Giorgia Meloni has now been in government in Italy for six months. Your will to power is as irrepressible as on the first day. Of course, the dashing party leader of Italy’s right-wing nationalist brothers also wanted to single-handedly decide on filling the top posts in the five most important Italian corporations with significant state participation. In February, she let her coalition partners know that she would not let anyone talk her into it.
At the energy company Enel, she failed with this course. After weeks of fierce coalition wrangling, something unexpected happened in April: Ironically, Meloni had to give in to Italy’s most valuable stock exchange group and let its two junior partners do their thing. The government got into a lot of trouble with this: If the designated top duo stands for election to Enel shareholders at the general meeting in Rome on Wednesday, there will be a contest vote between the Italian Ministry of Finance, which still has a 23.6 percent stake in the ex-monopolist is, and rebellious investors from abroad. Such a showdown with minority shareholders has never been seen in Italy.
The government had already failed on the Milan stock exchange on the day of the candidate selection. Enel’s share price lost more than four percent. The financial market fears that a less green era is dawning in Rome. The outgoing Enel boss Francesco Starace has been very successful in driving the group’s energy transition since 2014. Enel already generates almost 60 percent of its electricity from renewable sources in 30 countries. As early as 2025, the green share should increase to 75 percent.
Starace’s motto was: “It’s not only a good thing, it’s also financially worthwhile”. Enel was considered an interesting investment worldwide, while Starace was very popular with institutional investors, who control 56.7 percent of the shares. The market value rose sharply. Now, however, the new group management offers investors no guarantee that the decarbonization course in Rome will continue.
Four days after the government decision, a largely unknown Lithuanian named Zach Mecelis entered the scene in London. He is head of hedge fund Covalis Capital based in the British Cayman Islands. Mecelis didn’t mince his words. The international investors, the employees and the subsidiaries of Enel would have deserved something better than the list of candidates for the board of directors presented by the Roman politicians if he attacked Meloni’s government head-on. The Covalis boss finds the opaque decisions in Rome, in which political relations took precedence over corporate strategy and the interests of shareholders, unacceptable. “I want this toxic process to stop,” he said. Covalis holds three percent of Enel’s shares and has held shares in the electricity supplier since 2004.
Mecelis is targeting Paolo Scaroni, who is due to be elected Chairman of the Board of Directors by shareholders on Wednesday. The 76-year-old is known for his close relationship with Silvio Berlusconi. Between 2002 and 2005 he was CEO of Enel. Above all, Scaroni was head of the Italian oil and gas group Eni from 2005 to 2014. During this time, he put Eni on a staunchly pro-Russian course. The close connection to Moscow was the linchpin of Rome’s foreign policy during the four Berlusconi governments. Even after the attack on Ukraine, the aged former Prime Minister Berlusconi did not move away from his friend Putin. His party, Forza Italia Scaroni, now prevailed in the position swap with Meloni.
How did the government imagine that? Did she really expect international investors to be indifferent to Scaroni? And Italy’s American allies?
The irritation on the other side of the Atlantic is unmistakable. “The appointment of Scaroni is not a wise decision by the Italian government because he was the architect of a strategy based on Russian supplies at Eni,” said American energy expert Alan Riley of the Atlantic Council Global Energy Center in an Italian newspaper interview. Today, Scaroni does not guarantee the attitude required for the necessary diversification of energy sources.
While the shareholder advisor ISS supports the government and its candidate Scaroni, the competitor Glass Lewis spoke out in favor of the opposing candidate Marco Mazzucchelli proposed by Covalis. Glass Lewis writes that the 60-year-old manager with a long career in Italian and international banks can better guarantee independent supervision and act as a counterbalance to the CEO on the board. Norway’s oil sovereign wealth fund, Norges, also announced on Friday that its choice would fall on Mazzucchelli.
In addition: As the successor to the popular Enel boss Starace, Meloni’s coalition partner Lega pushed through the tried and tested manager Flavio Cattaneo. Matteo Salvini’s right-wing populist party has never appreciated Starace’s strategy.
Investor rebels are unlikely to inflict a defeat on Meloni on Wednesday. But turning investors in the financial markets against you is not a wise idea when you govern a country with 2700 billion euros in debt. In 2023, in times of rising interest rates, Rome will have to refinance 249 billion euros in government bonds. Rating agency Moody’s will reassess Italy’s creditworthiness on May 18th. And the creditworthiness of the euro country is only one step above the notorious junk status.