26 March 2006

Enel: profits (and prices) sky high

Enel {the electricity company} has a record Balance Sheet. In 2005 it had net profits at Group level of 3,895 million Euro which is a net increase of 1,264 million Euro in relation to 2004. These are impressive numbers. Grand numbers for a Group that still has the Italian State as the controlling shareholder. And thus, all of us who, basically, have the situation of an electricity monopoly.

Enel has its profits thanks to the monopoly and the lack of strong investments in new sources of energy.
Italian citizens pay prices for energy that are higher than the average for the rest of Europe. They should first bring energy costs in line with those in Europe, and only then spend time to evaluate the dividends and the bids. Reference points for Enel should be the level of service, price competition, the support to revive the Italian economy and the development of renewable energy.

As well as this, the acquisition of Suez does not even seem to have the necessary economic basis. I’m quoting from the article of Alessandro Penati in today’s edition of la Repubblica: “The financing of the OPA would take the combined debt for the Enel-Suez Group to 5 times their operating margin to the limit of the downgrading of the rating: Enel-Suez would become one of the most highly indebted electricity companies in Europe with the objective for years to reduce the debt.”

This is a situation that would not allow for reduction of tariffs to private individuals nor investments connected to innovation.

And, anyhow, I find it profoundly immoral that a service like energy that is essential for our life, in a regime of basic monopoly, yields enormous profits at the expense of the citizens and of industry.
Enel, lower your prices, then think of all the rest.

Posted by Antonio Di Pietro in Economy