Headaches of Nationalization

On the very same day last week that Socialist Giuseppe Saragat was elected President of Italy (see THE WORLD), the Italian government announced the transfer of 35 more electric-power companies from private ownership to Ente Nazionale per L'Energia Elettrica, the huge, state-owned electric-power company. The coincidence was significant: the same political forces that elected Saragat have also joined to make Italy one of Western Europe's most nationalized countries. Such an alliance two years ago set in motion the nationalization of the electric-power industry that was completed last week. All this despite the fact that the Italian government has discovered that taking over power is not necessarily the best way to exercise it.

Shortages Ahead. Power nationalization has only compounded Italy's many economic woes. It has scared off investment in industry, helped to send the stock market into a sharp downward spin and contributed to a marked slowdown in Italy's industrial growth. ENEL now faces the task of continuing a high-voltage expansion program just when money is scarce and it is burdened with annual compensation payments of $350 million to private industry. Last week ENEL was forced to turn to foreign markets in an effort to borrow the money it badly needs.

ENEL has so far sustained itself mostly on past planning: nearly all of the 48 power stations under construction were started by private owners. By 1973, Italy's power needs are expected to double to 110 billion Kw-h., and a serious power shortage may occur even sooner unless the agency gets moving fast with more new projects. The cost of necessary expansion--plus the compensation payments--adds up to $1 1/4 billion a year. The agency, despite a slight increase in profits last year, can handle only about a third of that from its revenues.

Under President Vito Di Cagno, 67, a Christian Democrat who proved his administrative skill as president of IRI Finelettrica, one of the five largest electric companies in Italy before nationalization, ENEL has at least had the benefit of levelheaded management. From the start, Di Cagno has steadfastly resisted political pressures from the left and right, refused to permit the agency to become a pork barrel. All of ENEL's 828 executives come from the old companies, but most of its problems are the fault of nationalization itself.

Private Success. In a development that is especially galling to ENEL's managers, the dispossessed power companies are using their compensation to invest in profitable new private enterprises. Edison, whose corporate shell was left in private hands after nationalization, is now a leader in chemicals, computers and farm equipment. Adriatic Electric has merged with huge and powerful Montecatini. Even the state-owned IRI Finelettrica--which managed to get "nationalized" by being swallowed up by ENEL--has shifted its investments into steel and a nationwide telephone system, is now channeling compensation money into new industrial development in southern Italy.

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