Enel’s Strategic Plan 2019-2021: the renewable future

Enel’s Strategic Plan 2019-2021: the renewable future

Enel CEO Francesco Starace and Chief Financial Officer Alberto De Paoli presented the company’s Strategic Plan 2019-2021 to the financial community and the media in Milan on 20 November.

There’s a new energy in the world. It’s a renewable energy which consists of digitalisationtechnology and customer centricity that makes the creation of sustainable value possible. And Enel is undoubtedly a leader when it comes to this new energy, which is no longer simply a product for generation and distribution, but a development facilitator. Not only that, Enel works to maintain this leadership on a daily basis, in every country where the Group has a presence.

This is the summary of what investors and financial analysts heard during Capital Markets Day 2018 at Milan’s Hotel Excelsior Gallia on 20 November, when Enel CEO and General Manager Francesco Starace and CFO Alberto De Paoli presented the company’s Strategic Plan 2019-2021. As Monica Girardi, Head of Investor Relations, noted in her welcome address, this was a sustainable event.

 

Enel’s record winning achievements

Francesco Starace began his presentation by outlining the characteristics that demonstrate Enel’s leading role in the global energy sector: it is the prime grid operator with 73 million end users, has the world’s largest retail base with 64 million customers (gas and energy) and is the preeminent private player in renewables with 43 GW of installed capacity.

The strategic pillars reprise and consolidate the messages of the previous plan. First, industrial growth with an investment forecast of 27.5 billion euro (a 12% increase with respect to the previous plan) focuses on the development of renewables, grid flexibility, quality and resilience and infrastructures for large urban agglomerations, such as fibre optics, smart lighting and charging networks for electric vehicles.

Furthermore, the continuation of the operational efficiency programme will provide savings of 1.2 billion euro, while the simplification of the corporate structures with an active policy of asset rotation will maximise the Group’s value, optimising the balance between risk and opportunity. This activity will continue to preserve the core involvement of the people who are part of Enel and local communities.

This is an integrated, organic and highly diversified development model, in which digitalisation plays a key role, and which has been designed, as our CEO pointed out, to “reach maximum operational efficiency, ensure sustainable long-term industrial and socio-economic growth and fully compensate market volatility.”

“Macro trends linked to technological development,” continued Starace, “are shaping the energy transition at a global level. This will be the year of electrification, a phenomenon that, like urbanisation, is generating huge opportunities that we are perfectly positioned to meet.”

The Group therefore intends to commit to two additional United Nations 2030 Agenda Sustainable Development GoalsSDG 9 (Industry, Innovation and Infrastructure) and SDG 11 (Sustainable Cities and Communities).

Enel X, the division focused on technological innovation, new products and digital services which was launched a year ago, will play a crucial role as it concentrates increasingly on its offer of products and services. These include, for example, demand-response and energy storage, smart public lighting systems and new fibre optic grids for megacities, plus a widespread network of 455,000 new charging stations to support the spread of e-mobility.

“We have grown stronger over the past four years,” explained Enel President Patrizia Grieco, “and we are now the top private player in renewables, the preeminent global network operator and the leader in technology and investment. We will increase our growth capital expenditure by 12%, raising it to 27.5 billion euro over the next three years, thereby confirming our firm commitment to sustainable growth.”

 

The new SDGs and the creation of shared value

The Enel Group remains firmly committed to contributing to the Sustainable Development Goals which have been a corporate focus for the past three years and are, as Francesco Starace emphasised, “the heart of our strategy based on the creation of shared value”: SDG 4 (Quality Education); SDG 7 (Affordable and Clean Energy, especially for the billion people on the planet who do not yet have access); SDG 8 (Decent Work and Economic Growth); and, in particular, SDG 13 (Climate Action; the reduction of CO2 emissions in order to fight climate change).

Indeed Enel will make substantial investments in the renewable energy sector over the next three years: green energy will account for 64% of the 16.5 billion euro set aside for industrial development in the plan for 2019-2021. Consequently, renewables will increase from 45% to 55% of the installed total, by the end of this period. This will further consolidate the Group’s global leadership in the clean energy sector.

“We are increasing investment in renewables this year for two important reasons,” explained Alberto De Paoli. “The first is that we are seeing a radical change in our business, a definite trend of economies towards decarbonisation, the second that we want to have more direct contact with customers, who are increasingly sensitive to this issue. We are moving fast because we believe that timing is essential to operating in the best way possible in these new, very promising markets.”

At the same time, substantial investments have also been allocated to increase asset value, by improving the resilience and flexibility of grids and generating plants with the application of latest generation digital technology.

Given these targets, a substantial increase in the performance of invested capital has been forecast. This, together with a considerable reduction in the risk assessment of the business, enables the Group to maintain a dividend policy based on a 70% pay-out and to introduce a minimum dividend, for the first time, for the entire duration of the plan.

All things considered, the Strategic Plan balances strong, firm profit growth with the essential requirement of respecting the environment and creating long-term sustainable value for the Group. This is without forgetting, as Francesco Starace highlighted at the end of his presentation, that “our strategy is, and always will be, firmly linked to the involvement of people, those who work with us and our customers: our most precious capital is human capital.”