A glance at Twitter gives a pretty good idea of José Manuel Entrecanales Domecq’s priorities. There is the odd post about the company he runs. But the vast majority of the 51-year-old’s tweets and retweets are about climate change – and his own involvement in the fight to combat its effects, whether as a member of the World Business Council for Sustainable Development, attending the UN climate conference in New York, or directing followers to research papers.
Entrecanales believes that he is at the forefront of the battle against global warming as the boss of Acciona, the €3bn-worth Spanish infrastructure company. He has been accused, however, of allowing his personal preoccupation to lead him to “bet the farm” on renewable energy, in which Acciona invested heavily before Spain’s financial crisis. It was a bet which went badly wrong after the government slashed subsidies to the sector, leading the company to post a €2bn net loss in 2013.
Entrecanales insists the future is still bright for renewable energy. Indeed, Acciona received a vote of confidence in that future when US buyout group KKR invested more than €400m in its international wind and solar business earlier this year. But there are ways in which the company feels like a throwback to the past – to a pre-crisis Spain populated by overconfident companies.
Achieving an interview with its boss feels a bit like being granted an audience with the Pope. We are ushered by numerous flunkeys – who turn out to be rather senior members of Entrecanales’ team – through anteroom after anteroom before being introduced into the presence.
The family are members of Spain’s social elite after marrying into the aristocratic Domecq dynasty, and Entrecanales popped up recently on the pages of Hola, the Spanish gossip magazine, attending a high society wedding. The elegant grandeur of Acciona’s offices, and of Entrecanales’ in particular, seems redolent of the time of easy money and grandiose ambitions that characterised Spain’s large infrastructure businesses before 2008.
The corporate governance of the company also reflects traditional Spanish business mores. His father handed over Acciona, which was formed from the merger of a company his grandfather founded in 1931 and two other companies, to his son a decade ago. Entrecanales – like many other continental European company bosses – combines the roles of chairman and chief executive. The family owns more than half of the shares, leaving minority shareholders with little say over strategic decisions. Entrecanales points out that, although there are four family members on the board, most of the non-executives are independent.
He says that “we are happy with the union of the two roles” and that shareholders have never questioned his leadership, even during the darkest days of the crisis. He never felt, he says, that there was a moment when he lost the confidence of either members of the board or of the family shareholders.
He believes the majority family ownership and his dual role as owner and executive decision maker deliver advantages rather than disadvantages for shareholders, giving him a longer-term perspective than many company bosses. “In family companies we can normally afford to be longer term. If you are looking for a different type of company you shouldn’t be investing in Acciona.”
He argues that more short-termist investors might have forced Acciona to abandon its commitment to renewables, or might prefer the company to unlock value by shedding assets.
Acciona’s operations are split between construction, infrastructure and renewable energy, but Entrecanales says its business strategy has been focused on sustainability and the challenge of confronting climate change, a growing global population and scarce resources.
“From a business point of view it’s a great opportunity because contributing to solve anything that is a social need is by definition a good business opportunity,” he says.
The aims are laudable – but they suffered a severe setback after the collapse in the Spanish property market and the ensuing financial crisis, which not only led to the government cutting subsidies to renewable energy producers, but ravaged Acciona’s construction business.
Entrecanales admits he feels let down by the government, as well as worried about Spain losing the comparative advantage he believes the country had built up in renewables.
“I do feel disappointed. I understand the environment under which the decisions were taken but I think there is still . . . an enormous opportunity for . . . Spanish industry and for Spain as a country to continue to be a leader in that industry. We have rarely been leaders in many industrial sectors in Spain in the past century and in this particular case we were.”
As a result of the crisis, Acciona has struggled with high debt levels and the challenges of refocusing its business. Net debt is down from its recent peak of €7.5bn in 2012 but is still high at €5.9bn, although Entrecanales bridles at the suggestion that the company’s survival was ever in doubt. “We never had a question about our sustainability,” he says. “We were leaders. We can still be.”
And he believes the renewables industry still has a profitable global future, with more than $6tn of investment expected over the next 15 years, an estimate backed up by the International Energy Agency. He is equally bullish about Acciona’s role. “Wind [power] will still be there, our knowhow will be there, the technology will still be there.”
Entrecanales says that, even with the benefit of hindsight, he does not regret the level of investment that Acciona put into renewables. “Growth is by definition a volatile thing . . . There was a great degree of confidence, overconfidence in the strength of the Spanish economy and our own capacity to grow and to make better companies.”
Acciona, like other Spanish multinationals, was cushioned from some of the domestic crisis by investments abroad. The company employs 30,000 people in more than 30 countries, although some of these territories pose risks of their own. Acciona was badly burnt by the downfall of Eike Batista, the Brazilian billionaire, although Entrecanales is sanguine about rising political risk, both abroad and at home. He says the debate over Catalan independence “doesn’t concern me a lot” and that Acciona is actively analysing a business opportunity in Kazakhstan. “Most infrastructure is going to be built in riskier countries. You cannot afford to only work in very safe, very stable countries.”
If political risk is one question mark over Acciona’s future, so too is media speculation over disagreement between Entrecanales and his cousin, Juan Ignacio Entrecanales, vice-chairman of the company, over the relative weight in the business of construction versus renewables. Entrecanales says there is no pressure from the family to break up the business and that it is “not yet” time to consider doing so.
He adds that, at 51, it is also much too early for him to think about succession at Acciona, or whether any of his four children will follow the professional development path he took – including four years at Merrill Lynch before joining Acciona in 1990.
But he does acknowledge that at some point in the future he might like to spend more time with the Foundation for Innovation and Sustainability he created in 2009 than in the day-to-day running of the business. If his Twitter account is anything to go by, one senses it is that world in which he is happiest.
Market verdict
One director on several Spanish boards, who did not wish to be named, suggests that Entrecanales’ record is inferior to that of Rafael del Pino at rival Ferrovial: “Entrecanales bet everything on renewables,” he argues.
Investors appear less pessimistic. Operating profit has risen by a quarter in 2014, and although, at €51.49, the shares may be far off their peak of €235 at the end of 2007, they have rebounded significantly from much lower levels in the summer of 2013.
Culled from FT
