In a statement, Covalis said that the system that led to the government's nominations "undermines investor confidence, erodes value and is out of line with international standards of best practice in shareholder democracy."

The government decided on April 12 to oust Francesco Starace, who has been Enel CEO since 2014, and replace him with Flavio Cattaneo, currently executive vice president of high-speed train operator Italo.

Rome also named as chairman Paolo Scaroni, a former Enel and Eni CEO, as part of a round of nominations in state-controlled firms decided by Prime Minister Giorgia Meloni's rightist government.

A day after Cattaneo was announced, Enel shares fell by 4%, with investors fretting over the proposed CEO's lack of expertise in the renewable energy sector. He will also have to deal with a debt pile which amounted to around 60 billion euros ($66 billion) in 2022.

With almost 60 Gigawatt (GW) of installed capacity, Enel is one of the world's biggest players in renewable energy.

Covalis complained about an "opaque process", saying it was unclear "what the government's proposed slate stands for or what their plan is for Enel", and adding it wanted to "start a debate" on what the company needs.

SEEKING CLARITY

The hedge fund, which owns abut 1% of Enel, did not propose a CEO candidate. Its list comprises the names of Marco Mazzucchelli, Leilani C. Latimer, Francesco Galietti, Monique Sasson, Paulina Beato and Daniel Lacalle.

A source familiar with the matter said the fund's primary objective was to prompt the government to clarify its vision for Enel and explain the choice of Cattaneo.

The Italian government is Enel's leading shareholder, with around 23.6%, and the company is deemed strategic to national interests, giving the executive special veto "golden powers" over its running.

Given this arrangement, it is unlikely that Covalis' list of candidates could prevail over the one proposed by the government when Enel shareholders' meet to vote on the board's renewal on May 10.

Intesa Sanpaolo, which has a "Buy" recommendation on Enel shares, backed the proposed new leadership, saying in a note it was "confident that the new management team will adopt a transparent and market-friendly approach".

In an interview with the Financial Times published before Covalis unveiled its list, the hedge fund's founder Zach Mecelis said Enel was trading at a discount due to uncertainty over management choices.

"Enel's stock will go up 30 to 40 per cent if this process is run differently," he said. ($1 = 0.9098 euros)

(Editing by Cristina Carlevaro and Keith Weir)

By Alvise Armellini and Giuseppe Fonte