♪ francine: power company enel rocked the markets when its ipo became the world's biggest at the time. almost three decades later and the company is still thriving as europe's largest utility and a dominant player in the sustainable energy space. now, enel is targeting a greener future with plans to go carbon neutral by 2050, and it is well

on its way, half of its capacity comes from non-fossil fuel sources. today on "leaders with lacqua," we meet the chief executive of enel, francesco starace. thank you for joining us today right here today at bloomberg. mr. starace, how difficult was it for enel to go from a coal polluter to one of the most renewable energy-friendly utilities in the world? francesco: first of all, we totally good polluter, we already had a sensible amount of renewable energy in the legacy of large hydro plants that most utilities have in europe. now we have a lot more. let's say it was, in retrospective, things always seem easier than they were. so it was a little bit of a mind-changing exercise on a large-scale, let's put it this way. it took a while, but there was a point where everything turned around.

there were a couple of years where things really changed. francine: what years? francesco: they were like, i would say, 2012, 2014. and after that, it was a little faster. francine: if you look at the shift from fossil fuel to renewables for the industry as a whole, how disruptive will it be for you, but also for your competitors? francesco: it is really disruptive. it is a big shift. there is a huge change coming. and it will take, i would say, 15 to 20 years to really get at the end of this shift, so a huge transition ongoing with shocks in different parts of the world. the base of install capacity that needs to be substituted is very large. it has been accumulated over 50 to 60 years, so it will take time, but it is ongoing and will not stop. francine: what is the catalyst

of change, political power, asking the utilities to be more environmentally friendly, or the price of renewables came down to competitiveness with old-school fuel? francesco: originally it was a political decision that triggered the first moves. without that, probably it would have taken a longer time, but today it is mostly economics that are driving the change today, widely everywhere in the world. so i would say it is no more political. it has been at the beginning. now it is just the pure technology revolution and the economics that come with it. francine: the competition is changing. germany wants narrowly focused companies. you still want the vertically

integrated approach. why? francesco: today in the world on the technology front, the disruption hitting the generation segment is incredible because of this renewable wave coming and continuing to change things. and that triggers another change, which is the digital transformation of networks. we call them still distribution grids, but they should be called networks because they work in a network-kind-of-way when they have been digitized. this change coming at us from all sides disrupts the value chain or modifies the value chain in a way that is difficult to predict going forward. i am not saying in the next week or month, but in the next years. so we are those that think it is very dangerous to take a bet and say only this part of the chain will be valuable in the next years and that part not. i think it is going to be taking really understand, if ever, if there is a value chain breakdown. francine: but what is a while, five years?

does that mean that you can realize parts of your business no longer makes sense to hold onto? francesco: i think in five to 10 years, you will see the transformation taking place. the value that can be created in managing this transformation is what is at stake today. and we think it is much more valuable to manage its transformation, rather than dump it away. so that is the focus for us. it takes a lot of effort to manage the complexity. but if you can do it, there is a lot of value in it. francine: what are utilities companies today? is it a software company? they have changed so much, right? it's not the reactor you had. francesco: we like to think of a utility as an enabler of things. because energy really enables you to do things. energy alone is nothing. so a utility should become some body that enables other parts of society to do other things. in that sense, i think, utilities need to keep changing to adapt to what society needs from them. and today, yes we are provider of energy but we provide things together with energy. so it is important that utilities keep broadening the spectrum, not narrowing it. francine: do you think 2018 is the year where a lot of utility companies decide what their future will be, if they break up or if they don't?

francesco: i think some have decided. we have decided to keep, so it will take for them another year maybe, but after that, it is too late. even if they don't decide, they have decided. sometimes you decide by not deciding. francine: why is there a greater acceptance and a greater presence of renewable energy in europe than the u.s.? francesco: because europe started with a political goal, which the u.s. never had. so the political angle that europe started with is still present in the trajectory of renewables in europe. the u.s. never had that view, let's say as a whole, then some parts of california had the same

approach. some parts of the u.s. have a bigger chunk of renewables than others. francine: you do very well in renewables in the u.s. what is your strategy there? francesco: keep growing. it is a very open and wide space of growth for renewabes in the u.s. it is a very efficient market, very liquid, efficient, and lots of professional background. it is one of the best markets, highly competitive, but great space. francine: ok, so if there is a shift from power production to services for utilities, what is the next bet? francesco: the next bet for utilities is very difficult to say, but there are big parts of the value chain that have opened up. for example, all the the mobility space. what is the utility role in the evolution of cars? what is the utility role in electricity being used for heating for buildings, for cooking? there is a lot of other spaces in which utilities can play a

