CARLO PIGNOLONI - CEO&Country Manager, Enel Romania | SIREN 2021

I'll speak in English to be more useful for you as a listener. I don't want to skip your question because clearly it is sensitive. The purpose, and thanks obviously for the invitation because I'm honored to be here, is about the strategy in the energy sector. And I'd say a little answer also about what's happening in this moment, not only in Romania but rules in Europe, is just looking at the strategy. Because it's more than clear that in the moment in which we are depending on commodities, in a period of time that are cyclic in several markets, not by chance also in Romania we are going to see a spike of prices due to the commodities. And I want to remind everybody that now we have a further commodity in Europe that is the carbon costs for the generator, which unfortunately is leading us to see these spikes of prices that at the end are affecting the whole market, because as you know the factory of energy is in the generation side.

We know very well what's the answer for the future, because as it happens in many other countries all over the world, renewables are bringing a lot of stability in the price. For instance, as also Eric was saying, about the possible PPAs linked to the generation of new capacity of renewables, that is a common practice in the United States, in South America, and many other countries. It's a way also for the final customer, obviously in this case we are talking about business customers that are more clearly capable to negotiate, we are not talking about retail customers. But in this case they are choosing to buy energy directly from the generator, and that's why the boom of renewables over the world is not only because there is a strong need to overcome the trouble about climate change, which we know is already affecting us, it's not something that has to come, unfortunately it's real life. But also because price-wise it is introducing this kind of stability, and this is the first time in the history probably of the markets. This is why we are talking about revolution.

Coming back to this point, this kind of revolution is asking for a strong commitment. It's very complex, I fully endorse what Mrs. Popescu was saying. From one side, Romania has to do a lot of things in the sense that we have still to implement the directives, the 944 that has been mentioned, the renewable one. In the moment in which the European Union has already launched the Fit for 55, as it's been mentioned by Mr. Povesco and the other speakers. So it's a sort of catch-up that we have to do. And for this reason, being here in Romania, due to several reasons I'd say, Europe is behind other geographies, and I want to remind that this is also a trouble in terms of competitiveness of economies. We have to do a lot.

My main message is that we should focus a lot on designing this new future and paving the way for this new future, with all the things, the laws, the policies that we've introduced, the translation into laws, the secondary legislation that we are going to mention, rather than the transition. Because in a way the transition is now, but the revolution that we have to design is for the future. And I wouldn't think that since we are talking about 2030, which is a step into the 2050 target, we are looking so far away that we should say, okay, let's put aside the troubles and focus on the transition. This would be a pity, because all the effort that we have to put in place requires a lot of participation from all the stakeholders.

I would include also customers in this kind of debate, because energy is not any longer a matter of policymakers sitting in a room, but is something that any citizen wants to know. And that's why I appreciate a lot what you were saying about education. Education is very important, so people have to be acquainted. The debate about customers blaming us for the quality of service is a positive sign of the increased attention about this commodity, but also because this is a fully liberalized market, and obviously it's very important that all of us are discussing all together about the difficulties in order to overcome the troubles that we are incurring.

Starting from generation, renewables has been debated many times, I don't want to repeat a lot of things. Clearly, all the efforts in order to simplify, I appreciate a lot what Mr. Chando was saying about the land. So there are a lot of elements in order to allow the investor to do what is necessary in order to increase the share of renewables. I'm also very positive about prosumers. You know that prosumers are a reality in a lot of countries in Europe already, Germany, Italy, we have dozens of gigawatts installed. I'd say that due to the hunger for energy here in Romania, we know we discussed about the fact that in this very moment Romania is an importer of energy, which is something very new, and it's a matter of security. One of the ways to overcome this trouble is obviously looking at utility-scale projects, but also foster the increase of prosumers as a factor of this market.

That's why I'm talking about complexity, because if you look at utility-scale renewable projects, you have some specific issues. On the other end, in order to have prosumers, you have to digitalize your grids, and this is a further effort. Fortunately, Enel, as other players, we are working all through these several value chains. Distribution and grids are absolutely key for our future. You were talking about Bucharest, that is our capital and is strongly needing investment in order to accommodate all these changes.

Because Mr. Chando was talking about the big effort to electrify transportation, it's true. But in order to do so, we have also at the level of distribution to allow that this may happen. This means strengthening a lot the grids of our main cities, probably starting with Bucharest, that is the most important one but not the only one. So this will be a key of the economy, because in those cities we are generating most of the GDP in this moment, but we have to adapt them. And in order to do so, since we are talking about distribution that is a fully regulated market, we need a policy and design that we are talking about in order to foster this kind of investments.

