By Pietro Lombardi
MADRID (Reuters) - Spanish power utility Endesa is slowing the pace of its renewable energy development, its top managers said, the latest energy company to adopt a more cautious approach to renewables in the face of high interest rates and rising debt costs.
Endesa said last year that it would spend 8.6 billion euros ($9 billion) in Spain and Portugal by 2024, mostly on grids and green power, as part of a push by its parent Italy's Enel (BIT:ENEI) to shift away from fossil fuels.
"If you see our development in terms of megawatts along the year, probably we will end up installing less megawatts than we thought," Chief Financial Officer Marco Palermo told analysts and investors on Tuesday after the company posted lower profits for the first nine months of the year.
Endesa, which is preparing to unveil its strategic update for the next three years on Nov. 23, is not in "wait and see" mode but "it's somehow taking a slower pace", he said.
Some European energy companies, such as BP (LON:BP) and Spanish power utility Naturgy (NTGY.MC) have this year scaled back planned spending on renewables.
While confirming the company's commitment to the energy transition, Chief Executive Jose Bogas stressed that such efforts will take into consideration the firm's financial position.
"We will do our best, but maintaining our financial strength in the future," he said.
Endesa is on track to achieve the upper end of its guidance for the year, Bogas said. It includes an adjusted profit, which strips out one-off items, of between 1.4 billion euros and 1.5 billion euros.
WINDFALL TAX
Bogas criticised Spain's potential extension of a windfall tax on large energy companies, which was included in a coalition deal between centre-left parties seeking to form a government, arguing that it could hinder investments.
Endesa, which has filed an appeal against the 1.2% levy, sees it as "discriminatory and unjustified" and in breach of European rules as it targets revenue rather than profit, he said.
"It is discriminatory for the Spanish utilities since it decreases our capacity to invest compared to other European players," he said.
The tax cost Endesa 208 million euros this year, causing in part a 36% decline in net profit for the first nine months of the year to 1.06 billion euros, the company said.
Palermo said its impact next year should also be higher than 200 million euros.
The performance of Endesa's gas business also weighed on the bottom line and led to results that RBC analyst Fernando Garcia said were disappointing.
"As we expected these results include a very negative evolution of gas unit margin" in the third quarter, he said.
The gas business should see a strong rebound in the last quarter of the year but "this will not be enough to neutralize all the negatives that we have been accumulating along the year," Palermo warned.
Adjusted net profit fell almost 28%.
($1 = 0.9415 euros)