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Enel's chief lays out new strategy, eyes reappointment
March 12, 2014 / 6:56 PM / 4 years ago

Enel's chief lays out new strategy, eyes reappointment

ROME, March 12 (Reuters) - With just weeks to go before hearing from Italy’s new government whether he still has the job, state-controlled utility Enel’s chief executive presented a new growth plan for the company on Wednesday, along with a reminder of his achievements over the past nine years.

At a presentation of Enel’s 2014-18 investment plan, Fulvio Conti laid out a vision for seeking growth in emerging markets and renewable energy, having already turned the once simple national utility into a multinational business.

Asked whether that meant he wants to stay on to implement this strategy, Conti told Reuters in an interview it was up to the new government to decide.

“Of course I am open to being reappointed,” said Conti, who became chief executive in May 2005, adding that the investment plan demonstrated he has the vision and his legacy showed he could deliver.

“We think our case is a solid case of creation of a multinational, with the scale, technologies and footprint that can boost future growth,” he said.

But industry sources say new prime minister Matteo Renzi is likely to want to place his own men at the helm of Italy’s state-controlled energy firms, and that Enel’s high debt and low valuation could work against Conti.

The Italian state owns 31.2 percent of Enel.

MULTINATIONAL

“We expect a change in the leadership of all the energy companies controlled by the state, because premier Renzi said he will change all the old managers,” a senior Italian utilities industry executive told Reuters.

Conti took pains to spell out his achievements in the first slide of his presentation to analysts on Wednesday, saying that since 2005 “Enel has been transformed into a fully integrated multinational player”.

When Conti took the helm, Enel was a national utility with a modest international presence in 11, mostly neighbouring, countries.

Now, with a market value of 50 billion euros, Enel is Europe’s fourth-biggest utility, with a presence in 40 countries. Under Conti, the firm’s net installed capacity doubled to 99 gigawatts, core earnings doubled to 16 billion euros and its customer base grew from 34 million to 61 million.

The firm says it is the biggest operator both in Italy, with 32 million customers, and in Spain with 12 million customers and has 6.3 million end users in Brazil.

It also ranks first or second with 1 to 3 million customers in Romania, Colombia, Argentina, Chile and Peru.

The centrepiece of Conti’s foreign expansion drive was the 2007 acquisition of Spain’s Endesa, with its large footprint in Latin America.

But it has come at a cost and Enel is now Europe’s most highly indebted utility with net debt of 40 billion euros and a credit rating just two notches above junk.

BAKER‘S SON

And while bulking up Enel’s revenue and balance sheet has brought Enel and Conti international prestige, the firm’s growth in net profits, dividends and share price has not kept pace.

Net profit last year came in at 3.2 billion euros, less than the 4 billion euros Enel earned in 2005 and dividend payments have been on an uninterrupted downward slide since then.

Enel’s stock has been the second-best performer in the 26-share Stoxx Europe 600 utilities sector index over the past six months, but at 3.9 euros it is still way below a high of around 7.5 reached in 2007, and the 6.5 euros prevailing when Conti took charge.

Conti blamed the recession and regulatory pressures.

“We had the worst recession ever, countries like Italy lost 25 pct of manufacturing output. So a lot of energy demand all of a sudden disappeared,” he said.

Even if all European utilities have suffered in recent years, those most eager to expand and invest abroad have suffered the worst.

Enel, Spain’s Iberdrola, Germany’s E.ON and France’s GDF Suez rank lowest in terms of share price to book ratios in the utility index, with Enel fourth worst at 0.98.

“Sometimes markets are not so clever. We have been accused of being too Spanish and too Italian. Investors feared we could get entangled in the economic crisis there,” Conti said, adding that Enel had emerged relatively unscathed.

Conti, a baker’s son who was promoted to the CEO’s role from being chief financial officer at Enel and before that CFO at Telecom Italia, will know his destiny when the treasury officially presents its slate of names for the new Enel board in late April, ahead of the shareholders meeting on May 22. (Additional reporting by Stephen Jewkes in Milan; Editing by Greg Mahlich)

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