Over the course of the next three years Enel will invest some 35 billion euros in renewables and grid modernization as it embarks upon a transformation whose aims are to create more value for customers, reach Net Zero emissions by 2040 and return the energy giant to “financial balance”. Supported by “three pillars”, the new strategy will see the company continue to develop renewable energy sources and invest in grids and resiliency, while on the consumer side it will focus increasingly on bundling services and products, creating value for customers and strengthening their loyalty. The goals – and the path forward that will enable achieving them – were outlined at Enel’s latest Capital Markets Day, held in Milan in November 2023, during which the company’s new chief executive officer, Flavio Cattaneo, presented the energy giant’s Strategic Plan 2024-26. According to Cattaneo, the new three-year plan will ensure that at Enel “financial sustainability will go hand-in-hand with environmental sustainability”.
Pumping billions into renewables and electricity grids
On the environmental side, Enel’s sustainability drive is backed by investments over the next three years that will see the company add an additional 13.4 GW of renewable generation capacity globally, bringing the total to 73 GW by 2026. Renewables are seen by governments and regulators as more competitive than traditional generation, Cattaneo said, and they can help reduce electricity costs and support countries in their efforts to become less dependent on coal, gas and oil.
The CEO reaffirmed Enel’s commitment to completely shut down all its carbon powered generation by 2027 and reach zero emissions of greenhouse gasses by 2040 when all power sold by the company will be generated by 100% renewable sources. Already by 2030, the company will reduce its total absolute emissions by 68% compared to a 2017 baseline level, Cattaneo said. The plan – which the CEO said is “compliant with the 1.5° Celsius pathway” established by the Paris Accords – is backed by some 35 billion euros of investments over the period, of which 12.1 billion euros will be dedicated to renewable energy, where Enel will pivot towards onshore wind power and battery energy storage systems (BESS) – which are critical in storing energy and balancing demand as renewables make up an increasing share of energy supply – as well as to repowering.
Grids will receive the lion’s share of investments over the course of the plan, with some 18.6 billion euros spent on improving their quality, resilience and digitalization, as well as on creating new connections.
Finally, some 3 billion euros will be devoted to developing client solutions, with a focus on ‘bundled’ packages of products and services, tailored to different types of users – private/residential consumers, governments, SMEs – and offered through a single touch-point, facilitating access and enhancing the overall experience.
A smaller, but more focused and profitable, geographic footprint
An important part of the energy giant’s transformation concerns its geographic spread. Over the 2024-26 period, Enel will reexamine its market presence and focus on investments that maximize customer satisfaction and engagement. The company will carry out a “geographical rebalancing”, Cattaneo said, concentrating on its main markets of Italy, Iberia and Latin America. During the presentation, the company’s Chief Financial Officer, Stefano De Angelis, said some 75% of investments over the course of the plan will go to Europe (49% in Italy, 25% in Iberia), 19% to Latin America and 7% to North America; in the previous period, some 45% of investments were made in the Latin and North America region. “Our focus will be on Italy and Spain, where free markets allow [us] to complement our offer with products and services and with higher marginality,” Cattaneo explained about the Group’s shift to a more focused geographic reach.
An easily accessible energy world built around our customers
Enel is always seeking ways to engage customers with solutions that enhance their lives and welfare. One key element of the new strategy is a focus on bundling products and services to create an offering that is convenient and cross-functional, able to respond to a broad plethora of customer needs.
For private/residential users and small- and medium-sized enterprises (SMEs), such solutions will be increasingly accessible from a single touch point, while key account managers will be assigned to top and large commodity and services users. This bundling approach is crucial to the Group’s transformation, as it enables cross-selling, which – accompanied by an improved customer experience – will strengthen brand loyalty. Products that support rapid electrification of uses (think mobility, residential and commercial heating/cooling solutions, cooking) will be prioritized with an eye to promoting customer loyalty and increasing the company’s marginality. Data will increasingly help the company expand its business, Cattaneo explained.
“The key drivers of our commercial strategy will be advanced customer segmentation, also with the support of AI, to limit churn and promote customized offering.” The CEO also said that channels will be remixed “to improve efficiency in clients acquisition and management”, reiterated that there will be a focus on “dedicated key accounts for top b2b and b2g clients” and “new operating models covering commodities and services with a single touch point”, and pointed to an “improved customer experience through simplified and digital processes for caring, invoicing and retention.”
“Three Pillars” that ensure financial and environmental sustainability
These goals will be sustained by the newly identified “strategic pillars” which will guide Enel’s transformation over the coming years. The first pillar, Cattaneo explained, concerns capital allocation: “Our capital allocation will be extremely selective and flexible,” the CEO said during the presentation in Milan, “driven by value, focused on opportunities that might arise to maximize the risk-return profile of the Group… Rules for investing capital are simple and clear: we’ll deploy capital where returns are visible, regulatory frameworks remunerative and macro economy and political environments are stable.”
Cattaneo also pointed out that the company would focus on its core markets: “Investments outside our core countries, where we can’t leverage on our integrated position, will be very limited.” However, this does not mean the company won’t keep its eyes open. “We’re going to look for market opportunities [as long as] these unlock better value, avoiding market volatility,” he added. This “pillar” also affects the company’s approach to innovation. Enel will no longer focus on developing all solutions and technologies in-house, especially if opportunities exist to acquire them elsewhere for cheaper, but will adopt a “flexible sourcing approach” that is open to partnerships on a project-by-project basis. The second pillar concerns operations.
“Group operations will run on simplified processes, [leading to] a leaner organization with clear accountability,” Cattaneo explained, adding: “We’ll maintain strict operating cost discipline to improve cash generation and offset rising inflation and cost of capital.”
Finally – but not less importantly – the third “pillar”, sustainability, which in the eyes of the CEO refers not just to the environmental impacts of Enel’s operations, but also to the impacts on the company’s financials. The CEO said the focus of the plan is to “create a sustainable business model able to self-finance its needs and continue addressing climate change issues” while enabling a deleveraging of the Group’s balance sheet and guaranteeing payment of an annual dividend. The previous strategic plan called for the company to have a net debt/EBITDA ratio of 2.4x to 2.5x by 2026; under the current plan that will decrease slightly, Cattaneo explained, to approximately 2.3x, helping improve Enel’s credit ratings, which – in turn – reduces its cost of capital.
Returns to shareholders
Enel not only provides customers with heat, electricity and power management solutions; the company also provides millions of investors, many of them customers. During the Capital Markets Day, Cattaneo was clear that the company has a strong commitment to maintain appealing and sustainable shareholder remuneration. During the presentation, the CEO promised that Enel will continue to pay out a minimum annual dividend of 43 cents per share over the course of the strategic plan. This could increase, he said, if the company manages to reach cash flow neutrality. Over the strategic plan period, the company sees total shareholder return – which includes earnings and dividend yield growth – expanding by approximately 16 percent. Crucial to the company’s meeting its 2024-26 goals is the focus on markets and investments that reduce risk and maximize marginality potential. For this reason, Cattaneo explained during the presentation that investment in networks will be concentrated on new connections and on improving quality and resilience of the company’s current asset base. “We’ll invest in Europe where we receive proof that regulatory schemes allow for a fair remuneration on capex,” the CEO said, pointing out that there is EU support for investments in grid modernization. “EU institutions are financially supportive of grid digitalization to better accommodate the rapid increase in renewable power generation and allow the offering of efficiency-based solutions, such as Demand Response service and bidirectional power flows.”
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