Investor rebellion over Enel board nominees gains pace

By Francesca Landini

MILAN (Reuters) -The Italian government faced growing opposition on Friday to its candidates to run utility Enel when Mondrian Investment Partners said it would support a rival list nominated by fellow shareholder Covalis Capital.

Covalis, which holds around 1% of the Italian energy group, has proposed former top banker Marco Mazzucchelli for the chairmanship as it presented a slate of independent candidates as an alternative to government-backed nominees.

Mondrian, which holds 1.7% of Enel shares, threw its weight behind the Covalis list as tensions flare before a shareholder vote on the new board on May 10, adding an independent board chair would be a "cornerstone of robust governance" at Enel.

Governance adviser Glass Lewis also urged shareholders to back Mazzucchelli to counter the influence of a CEO designated by the Italian Treasury, the single biggest shareholder.

In a management shake-up that has unnerved some investors, the Treasury has indicated Flavio Cattaneo, a former chief at power grid operator Terna currently at high-speed train operator Italo, to replace veteran CEO Francesco Starace who has been in the job since 2014.

The Treasury, which owns 23.6% of Enel, indicated as chairman Paolo Scaroni, a former boss at Enel and state-owned energy firm Eni and current chairman of soccer club AC Milan.

"Should nominee Mazzucchelli be elected to the board, he would be better placed to safeguard board-level independent oversight and serve as a better counterbalance to the presence of the CEO on the board," Glass Lewis wrote in its report.

Covalis, a London-based hedge fund, has complained of an "opaque process" regarding Enel, adding it was unclear "what the government's proposed slate stands for or what their plan is."

The Treasury has sought to reassure investors by telling them it wants utility Enel to continue to play a leading role in renewable energies while accelerating the disposal of assets to cut debt and maintaining its dividend policy, two sources familiar with the matter said this week.

In what is shaping up as a test of Rome's sway over state-backed firms, a group of institutional investors backed by asset manager association Assogestioni has filed a third slate of nominees, without CEO and chair candidates.

In its report, Glass Lewis also recommended Enel investors vote for Assogestioni's board nominees as "they are better suited to represent a wider group of minority shareholders".

(Reporting by Francesca Landini, writing by Gianluca Semeraro, editing by Federico Maccioni, Valentina Za and Louise Heavens)