Enel S.p.A. Annual Report 2013

Plain-text annual report

Annual Report 2013 3 1 0 2 t r o p e R l a u n n A enel.com Annual Report 2013 Contents Report on operations Consolidated financial statements The Enel organizational model | 6 Consolidated Income Statement | 134 Corporate boards | 8 Statement of Consolidated Comprehensive Income | 135 Letter to shareholders and other stakeholders | 10 Consolidated Balance Sheet | 136 Summary of results | 18 Statement of Changes in Consolidated Shareholders’ Equity | 138 Overview of the Group’s operations, performance and financial position | 28 Consolidated Statement of Cash Flows | 140 Notes to the financial statements | 141 Corporate governance Report on corporate governance and ownership structure | 253 Declaration of the Chief Executive Officer and the officer responsible for the preparation of corporate financial reports | 254 Attachments Subsidiaries, associates and other significant equity investments of the Enel Group at December 31, 2013 | 258 Glossary | 288 Reports Report of the independent auditors | 294 Results by business area | 39 > Sales | 40 > Generation and Energy Management | 42 > Infrastructure and Networks | 44 > Iberia and Latin America | 46 > International | 50 > Renewable Energy | 53 > Other, eliminations and adjustments | 56 Significant events in 2013 | 58 Reference scenario | 67 > Enel and the financial markets | 67 > Economic and energy conditions in 2013 | 70 > Electricity markets | 73 > Natural gas markets | 77 > Regulatory and rate issues | 78 Main risks and uncertainties | 99 Outlook | 104 Sustainability > Sustainability in Enel | 107 > People | 114 - Human resources and organization | 114 - Customers | 121 - Society | 122 > Climate strategy and the environment | 124 > Research and development | 126 Related parties | 130 Reconciliation of shareholders’ equity and net income of Enel SpA and the corresponding consolidated figures | 131 3 4 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsReport on operations The Enel organizational model As from February 2012, the Group has adopted an operating model designed to enhance operational flexibility, making Enel one of the most financially robust and, at the same time, most nimble companies in the energy industry. The model is based on the following organizational arrangements: > Parent Company functions, which are responsible for directing and controlling strategic activities for the entire Group; > global service functions, which are responsible for providing services to the Group, maximizing syner- gies and economies of scale; > business lines, represented by six divisions, as well as the Upstream Gas Function (which pursues se- lective vertical integration to increase the competitiveness, security and flexibility of strategic sourcing to meet Enel’s gas requirements) and the Carbon Strategy Function (which operates in the world’s CO2 certificate markets). The activities of the individual divisions are set out below. The Generation, Energy Management and Sales Italy Division is responsible for: > the generation and sale of electricity: - generation from thermal and schedulable hydroelectric power plants in Italy (through Enel Produzi- one, Hydro Dolomiti Enel, SE Hydropower, SF Energy and ENergy Hydro Piave) and in Belgium with the Marcinelle thermoelectric plant operated by Enel Trade under a tolling agreement - trading on international and Italian markets, primarily through Enel Trade, Enel Trade Romania, Enel Trade Croatia and Enel Trade Serbia; > provisioning for all of the Group’s needs and the sale of energy products, including the sale of natural gas to distributors, through Enel Trade; > the development of natural gas regasification plants (Nuove Energie); > commercial activities in Italy, with the objective of developing an integrated package of electricity and gas products and services for end users. More specifically, it is responsible for the sale of electric- ity on the regulated market (Enel Servizio Elettrico) and the sale of electricity on the free market and the sale of natural gas to end users (Enel Energia). As from July 1, 2013, following the acquisition of Enel.si from the Renewable Energy Division, these businesses were joined by Enel’s retail plant and franchising activities in Italy. The Infrastructure and Networks Division is primarily responsible for the distribution of electricity (Enel Distribuzione) and public and artistic lighting (Enel Sole) in Italy. The Iberia and Latin America Division focuses on developing Enel Group’s presence and coordinating its operations in the electricity and gas markets of Spain, Portugal and Latin America. The geographical areas in which it operates are as follows: > Europe, with the generation, distribution and sale of electricity and the sale of natural gas in Spain and Portugal; > Latin America, with the generation, distribution and sale of electricity in Chile, Brazil, Peru, Argentina and Colombia. The International Division supports the Group’s strategies for international growth, managing and inte- grating the foreign businesses outside the Iberian and Latin American markets, as well as monitoring and developing business opportunities that should present themselves on the electricity and fuel markets. 