role. and that happens when energy is being progressively decarbonized. when they stabilize, energy prices go down and society uses electricity for things that were not electrified before. francine: there is no doubt in your mind this is the path the world will take? francesco: it is happening. it is happening everywhere. so let's say utilities have this lucky moment in which -- it will be a long moment -- in which their business is growing regardless because electricity becomes more and more the energy of the future. so imagine you sit in a business segment whose base volume keeps growing alone on its own. that is great. so it is a question of being conscious about it. and really pushing that. ♪ francine: coming up, the google of energy? we will talk about enel's turn

to tech in search of the next big money spinner. ♪

♪ francine: power company enel was among the first of its kind to invest heavily in renewables, and the bet paid off, making it one of the biggest green power operators in north america. but as incentives have started to dry up, the company is turning to technology in its search for the next moneymaker. at the swanky offices of these units, innovators explore emerging industries like smart homes and electric vehicles in the hope of landing the next big thing. we are with the chief executive of enel, mr. francesco starace. how do you drive innovation? is sustainability a driver for innovation, or the other way around?

francesco: sustainability was the kicking factor for innovation to start, honestly. we were innovating technologically, and only certain parts, and by the way, not that much, so we needed to really have something that drove innovation. i think the concept we need to have a more sustainable business model to go forward required a change in the way we thought about the business model, and that was the innovation stimulus we needed. we used the sustainability need to stimulate innovation, then we have the second trick, which was to say let's stop trying to innovate alone and let's try to find out who is already innovating outside that can help

us, so open it up to help from outside. so we established centers in parts of the world where we brought problems we were not able to solve and asked for innovators to help us in doing that. that was great. that helped a lot. francine: this is what, a website? is it a website, or are you basically saying, we are trying to figure something out? ideas?ople come with the francesco: we started with a website after. we first went to israel, then we went to, of course, silicon valley. we opened a hub in moscow, rio, santiago. everywhere we saw some, let's say, concentration of innovative minds and startup culture, there we put our people and opened a small office and we really push for, really we brought problems. we brought them problems to

solve. they said, thanks. now we try. we had incredible results with this. we really found things we were never even thinking about. francine: how difficult is it to do in renewables? because there are many more markets, many more market players. competition is stiffer. it is little bits, right? francesco: it was a lot like that at the beginning. in fact at the beginning, there were a lot of comments because we started trying to develop projects in areas that have no subsidy or incentivization, only competitive battlegrounds. we got criticism at the beginning, why are you so stupid? why don't you invest where there are subsidies? because we think subsidies will end. we need to be prepared for when they will not be around so this needs to be sustainable. this will be the thing and we pushed that. we prepared for competition. we prepared for the moment when renewables would be an open, global, very wide and fierce battleground, and today we have a huge competitive advantage.

francine: ok, so you go to hubs. you tell them this is my problem. i need a better battery or storage facility. we will get to that. you buy them when they come with the answer, or you investin them? what is that relationship like? francesco: we don't buy them or invest in them. we have partnerships with venture funds that do that. we don't get into that. francine: why not? francesco: it is simple. we cannot make a mistake. we are not able to make mistakes, because you think things will never go wrong. i'm joking, but it is little bit the mentality we have. so if you can't make wrong investments, you better not invest in startups. we are genetically not able to do that. let other people do it. what we do is take startups and bring them to market quickly and deploy them on the large-scale we have, and do not pretend to have exclusive rights because we want them to become cheap, available ways of generating energy for everybody. so we see competition between

energy sources, not energy players. we want electricity to become competitive against other energy sources. that is the competitive fight we are in. francine: how realistic is it that electric vehicles become a meaningful source of revenue for you? francesco: they will become, obviously. francine: 10 years? francesco: maybe less. it is a funny thing. today, we are at the beginning of this huge curves that in the next year we will all laugh and say how stupid we were when we tried to predict the growth of electric vehicles, but if you see the billions car manufacturers are throwing into investing, into electric vehicle development, you have no doubt this will become a huge business. and of course we like the word "electric." in fact, there is a question

whether electric or electric car will prevail. which of the two words are more important? francine: which one do you think? electric. francesco: we don't care as long as it is electric. we love it. francine: you could be talking to facebook or google. it doesn't mean it is a car manufacturer that brings this kind of technology? francesco: no, but manufacturers have the know-how to mass produce things. the real advantage here is do you know how to mass produce millions and millions of vehicles in the right way, in the less expensive way, the most safe way? i think that is a know-how build over decades, and they have that. francine: what is the number one question for your innovation hubs? is it batteries? is it storage? francesco: no, it is more about predictability and linkability. what can we do with the data we have, explain things, predict things looking at the data?

