Enel Refinancing to Lead Utility Bond Issuance, UniCredit Says

By Esteban Duarte

July 16 (Bloomberg) -- Enel SpA, Italy’s biggest power company, may lead utility bond sales in the second half with the issuance of 5 billion euros ($7 billion) of notes to refinance its takeover of Endesa SA, UniCredit SpA analysts said.

Utilities in Europe are likely to raise about 17 billion euros in the second half, analysts led by Christian Kleindienst wrote in a report. Electricite de France SA in Paris and Essen, Germany-based RWE AG will each sell about 2 billion euros of bonds, the report said.

“We expect issuance activity to peak in September and early October,” Munich-based Kleindienst wrote in the report dated yesterday. “We also expect high investor demand for utility bonds to continue.”

European utilities issued 48.3 billion euros of bonds this year, more than any other industry, to pay for acquisitions and fund spending on new power plants, the analysts wrote. Companies and banks sold a record 749 billion euros of investment-grade bonds in total this year, 59 percent more than the same period in 2008, according to data compiled by Bloomberg.

The extra yield investors demand to buy utility company notes has narrowed 95 basis points this year to 137 basis points, according to Merrill Lynch & Co.’s EMU Utilities bond index. The spread compares with 267 basis points on Merrill Lynch’s broad investment-grade corporate index. A basis point is 0.01 percentage point.

Enel has 21 billion euros of debt maturing in the next 18 months, Bloomberg data show. That includes 15 billion euros of loans due in April 2010 used to finance the acquisition of Madrid-based Endesa in 2007.

An Enel spokesman in Rome declined to comment. Chairman Piero Gnudi said July 14 that the idea of a bond issue is “just a hypothesis” after the La Stampa newspaper reported Enel is preparing to sell 1 billion euros of notes in coming months.

Spokeswomen at EDF and RWE weren’t immediately available to comment.

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net