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In the summer of 2019, Enel CEO Francesco Starace considered the dramatic changes he had ushered in since taking the company’s helm five years earlier. Under his leadership, Enel had sought to improve its relationship with various stakeholder groups as well as shift towards more renewable sources of energy. The changes were still in process as Starace assessed what challenges and opportunities lay ahead.

Enel Group, headquartered in Rome, was one of the largest electric utilities in in the world in 2019, with $89 billion in revenues. Formerly Italy’s state-owned electricity utility, it had gone public and expanded across the globe, always with the Italian government as its largest shareholder. In this time, Enel had taken on massive debt and purchased a Spanish competitor.

When Starace had taken charge of Enel in 2014, he had faced a number of stakeholder groups with concerns about the company’s position. The company was one of the most indebted utilities in Europe and some of its new projects were being delayed by local activists. Environmental groups had filed suit against existing facilities. EU regulatory institutions demanded lower overall emissions from the generation of electricity. To set Enel on a new course, Starace issued two broad investment dictums:

  • No new investments that were opposed by the local population of the area where they were to be constructed.
  • No new investments that did not begin to produce revenue within three years.

These policies had had a transformative effect on the entire company. First, they required Enel to become more responsive to society’s wishes and more innovative in creating electric power. Its usual pattern of spending years designing massive power generation facilities had given way to large numbers of experiments in electrical generation, distribution, and sales.

Secondly, the policies supported a transition into renewable energy. Renewable energy could be set up relatively quickly and the price of solar, wind, and hydro technologies was dropping rapidly. The European Union had called for utilities to decarbonize, and Enel was set to follow the guidelines and halve its emissions by 2030, including decommissioning existing fossil fuel generation plants.

But how had these changes affected the company’s financial fortunes? The gross amount of electricity that Enel generated had declined as its green transition took hold, but profits had ticked upward. How had the changes affected the company’s risk profile and attractiveness to investors? Could Enel complete its efforts to decarbonize given its current balance sheet and income statement?

In 2019, Starace also was evaluating a revolutionary new financing technique that Enel had just invented—Sustainable Development Goal-linked bonds. Like other companies, Enel had previously issued asset-backed “green” bonds to finance the construction and purchase of renewable assets. Sustainable Development Goal-linked bonds, in contrast, were tied to overall performance of the company in meeting targets from the UN Sustainable Development agenda. How would going from asset-based to performance-based bonds change the risk profile of the company’s financing? What were the benefits and dangers of this new financing technique? With 73 million grid customers relying on Enel for their electricity in 2019, the importance of the company’s viability extended far beyond Enel’s executive suite.

Citation:  Gwen Kinkead, Jon Iwata, Stefano Giglio, and Jaan Elias, "Enel" Yale School of Management Case Study 23-017,  March 30, 2023.