Italy's ERG pledges 2.1 billion euros to become pure green

By Reuters

<p><body> <p>By Stephen Jewkes and Rita Plantera</p> <p><span class="caps">MILAN</span> (Reuters) -Italy’s <span class="caps">ERG</span> pledged on Friday to spend 2.1 billion euros ($2.5 billion) over the next five years to complete its transition to an entirely renewable company and drive earnings.</p> <p>Already Italy’s biggest wind operator, which generates some 60% of earnings from wind power, <span class="caps">ERG</span> said it aimed to add 1.5 gigawatts (GW) of capacity by 2025, boosting its solar business and selling assets to become a purely green player.</p> <p>The planned sale of hydroelectric and thermoelectric plants will also speed up the process to create a pure wind and solar player, <span class="caps">ERG</span> <span class="caps">CEO</span> Paolo Merli said. </p> <p>In March, sources said <span class="caps">ERG</span> had kicked off the sale of hydroelectric and gas-fired assets worth more than 1 billion euros.</p> <p>“We have selected the preferred bidders… and expect binding bids by end June,” Merli told analysts in a call on the group’s new plan to 2025. </p> <p>The Genoa-based group, controlled by the Garrone family, used to be one of Italy’s leading oil refiners before shifting its focus to renewable energy. </p> <p>The group, which aims to be fully carbon neutral by 2040, will expand into countries including Spain and Sweden, building on total installed capacity of 3.1 GW last year.</p> <p>“We are working on several M&A deals… with a focus on Europe,” Merli said. “We are also scouting for opportunities in storage and hydrogen.”</p> <p>Merli said acquisitions would be selective, adding tickets above 400-to-500 million euros ($485-$606 million) attracted too much competition and depressed returns. </p> <p>To make earnings more visible and facilitate debt-raising, the group will make 80% of its business “quasi-regulated” by taking part in capacity auctions and selling production to corporate clients through power purchase agreements (<span class="caps">PPA</span>).</p> <p>On Friday, it signed a big <span class="caps">PPA</span> with phone company Telecom Italia.</p> <p>Core earnings will rise to 550 million euros in 2025 from 481 million euros last year, the company said, adding it planned to maintain a steady dividend of 0.75 euros per share.</p> <p>Merli said the phasing out of incentives for green power generation would cost core earnings around 130 million euros but would be offset by income from new projects.</p> <p>“The capacity increase is in line with our expectations but the 2025 core earnings target is a bit below,” said one Milan-based analyst.</p> <p>At 1440 <span class="caps">GMT</span> <span class="caps">ERG</span> shares were down 4.8% after falling as much as 9% in early trade.</p> <p>($1 = 0.8258 euros)</p> <p> (Reporting by Rita Plantera and Stephen Jewkes; editing by Barbara Lewis)</p> </body></p>