New Enel CEO turns more cautious on renewable projects

Italy’s Enel (ENEI.MI) will focus its investments on power grids in the next three years and take a more cautious approach to spending on renewable energy projects, its new chief executive said this week.

Enel, hitherto the world’s biggest listed renewables developer, plans 35.8 billion euros ($39 billion) of gross capital expenditure in its plan to 2026, of which nearly 19 billion euros will help to modernise and make its networks more resilient.

Investments in renewables will be more selective amid rising interest rates and input costs, Enel said, adding it would spend a gross amount of 12.1 billion euros on onshore wind, solar and battery storage in the period.

The group plans to add around 13 gigawatts (GW) of new green energy capacity globally, also by clinching partnerships with other groups.

Net debt this year is expected to decline to 60 billion to 61 billion euros, remaining high for longer than indicated in the previous business plan, after some of the asset sales planned by the previous management proved more difficult to finalise.

Shares in the state-controlled power group were down 0.4 per cent at 1530 GMT paring a 1 per cent initial loss on the Milan bourse and underperforming a nearly flat blue-chip index.

Rising indebtedness was one of the reasons why the Italian government, which is the single biggest shareholder in Enel, decided to oust the group’s previous CEO, Francesco Starace.

New CEO Flavio Cattaneo pledged to spend only the cash generated by the business, without increasing the debt pile.

“Like in a family, you can raise debt to buy a house, but if you go out for dinner raising your debt, it is not good,” Cattaneo said.

Cattaneo and fellow new Chief Financial Officer Stefano De Angelis said the group would focus on grids because this business had returns set by regulators that were therefore more predictable. Among his previous roles, Cattaneo led Italian power grid operator Terna.

A slowdown in investments in renewable capacity could however make the group less integrated and more dependent on energy suppliers, analysts have warned.

Enel confirmed a floor of 0.43 euro per share for its dividend over the next three years.

Cattaneo, who succeeded long-serving CEO Starace in May, said the group was confident it could increase the dividend starting from next year, adding he would buy Enel shares to bet on a stock rise.

“I intend to buy 1 million more of Enel shares and… don’t intend to lose my money,” Cattaneo said, adding the group would cut costs for 1.2 billion euros in three years.

The group will devote some 3 billion euros to actively manage its customer portfolio through bundled offers, which will include different commodities and services.

This would help recover some market share after the customer churn rate rose significantly to 20 per cent.