It will be massive and it will change the way we live: the energy revolution has only just begun but we know it’s here to stay and to stay forever. Even the world of finance has noticed and is increasingly investing in those leading the change.
‘Revolution’ was the word that recurred most often at the second appointment of #MeetEnel, the series of meetings organized by the Enel Group to explore issues and strategic choices with sector experts and opinion leaders. “Enel’s 2030 strategic vision: a decade of opportunities” was the title of the digital event held on 18 February with Enel CFO Alberto De Paoli. Conversing with him were Giulio Baratta, Head of DCM Corporates EMEA at BNP Paribas, and Marisa Parmigiani, President of CSR Manager Network; the discussion was moderated by Mariangela Pira, a journalist for Sky TG24.
Towards the new energy system
Given the choices made in recent years, the Enel Group has a natural and privileged viewpoint with which to predict trends in the sector and measure the first effects of a transformation that will affect every energy company, not only the utilities. “While drawing from different sources, they will all tend to flow towards one type of energy, electricity, which is unique in guaranteeing sustainable development to fight climate change”, explained De Paoli.
This transformation will see them evolve into flexible and modular platforms to guide the system on the route to the energy transition. From the small number of large power stations producing energy for millions of passive consumers in a passive infrastructure, the transformation will lead the shift to an increasingly widespread system, based on renewable energies with increasingly digitalized networks connecting billions of active objects and consumers. “A transformation that will cause utilities to reinvent themselves” explained De Paoli.
“In Enel, we’d already spotted these trends 5 years ago, so we prepared: we changed our business model, investing in renewables, networks and digitalization”
Alberto De Paoli, Enel CFO
“The decision was not influenced by ethics alone, it was also influenced by business,” added De Paoli. Today, thanks to first-mover advantages, the Enel Group is a leader in the three main assets of the coming revolution: it is the world’s leading private operator in the renewable energy sector with approximately 49 GW of installed capacity, the largest private network operator (more than 74 million end users) and the operator with the largest client base, with over 70 million.
The three main trends of the future
What will Enel look like in ten years? On Capital Markets Day 2020, in addition to the three-year Strategic Plan, the Group’s vision up to 2030 was presented. De Paoli explained that Enel’s greatest advantage is being a leader in the sectors that will grow the most over the next decade, linked to the trends of decarbonization, electrification and digitalization. These are sectors already experiencing unstoppable growth like renewable energies that, thanks to the technological innovation of the past ten years, have become more competitive than fossil fuels. “This is a trend that even policy decisions cannot slow down”. For example, in the United States of America, which left the Paris Agreement under the previous administration (and is now rejoining), numerous carbon plants have been closed in favor of investment in more competitive renewables. The economic benefits of electrification for the end user will also help reinforce this trend, which is already underway: “When electricity is used for all one’s personal needs, from heating to travel, there are savings of 25-30%”.
Enel has another important advantage, one evoked in its purpose and included in its strategy: working for sustainable progress. This means creating value for all the stakeholders, not just the shareholders, and heading in the direction of a new form of capitalism, so-called “stakeholder capitalism”. This, explains De Paoli, “makes the company capable of lasting growth”, giving it the certainty of a long-term future. This also explains why the value of the Group on the Italian stock exchange has almost tripled from 2015 to today, rising from 35 billion euros to more than 90 billion euros at the start of 2021, thereby consolidating the Enel Group’s lead position among the European companies in the sector in terms of capitalization.
The decisive role of sustainable finance
At #MeetEnel, Baratta confirmed the decisive role of sustainable finance in accelerating the energy transition. Investors are very selective today, rewarding companies that are leaders in sustainability, “those that are going to guide the change because they will create value in the medium and long term: future-proof players,” explained Baratta, who also highlighted the role of public financing, “which by its very nature is interested in creating value for communities and for individuals, a value that is both social and environmental”.
“It’s a tangible value that today can be measured with very precise and solid Key Performance Indicators (KPI), as Enel does,” added Parmigiani. Today it is central to create value for all stakeholders. The idea of the stakeholder itself is changing: no longer the bearer of others’ interests, as in the 1990s, now the people directly, as citizens. “Today they are the principal stakeholders and the reputation of a company is an intangible value that is equally as important and valid as the KPIs”.
“Sustainability is the new must-have,” concluded De Paoli. Once it was considered a separate sector but today a strategy that revolves around sustainability is the only way for a company to do business and survive long-term. Including at the financial level. Green Bonds, linked to specific projects, reflect an old vision of sustainability. Our Group was the first in the world to launch Sustainable-Linked Bond that connect with the Group’s strategic objectives of sustainability. Reaching the sustainability-linked strategic goals decreases the Group’s risk level, which therefore requires a lesser amount of capital. “Today many companies have followed our lead and Sustainable-Linked Bond have become mainstream: we are proud to have been the first and to have innovated the financial system”. Another revolution that has begun and that will never stop.