how much can we improve things looking at the data? today and in the next few years the most important key or the most important capability we lack is that, the capability to put together a business concept and data analytics in the same brain, really difficult. francine: do you think anyone will build new gas power plants, or is that a thing of the past? francesco: no, they still have a future, a lot less than before. before joining enel, i was selling gas turbine power plants worldwide. i know this from the inside. but i think it is definitely not the same future that we had 10 years ago. francine: ok, if you look at the unsdg's, united nations sustainable development goals -- i can't even say it sometimes. are they too wide? francesco: no, they are not wide.

they are 17, so they are a lot. they try to improve the world, so they deserve some capacity. and out of those 17 sustainable energy goals, we focused on four, so we narrowed it down a bit because the business we are in doesn't cover health or other stuff. so we are working and trying to channel all our sustainability efforts into those four, which helps us also to motivate and drive people in the right direction. because, you know, to do good is not good enough. you need to know what good you want to do in order to have any impact. francine: coming up next, powering ahead. we talk the foresight required to drive enel and the united nations in the renewable space. ♪

♪ francine: throughout his 18

years at enel, francesco starace has been at the forefront of change in the energy business. management roles have included heading up the company's renewable unit, which is a leading player in the industry, but starace is not just a leading light at enel. he has also been given a key role at the u.n., tasked with delivering its sustainable development programs. so what kind of skills and foresight does it take to lead in the power space? francesco, have you always been passionate about sustainability, or did it come once you started working in utilities? francesco: it came when i was working in utilities. i should say, it is something that comes to you when you work at companies that have to do with the society. a utility only thrives if the society within which it works is in good hands. otherwise, it cannot work well if it does not work in a society. francine: you can say that about every industry.

francesco: yes and no, but utility is a long-term thing. if society does not really thrive, it cannot survive. you can sell furniture and go away and go somewhere else. utilities not that quick to move, so you really need to work for the society you are in. and that is why sustainability is so important for some industries that have a big impact on society. and utilities are those.

francine: did you look at the business case for it, or was that before? francesco: no. it was at that time. i mean, there is obviously a business case. there is no question that the value you share with companies or with people that are living around you, the value you create with them can be much more if it is done in an inclusive and sustainable way. it is an incredible change. and, by the way, this triggers a different line of thinking in a utility, which like we said before, stimulates innovation. it is a retroactive loop that works beautifully. it requires a little change in the mindset of managers. francine: you must have had struggles when you started out out? francesco: i did. i did at the beginning. but what we did, we used small examples and built around those examples. a good story, then people bought into them. so what was an example building change like that.

it worked like that. francine: when you look at clients, how can you tell the companies that do good for real and the ones that just do it for pr reasons? how difficult is it to tell? francesco: it is very simple. it is fake versus real concentration. and then it is about what they say. it is about what they do. at the end, it is about what they actually end up providing with societies that live with them, and it is something -- just scratch the surface and you see immediately. francine: what kind of leader are you? do you micromanage? do you have an overview? francesco: i used to micromanage a bit. then i understood that was the maximum i could do myself. i trust people a lot, basically. i trust a lot, my people. i trust them at least two times or three times, so that is a lot. but you know what i do? unfortunately i have a certain age and certain experience, so i know what is happening forward. i always look a couple of steps ahead. and then if i see they will make a mistake, i don't try to stop that. i try to go and protect them after so that they learn.

that is what i really do. sometimes they joke with me and they say, why didn't you tell us? i prefer that a lot. it works. it works. francine: what kind of advice did you give when you were starting out? francesco: just be, keep your mind alert. the thing with any job, not my job, any job, is if you get good at it, after a while you acquire a certain safe feeling about what you know, about what you think you know, about how things and how they unfold in front of

you, and you lose touch. so you should always be on the edge, always be on the edge, because things change quicker, always quicker, even if you think that they have to change quicker, they change quicker even, so be on the edge all the time. never feel comfortable. francine: how much focus do you put on diversity on your board, but also amongst your employees? francesco: diversity stimulates this energy feeling. you always have a different mind, particularly when you talk about diversity, you imply gender diversity, which is an easiest way of diversity measurement, but really i think it is the mindset diversity that matters. that has to do with culture, preparation, what professions people come from, and inclination and character of people. i try to mix always different people. this is, in my team you will find completely different people together, which making life not easy, but it generates thinking and ideas. francine: do you ever worry about an activist investor coming in? francesco: no. francine: why not? francesco: why should i worry about it? i mean if there's something i worry about, it's not the activist. it is that thing i should worry about. the activist is always after something wrong.

if they are targeting a company, it means something in the company doesn't work. francine: francesco starace, thank you so much for joining us. that was the chief executive of enel. thank you. ♪