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WEEKEND INTERVIEWS - Venturini: "The boom in renewable energy will continue"

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INTERVIEW WITH FRANCESCO VENTURINI, CEO of Enel Green Power. “Oil price volatility is a push to invest in green energy. Soaring in the USA” – “2015 Financial Statements, targets achieved” – The incorporation into Enel: “The withdrawals? Negligible” – And on a changing Italy: “Renzi does everything to support innovation but the battle will be long”

WEEKEND INTERVIEWS - Venturini: "The boom in renewable energy will continue"

Low-cost oil does not harm the development of renewables. On the contrary, in 2016 the "triumphal march" of sun and wind will continue, which was one of the major surprises of last year, marked by the collapse in crude oil prices and the investment boom in green energy. A business in which Enel, with Enel Green Power, will invest a mountain of money: 9,7 billion, therefore more than 50% of the expenditure destined for growth which is forecast at 17 billion in the 2016-19 plan. “Together with the networks, we will be the driving force behind Enel for the next few years. It is an energy revolution which has its industrial reasons and which is strongly correlated to the volatility of commodities rather than their price. This is a phenomenon that we have already observed for 2 or 3 years and I am convinced that I will not be proven wrong in the near future”. Francesco Venturini, managing director and general manager of EGP (Enel Green Power), is not at all worried about the earthquake shaking the black gold markets. He looks to the ambitious targets of the business plan with confidence and considers the incorporation into Enel a success: the withdrawal requests, which closed yesterday, were completely "negligible". Of changing Italy, he thinks that the Renzi government "is trying to do everything to support the renewal effort that comes from companies and civil society, with a set of laws that can concretely make the innovation blossom, of which the country is able". Even if he does not hide the fact that resistance is not lacking and is strong: “We are not a country for big shocks, many prefer small steps. The system is complex – he says in this interview with FIRSTonline – and will require long and difficult battles ”.

Global investment in renewable energy hit a record $329 billion in 2015. A surprising market response that does away with the theory that only a high price per barrel of oil could have sustained green energy spending. Is this a trend that will be confirmed in 2016 or will this unstoppable race slow down with the recovery in oil prices that some indicate for the second half of the year?

“It's a trend that won't stop for several reasons. First I would put the fact that we are now competitive in terms of price with conventional sources. A convenience that varies from country to country but increases from year to year. Then the simplicity of installation plays in our favor: there are countries like the United States where we are able to create 200 Megawatts (Mw) in about 9 months, from approval to commissioning, when for a gas-fired plant it goes from 3 to 5 years depending on the areas of the planet. Finally, the factors of scale push renewables, because the plants are modular; the fact that they generate work, increase the energy independence of the countries that adopt them and are sustainable for the environment. But there is one factor above all that is decisive in a period like this”.

Which?

“Oil price volatility creates uncertainty. For this reason, more and more companies or countries invest in renewables and they will do it more and more: thus they block profitability for 20 years with long-term PPA contracts. It is a driving force that will continue to strengthen the sector. Also in 2016. In particular, I foresee a boom year in the United States where the government has extended the tax incentives by 5 years and it is possible to sell green electricity to a utility at about 25 dollars per megawatt hour”.

Russia pushes for a 5% cut in oil production quotas and attempts to involve OPEC. Saudi Arabia does not commit itself but treats. Is something going on?

“My impression is that Saudi Arabia is starting to worry: it has not achieved its objectives of eliminating American shale production and has burned 100 billion. From the point of view of a green producer like us, that's fine: it will only incentivize the utility we mentioned to hedge against the risk of price volatility and buy green electricity at 25 dollars”.

The development of renewables has become central and the incorporation of EGP into Enel, five years after the IPO, stems above all from industrial needs. Important competitors such as E.on and Edf are moving along the same lines. But there are also financial reasons, such as consolidating the entire profit of EGP (360 million in 2014), and not just 68%, or simplifying the chain as Enel has done with its subsidiaries in South America. It must be said that the EGP shares from the 1,6 euro placement have never gone beyond 2,2 euro. A potential that has remained partly unexpressed?

“EGP has discounted Enel's significant shareholding weight and strong exposure to falling market prices throughout Europe and particularly in Italy. For this reason we have moved investments to other countries. Since listing in November 2010, installed capacity has risen from 6,1 GW to over 10 GW, growth capex has nearly doubled from 2010 levels, with greater allocation in emerging countries rising from 10% in 2010 to around 80% of the total in 2015. As regards profitability, we are in line with the plan targets. A very positive balance".

Speaking of financial statements, how did EGP end 2015?

“We are confident that we have hit our targets, in line with market sentiment. I won't add anything else while waiting for official communications”.

And for 2016?

“We plan to increase the additional installed capacity from 1 to at least 1,5 Gigawatts. After the acquisitions of India and Germany, of a strategic nature and linked to market penetration, we will continue to study interesting opportunities where they arise. In mature markets, such as in France and Portugal, and in other regions, we will continue the business of asset portfolio management to evaluate new opportunities for potential divestitures and acquisitions. The development will continue in Latin America: we are aiming a lot at Mexico and Peru, Brazil remains very interesting, we are preparing for a big race in Chile in March. We also expect good news from Morocco and Egypt, excellent news from the USA. And we are working on South East Asia. In these areas we will make the big numbers on that 9,7 billion investment package of the 2016-19 plan”.

The Italian hub with F2i?

“He is working on acquisitions in Italy, analyzing what is on the market, promising and very fragmented, characterized by a process of consolidation. As in all of Europe after all”.

Coming to Italy, the Renzi government characterized its action with a strong push for change. As far as can be seen from a group with an international vocation such as Egp, can Italy's renewal be seen in its daily experience?

“There is change, we see a country trying to change. Looking at the energy sector in particular, I think we need to make a greater effort to assert ourselves in Europe so that the energy market that is being designed is as functional as possible for the industry and the citizens who are served by it”.

More generally, do you feel supported in this effort at innovation implicit in an activity like that of Egp?

“I think there is a group of people in the government who are trying to do everything to support the renewal effort that comes from companies and civil society, with a set of laws that can concretely make the innovation blossom which the country is capable: from the desire to facilitate the tax treatment of intellectual property to the ever greater attention towards infrastructures, to the excellence present in some universities such as the Polytechnics of Milan, Turin and Genoa. Of course, we are not a country that likes big shocks, many prefer small steps. The system is complex and will require long and difficult battles.”

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