By Stephen Jewkes and Nina Chestney
MILAN/LONDON (Reuters) - Europe's biggest utility Enel (MI:ENEI) is actively looking for mid-size acquisitions of mainly regulated assets outside Europe, with Latin America a focus, its chief executive told Reuters.
"We're looking at bolt-on deals below 5 billion euros ... several opportunities are coming to market in Brazil," Francesco Starace said in an interview, adding they were mostly regulated grids.
State-controlled Enel owns a majority stake in Spanish utility Endesa (MC:ELE) and is investing in green energy and grids to tackle the crisis in traditional power generation.
Italy's largest utility makes 47 percent of its core earnings from regulated network businesses, on which it plans to spend about one-third of its 14.6 billion euro growth budget.
Last year it bought Brazilian power distribution company Celg-D for about $640 million.
Starace, who confirmed an interest in Dutch energy company Eneco, valued at up to 4 billion euros, reiterated his opposition to large-size deals but said the group would look at assets in Europe that came to market from any break-up.
Utilities, long known for delivering reliable investment returns, are now breaking up, selling assets and eyeing mergers to cope with shrinking profitability.
Starace said Enel had recently been offered German energy group Innogy (DE:IGY) but had turned it down because it did not see any clear growth potential.
In March Germany's RWE (DE:RWED) and E.ON (DE:EONGN) announced plans to break up Innogy in a major shakeup that flagged a new process of consolidation in the industry.
"There is a growth story for Endesa as a result of a potential breakup of companies that have a less than sustainable status in the Iberian peninsula," Starace said.
Asked if Enel might sell Endesa to fund acquisitions, the CEO said there was no need since the company had financial headroom to fund any deal.
Enel, which sees its ordinary core earnings at 18.2 billion euros in 2020, expects net debt to be 2.1 times EBITDA in 2020 from last year's 2.4 times.
"We are not going to sell down or buy up. We are going to keep it," he said.
Funds have been eyeing Endesa's stable revenue, generous dividend and relatively low debt ratios for some time, sources have said.
"Every fall there's a migration of birds, my birthday and funds that knock on my door to buy Endesa," Starace said.
When asked if the issue of sanctions in Russia was having any effect on the sale of Enel's Reftinskaya coal power plant, the CEO said he was confident the deal would be agreed.
The plant produces power for the Russian market, which means it is not subject to any embargo or sanctions, he said, adding the buyer would be Russian.
"The sale is going to happen, it's a question of a few months," he said.