CNBC Interview with Francesco Starace, Enel CEO, from the World Economic Forum 2018

Following are excerpts from a CNBC interview with Francesco Starace, CEO of Enel and CNBC's Steve Sedgwick and Geoff Cutmore from the World Economic Forum 2018.

SS: Well, I am delighted to welcome a state employee to the show-, [laughter].

FS: [Laughter].

SS: Well, Francesco Starace, who's the CEO of Enel. So, I-, I appreciate, Francesco, the ambiguity-, ambiguousness of the-, the position you're in, of, of course, the government having a stake in Enel. But, that said, you can be very candid with us, as well.

FS: Sure.

SS: Italy, another election, and, let's face it, there are three fairly equally-,

FS: Mm-hm.

SS: Base groups, as well. We're not going to get cohesion from the government, are we?

FS: I think we are going to have another election in Italy which, by the way, has a track record of short-term terms, you know-,

SS: Mm.

FS: So, it's not anything particularly new or scary. We've had coalitions in Italy since ages. In fact, I think we could export some of the know-how of how to deal with coalitions elsewhere. It looks like-,

SS: What, to the United Kingdom, or somewhere, yeah?

FS: For example, or Spain. It looks like there is a lot of need for capability to get together, and that will be tested, again, probably-,

SS: But-,

FS: After the elections in March.

SS: But, let me row back, you and I had a brilliant, long conversation, in Conversation CNBC, over a year ago, and you were hoping that Renzi's reform could be a meta-reform-,

FS: Yes.

SS: The referendum went against, and I think that was quiet damning. Italy turned its back on, as you called it, the meta-reform, as well.

FS: Yes.

SS: What's it done in the meantime? Has it done enough?

FS: I think we have seen the Gentiloni government doing a lot to really take, squeeze out the maximum they could from the-, from the reforms that took place, and I think that was done in a proper way. Frankly, I think the reforming of a country like Italy, or any other mid-size, or large-size country, takes a while. It's not something you can do in one single bust, it takes a process of waves of reforms. Is the next government going to be able to do that again? We don't know. I mean, the fact is that this is something that we cannot turn our back, and walk away. It's interesting that none of the parties that go in to elections this, this term, talk about getting out of the Eurozone, or getting out of the Euro. That's gone, because they have understood that people don't like that, and I think that's a big step.

GC: Francesco, can I just move you on, I want to ask you, you have a key role, now, on delivery of UN Sustainable Development Goals.

FS: Yes.

GC: Overnight, we've seen the imposition of tariffs of up to 50% on solar panels-,

FS: Mm.

GC: From China. Is this going to roll back efforts to spread more widely this kind of renewable technology?

FS: In the US, because that's on the US technology. And I think it does, in fact, slow down a bit, probably, the-, or, let's say, jack up prices from-, from the installation of solar panels in the US, for a while. Let's say that this was in the air, it was expected. It's going to be criticized, or blessed. It's-, the industry expected a little more, can I say that? So, it's not as-, as hard and deep as it was expected, or feared, depending on the point of view. Let's not forget, today, the cost of a solar panel is about a third of the cost of the total installation of a big solar plant. So, it's not as impacting as it was expected, and I don't think it's going to slow down sizably. I mean, there will be some slowdown, but not-, not a halt, so this is going to continue-,

GC: And how-,

FS: And-, and let's not forget, this is not for a long time. This is transient-,

GC: Well, three-, three years, I think-,

FS: And then it's decreasing 5% over the years. So, it has to be read in the context of what was expected. It's, like I said, milder than expected.

GC: Just on current business conditions-,

FS: Yes.

GC: I mean, you've pretty much ruled out M&A activity for the time being here. Power prices across Europe, a little bit depressed, I think-,

FS: Mm-hm.

GC: Because we're not having a very cold winter. Just business conditions, generally, how-, how are you finding things?

FS: I think, and we-, we've said that many times-, many times in the past. Prices in Europe are going to be boring, rather than depressed, I mean, like they are today, and they're going to stay like this for a long time. And there is no way that this can change, in a short-term. What can happen is that, you see, all the snow can melt and become water, then we will have a lot of hydro-production, that's going to change the dynamics a bit, now and then. So, ths0-, this trend is the one we expected, and what you-, what you need to do in this kind of environment is become very efficient, and take a very hard look at the assets you have every year, and say, 'These ones I need, these noes I dispose of, and these ones I need to build,' and do that routinely. We know that the package for the market design that the EU is finalizing is going to help in that direction, because we will know what market design is going to be in front of us, so I think 2018 is going to be a turning year for decisions in investment in the-, in the content here.

GC: That is fascinating.

SS: Despite the fact that you say the EU lacks ambition, but we'll come back to that another time.

GC: No, that is-, that is fascinating, though. A key year for investment decisions-,

FS: Yeah-,

GC: In the sector. Thank you so much for being with us-,

FS: Thank you guys.

GC: Francesco Starace with us, the CEO of Enel. Sri, to you.

ENDS