Money I don't think is an issue, because there is a lot of liquidity all over Europe and the world. We have incredible allocation of funds. It's very important for the policymakers, and here we are obviously available to discuss everything, but at the end the decisions are on politicians, obviously, and that is right. We need clarity in terms of policies, in terms of decisions, because without them, we were talking about a fully regulated business, but broadly speaking all our efforts are regulated, and so the partnership with the policymakers is absolutely important.

I would like to mention another point that is what I was referring to, the participation of the customer. Because prosumer means that customers, not only at the level of business customers but also on top of our roofs, might become an actor. But in order to do so, we have to once again have clarity in terms of policies. I'd say that an important part of the funds might go to the customer as beneficiary, and having the utilities companies or other companies working in order to do so. I'm referring to energy efficiency projects that also in other parts of Europe are popping up, for buildings, for industries, and in this case we are unlocking basically also the usual debate between utilities and policymakers. Here the occasion is through the funds to allow the customers to become owners of the energy, through the support of construction from the electrical company. A lot of entrepreneurs, also Romanian entrepreneurs, can contribute to this kind of sector in several investments.

This is something a little bit new in the future. Even looking at the last decade in terms of investment, we know that transportation and efficiency were lagging behind in comparison to what has been done on the generation side. Now is the very moment, through the PNRR, through the Modernization Fund for sure that has been quoted correctly by you, and also through MES, which is an incredible opportunity designed on purpose, because the Modernization Fund is for Romania and not for all the countries in Europe. It can't be skipped. It's an incredible opportunity also for the growth of the economy. I want to repeat what Larry Fink was saying, the head of the most important fund in the world, BlackRock. He was saying that in the past he was talking about sustainability, now he's saying the energy transition is the most important economic opportunity in the world.

I don't want to say more because it's more than clear, and that's why the Green Deal has been designed as a transformation of the whole economies. Then obviously there is transition, transition is important, gas we already talked about. But once again we should focus on that design and what is going to happen in 10 years, 20 years' time, otherwise we'll never get there. That's my warning. And from our standpoint, gas for sure should be used for the transition, especially on the generation side. We are doubtful about some investments on the distribution side because it might be a sort of lock-in for the future, because gas in the not-so-distant future is going to finish, so there are also some doubts about security in the long term.

For sure, hydrogen is my last remark. Blue hydrogen, there is this debate about green and blue hydrogen. Green hydrogen for the time being is a little bit more expensive, this is true. I want to remind that renewable technologies are the only ones that have diminished several times in their specific costs, and so our expectation is that renewables will become cheaper and cheaper in the future, even more than they are now. Also in this sense, the recent study provided by Cornell about the impact of blue hydrogen is raising some doubts. So for sure, we are fully available to exploit green hydrogen as a possible new fuel for the future. We are still doubtful about the blue one.

This is it, I don't want to go further because I took too much of my time. I hope what I said was interesting for all the audience, and once again I thank you because discussions among us are very, very useful. It's the only way in my view to evolve in the right direction.

Yeah, no, for sure. Obviously we are interested in all the fields, I don't want to focus specifically on one field. Definitely renewables are important, as also Eric was saying, but most of the energy players are looking at this, because for 10 years we were actors, 10 years ago. Now there is no sense not to be part of this transition. For sure renewables. I want to tell that for renewables still the Renewable Energy Directive has not been implemented. We are still incurring in very high costs of imbalances, so there are several actions to be put in place, several provisions to be set in order to improve basically the business environment in renewables. Definitely.

Distribution, we might do much more. We were correctly concerned about some invoices that are too high because there are some mistakes. I want to say that with digital meters this is not possible that it's going to occur. But for the time being, the rollout of digital meters in Romania is behind, and this is not obviously the decision of the distributor. And this obviously has consequences for consumers. These are relevant direct investments. Then there is a big part of indirect investments, the ones that I was talking about before.

If, as it happens in other European countries, the Romanian government decides, they can enable a lot of investment in private sectors for energy efficiency, both in transportation and in the efficiency of buildings, also obviously taking into account electrical efficiency through installation of rooftop solar and whatsoever. Also transition from thermal heating to the electrical one. And all this investment might be financed through European funds and done locally. Maybe for some of the goods should be imported, but for all the installation it will be made by local entrepreneurs. So that's why there is an incredible opportunity in terms of growth for the Romanian economy. This is it.