Enel mulls scrapping Argentina exit in big bet on Milei

Enel SpA is poised to scrap plans to sell off its remaining operations in Argentina, which would make it the first international company to shift strategy since Javier Milei took office promising to improve the South American nation’s business climate.

While it has yet to make a final decision, Italy’s largest state-controlled utility is now likely to keep power distributor Edesur after Milei pledged to liberalise the country’s energy market, according to people familiar with the matter.

Remaining in Argentina would mark a striking change of course for the company that recently offloaded two of its operations there: thermal power plants Enel Generación Costanera and Dock Sud. Those sales were part of a €21 billion (US$22.8 billion) asset-disposal plan, announced in 2022, that included exits from Argentina and Peru.

Enel declined to comment.

The reconsideration follows a January meeting between Milei and Enel Chief Executive Officer Flavio Cattaneo at Buenos Aires’ international airport. Cattaneo, who took over as CEO last May, emerged from the encounter optimistic about Milei’s approach to Argentina’s ailing economy and began to rethink the plan to leave the country, La Nación and other local newspapers reported.

Milei is scheduled to travel to Rome on February 11, where Prime Minister Giorgia Meloni will host him for high-level state talks.

Since taking office on December 10, he has aggressively pushed to overhaul Argentina’s crisis-stricken economy. Days into his term, he published a sweeping decree, now in effect, to reduce government regulation. Separately, a sprawling reform bill that would grant the president emergency powers over energy prices is winding its way through congress, with a vote possible as soon as Friday. The government is also planning a long-term, multi-year revision to update pricing.

Milei’s challenges

Enel is among the international companies that have welcomed Argentina’s shift from heavily-protectionist former president Alberto Fernández. In recent weeks, Milei’s policies have won the praise of Techint CEO Paolo Rocca. The Argentine president also held a conference call with BlackRock CEO Larry Fink and said he will organise a summit of tech leaders as he seeks to project confidence amid worsening economic forecasts.

Still, the move amounts to a massive wager on the new leader, who has been forced to water down his initial reforms in a bid to get them approved in the legislature, where his party holds only a slim minority. Milei has weakened some of the bill’s emergency power provisions, curbed its austerity measures and suspended plans to privatis`e state-run oil company YPF SA.

Enel’s Argentina assets, which currently have negligible value, should become more profitable under Milei’s plans to unwind generous energy subsidies that have made utility bills a bargain for consumers, even by Latin American standards. Since the country’s economic crisis in 2002, utility prices have been forcibly frozen or held far below inflation, except for a brief period during the pro-business administration of former President Mauricio Macri.

Milei’s deregulation decree will remain in effect unless both chambers of Congress vote it down. An Argentine court this week ruled a key labour reform plan unconstitutional, dealing a blow to the president. Milei has also liberated imports, which were previously frozen under a highly discretionary programme, and devalued the official currency by more than 50 percent.

Cattaneo has undertaken a broad review of Enel’s strategy, taking a cherry-picking approach that has sought to avoid rushing asset sales and focus on higher-margin renewable projects and distribution grids.

The company’s last public remarks on its Argentina plans came in November, when Chief Financial Officer Stefano De Angelis said it “will see what will happen with Milei.”