6 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsThe chief geographical areas of operation for this Division are: > central Europe, where the Division is active in electricity sales in France (Enel France), power genera- tion in Slovakia (Slovenské elektrárne) and Belgium (Marcinelle Energie); > south-eastern Europe, with the development of generation capacity in Romania (Enel Productie), and electricity distribution, sales and support activities in Romania (Enel Distributie Banat, Enel Distributie Dobrogea, Enel Energie, Enel Distributie Muntenia, Enel Energie Muntenia, Enel Romania and Enel Servicii Comune); > Russia, with electricity sales and trading (RusEnergoSbyt), power generation and sales (Enel OGK-5), and support services (Enel Rus) in the Russian Federation. The Renewable Energy Division has the mission of developing and managing operations for the gen- eration of electricity from renewable resources, ensuring their integration within the Group in line with the Enel Group’s strategies. The geographical areas of operation for this Division are: > Italy and the rest of Europe, with power generation from non-schedulable hydroelectric plants, as well as geothermal, wind and solar plants in Italy (Enel Green Power and other minor companies), Greece (Enel Green Power Hellas), France (Enel Green Power France), Romania (Enel Green Power Romania) and Bulgaria (Enel Green Power Bulgaria); > Iberia and Latin America, with power generation from renewable sources in Spain and Portugal (Enel Green Power España) and in Latin America (various companies); > North America, with power generation from renewable sources (Enel Green Power North America). The mission of the Engineering and Research Division is to serve the Group by managing the engineer- ing processes related to the development and construction of power plants (conventional and nuclear), while meeting Enel’s quality standards, ensuring compliance with the deadlines and financial objectives set for it. In addition, it is responsible for coordinating nuclear technology operations, providing independent monitoring of the Group’s nuclear activities with regard to safety issues. Finally, it manages research activi- ties identified in the process of managing innovation, with a focus on strategic research and technology scouting. In the Annual Report 2013, the results by operating segment are discussed on the basis of the organiza- tional arrangements described above and taking account of the management approach as provided for under IFRS 8. For that reason, the generation and energy management results of the Generation, Energy Management and Sales Italy Division are shown separately from the results pertaining to electricity and gas sales in Italy, consistent with the practice in previous periods and with the structure of internal reporting to top management. In addition, account was taken of the possibilities for the simplification of disclosures associated with the materiality thresholds also established under IFRS 8 and, therefore, the item “Other, eliminations and ad- justments” includes not only the effects from the elimination of intersegment transactions, but also the figures for the Parent Company, Enel SpA, the “Services and other activities” area and the “Engineering and Research” Division, as well as the Upstream Gas Function. 7 Corporate boards Board of Directors Chairman Chief Executive Directors Secretary Paolo Andrea Colombo Manager Officer and General Fulvio Conti Claudio Sartorelli Alessandro Banchi Lorenzo Codogno Mauro Miccio Fernando Napolitano Pedro Solbes Mira Angelo Taraborrelli Gianfranco Tosi Board of Auditors Chairman Auditors Alternate auditors Sergio Duca Lidia D’Alessio Gennaro Mariconda Giulia De Martino Pierpaolo Singer Franco Luciano Tutino Independent auditors Reconta Ernst & Young SpA 8 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsPowers Board of Directors The Board is vested by the bylaws with the broadest powers for the ordinary and extraordinary manage- ment of the Company, and specifically has the power to carry out all the actions it deems advisable to implement and attain the corporate purpose. Chairman of the Board of Directors The Chairman is vested by the bylaws with the powers to represent the Company and to sign on its behalf, presides over shareholders’ meetings, convenes and presides over the Board of Directors, and ascertains that the Board’s resolutions are carried out. Pursuant to a Board resolution of May 2, 2011 (as amended on December 18, 2012), the Chairman has been vested with a number of additional non- executive powers. Chief Executive Officer The Chief Executive Officer is also vested by the bylaws with the powers to represent the Company and to sign on its behalf, and in addition is vested by a Board resolution of May 2, 2011 (as amended on De- cember 18, 2012) with all powers for managing the Company, with the exception of those that are oth- erwise assigned by law or the bylaws or that the aforesaid resolution reserves for the Board of Directors. 