Italian energy company ERG prefers 'value over volume' in new business plan

Italian energy company ERG ERG is ready to adopt a selective and more flexible approach to seize market opportunities, CEO Paolo Luigi Merli said, as part of company's new 2024-2026 business plan released on Wednesday.

"Having completed the transformation of the group into a pure renewable player, we have now evolved our strategy by shifting to value over volume," Merli told analysts in a call on Thursday.

Development in the U.S. is a central element of the plan, the company said.

ERG, owned by Italy's Garrone family, was one of Italy's leading oil companies before shifting its focus to renewable energy. Following an asset rotation completed in 2023, it now generates power from wind and solar sources.

Under the new plan, ERG pledges to pay a dividend of up to 1.3 euros ($1.41) and invest up to 1.2 billion euros, despite current volatility and uncertainty in prices affecting European electricity market and reducing visibility.

It plans to set the exact amount for the dividend each year, but will guarantee a minimum value of one euro, the amount included in its previous plan.

ERG will invest in countries where it already operates, with a focus on the U.S. market, which it entered in December with an investment of around $270 million for two wind and solar assets.

Stifel described the business plan as "positive," noting that ERG reiterated a solid strategy focused on the most reliable geographies.

It also highlighted that the group already returns a lot of money to investors through dividends and buybacks - around 30% more than peers.

ERG aims to reach an installed capacity of about 4.5 gigawatts in 2026 and up to 5 gigawatts in 2028, slightly different from the previous plan, which forecast reaching 4.6 gigawatts in 2026 and around 5 gigawatts in 2027.

It expects core profits to reach 600 million euros to 650 million euros in 2026.

The group also reported first quarter results, which were broadly in line with a year ago as adjusted revenue was up 2% to 218 million euros and adjusted net profit remained flat at 78 million euros.

It reconfirmed its guidance for 2024.

($1 = 0.9202 euros)