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The internationalization strategies in the european renewables market: Enel Green Power Iberian expansion
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Daniele Castellet Y Ballarà, Libera Univ. degli Studi Maria SS.Assunta-(LUMSA) di Roma, 2011-12
Daniele Castellet Y Ballarà
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The renewable energy markets are undergoing profound changes that affect investments, industries and policy landscapes. Global trends show a growing importance of renewable energy compared to conventional energy sources (coal, oil, gas, nuclear). In 2010, renewable energy reached a huge success in the world market of energy production, accounting for a quarter of the world's total installed capacity.
Furthermore, the renewable energies market is witnessing a continuous trend towards the increasing of investment in a growing number of geographic areas. The growth of global investments, equal to 125% in the period between 2005 and 2009, regards the production of "green" electricity, but also heat and bio-fuels. The policy interventions present a strong dynamism and an increasing attention of policymakers towards the promotion of clean energy. In 2010, the countries that were active in intervention policies or that have implemented measures to support renewable energy were 100, almost doubling the amount of 55 in 2005.
In this thriving market, renewables companies began to move beyond their national borders, implementing projects of greenfield investment in new countries. This phenomenon integrates with the trend that had so far seen internationalization strategies through mergers and acquisitions and strong cross-border capital movements by financial investors.
There is no doubt that national policies and public support measures still represent a fundamental factor on the foreign investment decisions in the renewable energy market. It is also true that the growing attention of worldwide governments’ environmental policies has generated a significant interest of energy companies and financial investors towards a renewable energy market with an enlarged size. The boom of global investments in the last five years has seen not only the growth of domestic investments but also that of foreign direct investments by industrial companies and a wide variety of international financial investors. In fact, the latter are increasingly attracted by the value of companies and projects in renewable energy and by the limitation of risk arising from the commitments of governments and the public capital support.
In this active and ever-evolving scenario, strongly influenced by factors exogenous to the company such as incentive policies and support tools, companies look to international markets with a new perspective and greater expectations for growth in the future.
In this context, the thesis focuses on Enel Green Power internationalization strategies, particularly on the expansion in the Iberian Peninsula through the establishment of Enel Green Power España. This strategy has been implemented through the integration of EUFER (the joint venture with Gas Natural/Union Fenosa, indirectly owned by Enel Green Power) and ECyR (the renewables division of Endesa). The first chapter of the work concentrates on the internationalization process, presenting among other things the theoretical background, the foreign market entry methods and the foreign direct investments in the renewables sector.
Secondly, the European renewables market will be presented, describing the global context and the European one (focusing also on the European energy policy).
Afterward, the focus will shift on Enel Green Power’s internationalization strategy. Particularly, chapter 3 will firstly introduce the company, with its history, business model, risk factors and competitive advantages. Then, it will centre on Enel Green Power’s geographic expansion and diversification strategy, explaining its global footprint, the internationalization methods and the future landscape. The last part of the chapter will perform a competitor analysis, describing Enel Green Power’s main competitors’ features (Iberdrola Renovables, Acciona Energía, EDF Energies Nouvelles, E.ON Climate & Renewables and EDP Renováveis).
Finally, the last chapter of the work will concentrate on Enel Green Power’s Iberian Peninsula expansion. First of all, the Endesa acquisition process will be described, together with the main reasons for it. Then, the chapter will focus on Enel Green Power España foundation, illustrating the Spanish renewables market features, the process and the reasons for the establishment. The third paragraph will explain the integration results, highlighting the synergies and interdependencies achieved and the new company competitive advantages. The chapter ends with a representation of Enel Green Power España’s future outlook, emphasizing the possible strategies’ evolutions.