Reuters: Hot Stocks: UPDATE 2-ERG to focus investments on renewables

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UPDATE 2-ERG to focus investments on renewables Dec 19th 2012, 10:25 Wed Dec 19, 2012 5:25am EST * ERG to grow in renewables in Romania, Bulgaria * Sees core earnings at 600 mln euros in 2015 * Shares rise more than 6 pct (Adds analyst comment, shares) By Stephen Jewkes MILAN, Dec 19 (Reuters) - Italian group ERG said it planned to invest 500 million euros ($661 million) to end-2015 as it presses ahead with a planned transformation from being a refiner to a renewable energy company. In its first business plan since 2008, ERG said on Wednesday it would focus on investing in renewable energy projects mainly in Romania and Bulgaria as it looks to wind power to drive its business. At 1021 GMT ERG shares were up 5.7 percent, while the European utilities index was up 0.5 percent. "It's a good concrete plan focused on renewables, and it's good to see they've given targets that are doable," a Milan analyst said. ERG expects an average 13 percent equity internal rate of return in its renewable business, which is supported in Italy by incentives and a clear regulatory framework. Meanwhile, the outlook for refiners, battered by weak demand and heavy competition from Asia, remains clouded due to Europe's sluggish economy. "The business plan is a continuation of the good work done in recent years that has allowed the group to react promptly to changes, repositioning its portfolio towards more profitable and less volatile business," ERG Chief Executive Luca Bettonte said in a statement. In December ERG agreed to buy wind assets from France's GDF Suez to become Italy's largest wind energy player and one of the top 10 in Europe. The company recently bought a wind farm in Romania through its LUKERG Renew joint venture with Russia's Lukoil ERG, controlled by the Garrone family, said it expected its core earnings to be around 600 million euros in 2015 and confirmed a dividend policy, which in recent years has offered 0.4 euros per share. ERG said it expected to invest just 28 percent of its overall spending in the refining and marketing sector to end-2015. The company has sold part of its stake in a refinery in Sicily to Lukoil to reduce its exposure to the volatile industry. It has an option to sell its remaining 20 percent to the Russian group in October 2013. "We see confirmation of the exit from refining, the healthy free cash flow generation and the dividend policy and EBITDA visibility ... as supporting elements," a Milan-based broker said. ($1 = 0.7568 euros) (Editing by Lisa Jucca and Jane Baird) Link this Share this Digg this Email Reprints

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