Focus: Wanted! Investors demand Italy hire renewable expert, global networker to run Enel
05/04/2023 12:15
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Italian government set to replace Enel CEO
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Hard to find ideal candidate to succeed Starace
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Investors want international focus maintained
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Enel has bet big on renewables but debt in focus
(Adds detail on candidates shortlisted to replace Starace,
paragraph 5)
By Francesca Landini, Giuseppe Fonte and Angelo Amante
MILAN/ROME, April 5 (Reuters) - Expertise in renewables
and an international focus are what investors want to see from
a new head of state-controlled Enel ENEI.MI , as Italy's
government screens candidates to replace the energy group's
long-serving chief executive.
Prime Minister Giorgia Meloni's administration is determined
to oust current CEO Francesco Starace, several sources told
Reuters. In charge since 2014, Starace is in the crosshairs of
Meloni's inner circle as he is deemed too independent.
Meloni's office is also concerned about the group's debt
pile. But sources familiar with the matter said that head
hunters hired by the Treasury are finding it tricky to put
forward potential successors with the broad range of skills
required to run one of Europe's largest utilities.
Leading candidates to run Enel include Stefano Donnarumma,
CEO of Italian power grid operator Terna TRN.MI , and Luigi
Ferraris, who worked for Enel for 16 years including as CFO
before becoming chief executive at Italian railways operator
Ferrovie dello Stato, the sources said.
Flavio Cattaneo, vice president of high-speed train operator
Italo, the chief executive of EDF's EDF.PA Italian unit Edison
Nicola Monti and senior managers at Enel's units such as
Francesco Venturini are also being considered, the sources said.
Venturini runs Enel X, the group's division specialising in
technology and energy transition.
Enel and Edison declined to comment. Donnarumma, Ferraris
and Venturini were not immediately available for comment, while
a spokesperson for Cattaneo said the executive was not
interested in the job.
A decision is expected in mid-April. In the meantime several
shareholders have signalled to Rome that they don't want an
abrupt change in Enel's strategy, in particular a drastic
reduction in the group's international exposure. Some investors
fear the government under nationalist Meloni may want the
company to be more domestically focused.
"I would recommend (the new CEO) not to try to shake up
everything," said Jean-Hugues de Lamaze, managing director at
alternative energy investment firm Ecofin, which has $2.2
billion of assets under management and has held a small stake in
Enel for the last six years.
"Starace announced a major programme to restructure the
group to go back to a growth path... I would like to see it
confirmed," he added.
U.S. OPPORTUNITY
With almost 60 Gigawatt (GW) of installed capacity, Enel is
one of the world's biggest players in renewable energy.
Starace won plaudits for his commitment to green energy.
However, investors and the government grew restless over a debt
pile that had grown to around 60 billion euros ($65.40 billion)
in 2022 from 45.5 billion in 2020, when Starace was reappointed
for a third term.
The company, which has been hit by soaring gas prices
and government measures capping bills to shield consumers, saw
net profit slip to 5.4 billion euros last year, from 5.6 billion
euros in 2021.
In November Enel unveiled its updated strategy to 2025,
pledging to cut net debt by 21 billion euros via asset
disposals, while at the same time investing 37 billion euros and
increasing installed renewable capacity by 21 GW.
It plans to focus on six core markets - Italy, Spain, the
United States, Brazil, Chile and Colombia.
The new CEO should not sacrifice the group's exposure to
North America and confirm its dividend policy, a number of
investors said.
"People in Italy may prefer that Enel focuses on making
things as much as possible in its home country and not investing
so much abroad, but the company has no choice... if it wants to
attract foreign investors," said Vincent McEntegart, multi-asset
investment manager at Aegon Asset Management, an Enel
shareholder with assets under management worth $311 billion.
For Enel, U.S. President Joe Biden's green energy subsidy
package could mean double digit returns in North America
compared with single digit in Europe, McEntegart said, adding
such returns would underpin the group's attractive dividend
policy.
Ecofin's de Lamaze agreed Enel should not retreat from
global markets.
"The future for European utilities is international
development in advanced markets. You can't have an Italian only
Enel, it would be such a step back," de Lamaze said.
EXITING GAS
Since Starace was appointed CEO in May 2014, Enel has
increased its installed renewable energy capacity to 59 GW from
36 GW at the end of 2013.
Starace's mantra has been electrification of consumption and
digitalisation of grids and he said last year he wanted to
leverage a renewed focus on energy security around the world to
accelerate the group's exit from natural gas. The group
currently plans to become carbon free in 2040.
"My priorities for the new CEO would be to continue to roll
out renewables and accelerate the exit from gas," Simone
Siliani, the director for Italy's Fondazione Finanza Etica, told
Reuters.
Finanza Etica, which is an active investor on ESG issues,
has been holding a tiny stake in Enel since 2008.
"Enel can make the difference if Italy wants to meet its
decarbonisation goals," added Siliani.
($1 = 0.9174 euros)
(Reporting by Francesca Landini, Giuseppe Fonte and Angelo
Amante; Editing by Keith Weir and Susan Fenton)
((francesca.landini@thomsonreuters.com; +39 02 66129437;
Reuters Messaging: reutersitaly.thomsonreuters@reuters.net))