Enel's Q3 2019 earnings transcript [Source: Seeking Alpha](https://seekingalpha.com/symbol/ESOCF) paints a picture of a company in transition, aggressively pivoting towards a renewable future. While the headline figures show solid growth – a 14% increase in net income and an 11% jump in ordinary EBITDA – a deeper dive reveals a potential strategic gamble: prioritizing long-term renewable growth at the potential expense of short-term gains.

The transcript highlights Enel's aggressive expansion in renewable energy development, particularly within Enel Green Power. Capital expenditure in this area has skyrocketed by 24% year-on-year, with the majority directed towards North America, Latin America, and Iberia. This substantial investment reflects Enel's ambitious goal of scaling up renewable development to an impressive 4 gigawatts per year from 2020 onwards.

However, this focus on future growth seems to be impacting Enel Green Power's current performance. While ordinary EBITDA remains stable overall, the transcript reveals an almost negligible contribution from new renewable capacity added in the first nine months. The explanation lies in the peculiar phasing of installed capacity during 2019. Enel deliberately front-loaded efforts on opening new sites and streamlining development processes, pushing the bulk of capacity additions to the last quarter.

"This strategy, while laying the groundwork for future renewable dominance, may have come at a cost. Enel's CFO explicitly states that the "contribution of asset development, roughly €300 million, was indeed relatively low, in line with the first half due to the shift of renewable capacity addition towards the last quarter." This suggests that, had Enel followed a more conventional, linearized capacity addition schedule, they could have potentially realized a significantly higher EBITDA contribution from their renewable investments in 2019."

Crunching the Numbers

Let's analyze the potential impact of Enel's strategy.

**Reference:** These figures are based on calculations derived from the earnings transcript. Enel expects to install 2.4 GW of renewable capacity in Q4, generating an estimated €320 million in EBITDA in 2020. Assuming a proportional relationship between capacity and EBITDA contribution, and a typical 40/60 split of capacity additions between the first and second halves of the year, we arrive at the hypothetical figures. It's important to note that these are estimations and actual results could vary.

This leads us to a fascinating hypothesis: Did Enel deliberately forego a significant chunk of 2019 EBITDA in a strategic move to accelerate its renewable dominance? Could they be sacrificing short-term gains for a long-term competitive advantage?

A Risky Bet with Potential Long-Term Rewards

It's a risky move, but potentially a brilliant one. The global energy landscape is rapidly shifting towards renewables. By prioritizing the rapid development of its renewable capacity, Enel could be positioning itself as a leader in this burgeoning market. This would not only enhance its brand reputation and attract ESG-focused investors, but also pave the way for sustained, long-term growth driven by a robust renewable asset base.

"The decision to prioritize long-term growth over short-term gains is a bold one. However, in the context of a global energy transition, it's a gamble that could pay off handsomely for Enel in the years to come."

Enel: A Legacy of Energy Innovation

"**Fun Fact:** Enel is named after the Italian National Electricity Board (Ente Nazionale per l'energia elettrica), from which it originated. This connection to its roots highlights Enel's long history in the energy sector and its evolution into a global leader."