UPDATE:Enel OKs Up To EUR8 Billion Cap Hike; Sees Fully Subscribed

Enel SpA (ENEL.MI) Thursday said it approved a capital increase of up EUR8 billion, as well as other multi-billion-euro measures, to pay off a large chunk of its debt and avert credit agency downgrades.

Europe's most-indebted utility said the 2009-2013 strategy plan targets EUR10 billion asset disposals and cuts investments by about EUR12 billion from the previous five-year plan. It also switches its dividend policy to a payout ratio of 60% rather than the previous fixed rate per share policy, allowing the utility to lower its net debt to EUR41 billion by the end of 2010.

Enel's net debt is expected to balloon to more than EUR61 billion this year after it agreed to purchase a 25% stake in Endesa SA (ELE.MC) to reach a 92% holding.

Enel is the latest company to go cap in hand to its existing shareholders to raise billions of euros via the issue of new stock. Spain's Gas Natural SDG SA (GAS.MC) Tuesday announced a EUR3.5 billion capital hike.

"The rights issue..., the new dividend policy, the disposal on non-strategic assets...will generate solid cash flows that enable our company to be ready at the first signs of a recovery of the markets and economy," said Chief Executive Fulvio Conti in a statement.

Enel said it expects 2009 results to grow compared with last year, despite the global economic slump.

The new dividend is "a bit" worse than market expectations said a Milan-based analyst who asked not to be named. The analyst said that with the capital hike, meaning there will be more shares, and the new policy of a 60% payout ratio of net profit, the overall dividend amount is lower than before. The analyst adds that Enel's dividend yield is still "attractive."

The 32%-state controlled utility said it expects the capital increase to be fully subscribed after the controlling shareholder, the Italian Treasury, has expressed interest. The rights issue is expected to take place in the first half of the year.

Italy's Treasury owns directly 22% of Enel, while another 10% is held by Treasury-controlled Cassa Depositi e Prestiti SpA.

Intesa Sanpaolo SpA (ISP.MI), Mediobanca SpA (MB.MI) and J.P. Morgan (JPM) will act as joint global coordinators and joint bookrunners. The three banks have committed to underwrite the capital hike for up to EUR5.5 billion, Enel said.

Thursday, Enel also said 2008 net profit jumped 35% to EUR5.29 billion on the year, meeting market expectations, after consolidating its stake in Spanish utility Endesa.

A survey of 11 analysts polled by Dow Jones Newswires had expected an average net profit of EUR5.30 billion.

At 0805 GMT Enel shares traded EUR0.06, or 1.78% higher, at EUR3.43 in a slightly lower overall market.

Enel's share price over the last three months is down around 23% on debt level concerns and on speculation of a rights issue. Over the same period, Italy's benchmark S&PMib Index shed around 31%.

Company Web site: http://www.enel.it

-By Liam Moloney, Dow Jones Newswires; +39 06 6976 6924; liam.moloney@dowjones.com

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