Ence to invest 662 million euros to 2020

Ence to invest 662 million euros to 2020

Spanish pulp producer and renewable energy firm Ence recently unveiled its Strategic Plan for 2016-2020, including an ambitious investment drive of 662 million euros.

The funds will be earmarked to increase capacity at its pulp mills, reduce production costs and boost the generation of renewable energy from biomass.

Ence is the leading producer of eucalyptus pulp in Europe with a capacity of 930,000 tonnes per year and is the second company by sales on the continent.

The company exports much of its pulp production and its improved competitiveness has made it one of Spain’s more successful exporting firms.

In the next five years, Ence expects to nearly double its earnings before interest, tax, depreciation and amortisation (EBITDA) to 375 million euros in 2020, up from a forecast 200 milion for 2015.

These figures take into account pulp prices remaining at current levels of $800 per tonne.  In a more conservative scenario, with pulp prices around $720 per tonne, Ence is forecasting EBITDA of 111 million euros in 2015, rising to 209 million in 2020.

But even these more conservative predictions compare very favourably with Ence’s 2014 performance, when EBITDA dropped 70 percent year-on-year to 43.8 million euros and the company posted losses of nearly 141 million euros.



Ence has certainly turned its fortunes around over the last two years thanks to its 2014-2016 Competitiveness Recovery Plan, which includes cost savings measures and efficiency improvements.

The closure last year of its Huelva pulp mill was an important milestone to recover profitability.

As a result of Spain’s 2014 energy reform, the mill’s cost base significantly increased, making operations at the plant inefficient.

But the company still has pulp operations in Navia, Asturias, and in Pontevedra, Galicia, where it has implemented a series of cost saving measures and investments in efficiency. These will complement its plan to return to profitability by 2016.

Ence is also the leading Spanish producer of renewable energy from biomass. It currently has 300 megawatts of installed capacity and is considering opening new biomass plants in other parts of the world.

Of its total investment budget over the next five years, 337 million euros will be set aside for the firm’s pulp business and 325 million for its energy operations.



In September, Moody’s Investors Service raised its rating on Ence to stable from negative, citing the success of the management’s restructuring plans started in 2014.

The ratings agency noted that Ence’s pulp operations have benefited from a combination of the strong dollar/euro exchange rate and historically high pulp price levels.

As part of its future strategy, Ence has promised shareholders that it will maintain an “attractive” dividend policy for shareholders as its earnings and cashflow situation improves. Its growth prospects in Spain’s key renewable energy business will also make the company attractive to international investors.

For information on investment and legal services in Spain, please contact corporate law firm Argali Abogados.

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