe, companies are looking to international markets for growth. Brazil's gross domestic product jumped 6.8 percent from a year earlier in the third quarter, the fastest in four years, while Italy's economy shrank 1.8 percent in the fourth quarter, the most in more than 25 years, according to national statistics. Spain's GDP contracted 0.7 percent.

"This is a release valve for Enel, which is shackled by restrictions in Italy," said Edoardo Liuni, a Rome-based analyst at IlNuovoMercato.

Acciona and Enel paid 42.5 billion euros for the Endesa stake in October 2007, beating Germany's E.ON AG. Enel had turned its sights on the Spanish company after failing to buy France's Suez SA in 2006.

Although Enel held two thirds of Endesa shares and Acciona one quarter, management was split equally. Acciona had an option to sell its stake to Enel at 43 euros a share starting in March 2010. Last week's offer ends the partnership a year earlier than planned, as asset values tumble.

Latin Expansion 

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