Enel, Italy’s largest energy utility is in the news with conflict over appointing a new CEO because aspirations differ between ESG investors and the Italian government. There are headlines like these:
Norway’s oil fund rejects Rome’s candidate for Enel chair, Financial Times
Wanted! Investors demand Italy hire renewable expert, global networker to run Enel, Zawya
Government board nominations for Enel run into opposition, msn
Enel confirms 2023 guidance, enters press blackout on nominations, Reuters
MILAN (Reuters) – Italy’s biggest utility, Enel, confirmed its full-year guidance and entered a press blackout period ahead of a May 10 shareholder vote on a challenged board shake-up.
The group, whose main shareholder is Italy’s Treasury with nearly a 24%-stake, is at the centre of a governance row that will be decided at the AGM scheduled for next Wednesday.
The Treasury has proposed a new management, putting forward a slate of six new candidates and ousting current Enel CEO Francesco Starace, who has been at the helm since 2014.
Hedge fund Covalis, which holds around 1% in Enel, presented an alternative list of nominees, criticising the process under which the government picked its candidates. Covalis said the system that led to the government’s nominations “undermines investor confidence, erodes value and is out of line with international standards of best practice in shareholder democracy”.[Would those best practices be ESG?]
Proxy adviser Frontis Governance has urged shareholders to back the candidates promoted by Covalis and reject names put forward by the Treasury, in a report tailored for Switzerland’s Ethos, a group of pension funds and other investors.
On the financial side, Enel’s ordinary earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter rose 22% to 5.5 billion euros above an analyst consensus of 5.4 billion euros. Net debt at the end of March was 58.9 billion euros, down from 60.1 billion euros at the end of last year.
Starace described the results in the first three months of 2023 as outstanding and said the group had already exceeded half of its 21 billion euro ($23 billion) asset sale target unveiled last November.
The state-controlled group intends to focus its business on the core markets of Italy, Spain, the United States, Brazil, Chile and Colombia.
Wanted! Investors demand Italy hire renewable expert, global networker to run Enel, Zawya
Expertise in renewables and an international focus are what investors want to see from a new head of state-controlled Enel, 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.
With almost 60 Gigawatt 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.
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.
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.
Summary:
Once again we have climatist financiers using ESG to push zero carbon against the mission of providing secure and affordable energy to meet citizen’s needs.
via Science Matters
May 5, 2023 at 11:35AM
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