Iberdrola Will Compete Head-To-Head With Enel Within The Italian Market

Iberdrola to enter ItalyIberdrola headquarters

Iberdrola is getting ready to enter the Italian electricity market before the end of the year, offering its own distribution rates. They will challenge competitors such as Enel, Eni and Edison and expect to reach a market share of 5%-7% in the next six years, namely a million of customers in 2020 and three millions in 2023. Iberdrola is not considering any acquisitions in order to carry out this strategic move. The liberalisation of Italy’s energy sector is expected to take place in 2019.

Analyts at Link Securities point out that this Iberdrola’s manoeuvre is a part of its international expansion:

This plan has lead the company to develop a significant activity in foreign markets like UK and US after the buying of local companies. In the case of Italy, plans will involve an organic growth similar to the strategy Iberdrola followed in Portugal.

The Italian electricity market has 37 million of supply points. A 65% of them – around 20 million of households and three million of small and medium companies- benefit from a regulated rate called Maggior Tutela, which covers 22,5% of the country’s electricity consumption. According to ACF’s experts:

In the liberalised segment there are almost 500 firms- in fact, Iberdrola itself provides services to a few industrial clients- and more than 120 companies are able to offer the Maggior Tutela, but the dominant position of the state- owned Enel is overwhelming with a market share reaching 85%, followed by Acea Energia y Altri Esercenti which have near 5% each.

Iberdrola sold almost all its power generation assets in Italy in June last year- 245 MW of wind energy assets by €197 million -, although it still holds a small 10 MW wind turbine factory named San Giovanni.

Furthermore, Iberdrola will release its 2Q17 results tomorrow. According to forecasts, the energy company could gain around €6.55 Bn and reach an earning per share of 0.11 euros.

In a Morgan Stanley’s report, however, analysts are considering an scenario in which Iberdrola’s EPS could climb too 0.43 euros in current year and 0.50 euros by 2019 due to its favourable business mix as well as its solid strategy.