Outlook

The Group’s strategic priorities in the period covered by the 2014-2018 Business Plan respond to the expected structural evolution in the world’s macroeconomic conditions and in the energy industry. More specifically, the former will continue to move ahead at two speeds: on the one hand the European countries, which are emerging slowly from the crisis; on the other the emerging economies, especially those in Latin America, where electricity demand is still expanding rapidly. In this environment, Enel expects the following main trends to drive the evolution of these scenarios: (i) the emerging markets will continue to fuel global growth; (ii) technological innovation will be one of the key factors driving trends in the energy sector; (iii) end users will be increasingly wellinformed about technology and environmental matters; and (iv) regulatory systems will sharpen their focus on environmental issues and system costs.

In the business plan, the Group confirms the increasingly important role of the emerging markets, with an investment policy targeted at consolidating its position and simplifying its corporate structure. Renewables will expand substantially, with careful selection of high-return investment opportunities. Another area of action will be the retail market, energy efficiency and, more generally, value-added services, a segment with robust growth potential. In this area, as in the smart grids field, Enel intends to strengthen its leadership position, leveraging the key driver, technological innovation, and a geographically and technologically well-diversified asset portfolio which forms the foundation of the Group’s future development.

Reducing debt and generating cash flow will also remain a top priority for the Group. And maximization of cash flow is precisely the goal of the plan for optimizing operating costs launched in 2013, which has already led to the identification of major opportunities for efficiency gains, with results that have easily exceeded expectations. These opportunities will continue to be pursued in the coming years, with a special focus on businesses in the mature markets.

In the 2014-2018 period, the Group expects to generate about €50 billion in operating cash flow (net of financial expense and taxes), to be used to pursue the gross investment plan of €28.6 billion and to pay dividends of €11.6 billion. The remaining free cash flow, equal to about €10 billion, together with the proceeds of the disposal plan in the expected amount of more than €4 billion, will be devoted to reducing the debt and minority buyouts, with a view to simplifying the Group’s structure and gradually enhancing the dividend policy. All of this is expressed in the financial targets set out in the 2014-2018 Business Plan:

Billions of euro    
 2014 2016 2018 
Gross operating margin  about 15.5  about 16.5  about 18 
Group net income  about 3  about 3.7  about 4.5 
Net financial debt  about 37  about 39  about 36