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Power player takes pulse of energy market

With investment plans that reach EUR 750 million over the next five years, Luca D’Agnese, country manager of Enel in Romania, talks to The Diplomat – Bucharest about the main challenges on the local market, his firm’s targets and the issue of market liberalization

April 2012 - From the Print Edition

For Luca D’Agnese, country manager of Enel in Romania, the energy sector was not his first love. “I worked for consultancy company McKinsey for 15 years. After this experience I moved into the utility industry and joined Italy’s power transmission company, which at that time was controlled by the State,” D’Agnese tells The Diplomat – Bucharest.
“This was a particular challenge for me because, firstly, it was a significant professional move, as I was switching from consultancy to operations, and secondly, it was a very challenging period for the industry itself. It came at the time of the liberalization of the generation sector in 2003-2004. So, significant changes were happening and it was difficult because as the liberalization had been delayed for quite a while there had been a lack of investment in the energy sector,” D’Agnese recounts. However, the Italian authorities at the time found the solution which led – three to four years after the liberalization process was implemented – to consistent investment in power generation totaling some 15,000 MW.
Liberalization lures investments
Luca D’Agnese believes that the Romanian authorities now find themselves in a similar situation. His view is that when a country has a regulated market it is clear that prices do not reflect the real cost of electricity, but the interests of the government, and there are some categories of user that typically get electricity below cost price.
These categories are always the same: big customers that need a lot of electricity and households.
“If Romania does not set a clear plan for market liberalization, it risks the worst of all possible scenarios. Investments in power generation take years, and as an investor you need the right rules for the market to be in place when you turn on the key of your plant, which is typically four-five years from when you decide to make the investment,” says D’Agnese.
“So, if you are credible, as a government, in setting a plan, let’s say in 2018 there will be this set of rules and you commit in a way that people will not think that you may change your ideas – then and only then will investments keep coming. On the other hand, if 2018 is just an announcement, we will have to deal with a new set of elections, and changes of mind. Romania will end up with a liberalized market anyway but a market where investments have not been made in five years.”
According to him, the Romanian authorities should not forget that there are currently power generation units which have to be closed because of environmental requirements, and this is why it is very important that the announcement made by the authorities is backed up by a consistent set of actions from now on to demonstrate the commitment of the Romanian authorities with concrete measures.
“At the Galati and Braila projects in which Enel is involved, even if we wanted to we could not start building tomorrow. For the time being it is not a decisive issue because we are still waiting to secure all the permits. But if we had the permits in place we would have to see the implications of the liberalization plan announced by the authorities. There is still a lot of uncertainty surrounding this matter,” says D’Agnese.

Challenges and targets

Enel acquired the Banat and Dobrogea distribution companies in 2004-2005 and later Muntenia in 2008-2009.
“We have been making substantial investments in the network and we have particularly concentrated on Muntenia because of the later acquisition. Now we are moving into a new phase, as we are trying to implement new ways of carrying out processes; the focus is to improve the service to our clients, which I have to say is currently very far from our targets. The most important measure of services is to what extent the average customer suffers interruptions. Actually last year we had a significant improvement versus 2010 due to a combination of investments and new ways of organizing our activity. We had a 20 percent reduction, which is a significant effort, but from the point of view of the customer it is still too long,” says D’Agnese.
Enel Romania has also seen changes in its management team in the last year and a half. After an initial phase during which most of the top people were from Enel in Italy, the company has now introduced an almost entirely Romanian group of managers.
“While 18 months ago there were three Romanians and nine Italians in the first management line, now we have two Italians and ten Romanians,” adds the manager.

Investments saga

Regarding investments, the Enel official stated that the firm’s main focus was Enel Muntenia. According to him, the high-voltage network was the focal point in 2009 and 2010. Last year, Enel continued investments in high-voltage lines, but the biggest share was in the medium-voltage network.
“The investments in the medium-voltage network will decline in the next three years and low voltage’s share will increase, particularly as we are to implement the smart meters projects, meaning an electronic meter for any business customer, which will allow us to carry out some small repairs in the network close to the customer’s house. We will shift towards low voltage with this end-metering system in one or two years,” says D’Agnese. Enel Romania’s total investment volume is intended to reach EUR 750 million over the next five years. ■

Who is Luca D’Agnese?

Luca D’Agnese, 47, first worked at Hewlett-Packard Italy which he joined in 1986. In 1988 he moved to McKinsey & Company and between 2003 and 2005 he was CEO of GRTN, the company responsible for planning and dispatching the high-voltage network in Italy. From 2005 to 2007, D’Agnese served as director of operations at Terna, the company responsible for the network planning, operation and maintenance of the high-voltage network in Italy. Over 2007 -2010 the Italian was CEO of investment company ErgyCapital, and in March 2011 he assumed the role of head of Enel’s operations in Romania.

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