9 Letter to shareholders and other stakeholders Dear stakeholders, The economic crisis that has reigned in recent years in many western countries appears to have passed through its most acute phase. Some countries, like the United States, have started down the road to recovery more decisively, while others, such as the euro-area countries, are individually regaining economic stability but are also struggling to emerge from the crisis at the same speed. Then there are the emerging economies where the Group is present, such as those in Latin America, which are continuing to grow. The trend in primary energy demand clearly reflects these dynamics. In the euro area, the fragile and slow recovery has not yet triggered a rise in consumption, which remains at its level of nearly two decades ago. Also weighing on the performance of the electricity industry in some countries, such as Italy and Spain, which are of great importance for Enel, are regulatory policies that have often looked to utilities as a source of funding for state budgets. The situation is different in eastern Europe and in Latin America, where development and economic growth continue to sustain the demand for electricity and gas, making new investment profitable. The growth of the renewable energy sector remains stable at the global level. The conditions I have described represent a cross-section of a complex reality that Enel has tackled by exploiting its geographic diversification, a well-balanced mix of generation technologies, management action to reduce costs and the optimization of investments and the generation of cash flow, all accom- panied by the expansion of the Group, especially in emerging markets and in renewable energy. The results of the past year have now reached and in some cases exceeded the targets announced to investors and have permitted us to confirm the good returns offered by our stock. The gross operating margin rose by 7.6% compared with 2012, reaching €17,011 million, despite revenue falling from €84,949 million in 2012 to €80,535 million in 2013. At the end of 2013, net financial debt had fallen to €39,862 million, a decrease of €3,086 million 10 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsfrom the €42,948 million registered at the end of 2012 and about €16 billion lower than its peak in 2007. The results of current operations and non-recurring transactions completed during the year, including asset disposals, more than offset the cash requirements of investments and the payments of dividends, interest and taxes, enabling us to maintain a strong balance sheet. Enel generated free cash flow in the last few years, including 2013, of €3 billion. For the future, we will face new market dynamics that are emerging under the pressure of four macro trends: the spread of new technologies, the growing contribution of the emerging markets to the world economy, the proactive role of customers and new approaches of institutions and governments in their energy and environmental policies. The priorities on which we will concentrate are: > redefining our strategy in response to the new business model and focusing: - on restructuring conventional generation in Italy and Spain and selective growth in that segment in growth markets; - on strengthening our leadership in renewable energy, with the creation of new capacity in high-potential markets and the development of new technologies on the path towards grid parity; - on maintaining our leadership in efficiency, service quality and the smart technologies of our distribution grid; - on delivering high-value-added services for our customers; > maximizing cash flows, in both mature and emerging markets, through continuous improvements in operating efficiency, a selective investment plan and stringent control over working capital; > completing the debt reduction plan, optimizing our asset portfolio and increasing the economic interest of the Group through minority buyouts and corporate reorganization. These priorities are marked by a constant drive towards innovation, the only way to maintain and renew our leadership on a lasting basis, and by a strong focus on the sustainability of our operations, as a prerequisite for adding value over time to the benefit of our stakeholders. Buoyed by the results we have achieved and aware of the tools we have to meet the challenges that lie ahead, we will continue to work to achieve these value targets in the markets of significance to our shareholders. The contribution of the operating divisions to Group performance is briefly described below. Generation, Energy Management and Sales Italy In 2013, macroeconomic conditions in Italy and the rest of Europe led to a further decline in electricity demand, which amounted to 317.1 TWh (-3.4% on the previous year). This situation, together with the increasing share of output generated from renewable sources, has tightened competition and increased the demand for balancing services for the system. Generation by the thermal power plants of the Division declined by 13.9% from 2012. Due to the considerable water availability during the year, hydroelectric generation recorded a 27.4% increase. Overall, the energy generated by the Division in Italy amounted to 59.6 TWh in 2013 (-5% on the previous year). The gross operating margin of the Generation and Energy Management area amounted to €1,176 million in 2013, an increase of 7.8% compared with 2012, with a significant contribution coming from the services market, made possible by the availability and flexibility of our plant assets. 11 In the gas segment, a revision of withdrawal commitments allowed us to rebalance volumes, thereby permitting us to avoid extra costs for lower-than-agreed withdrawals. The continuation of actions to improve the operating efficiency, reliability and safety of our plants also enabled significant cost sav- ings compared with 2012. The Sales area in 2013 continued to focus its attention on the most valuable segments of the mass market. In a highly competitive retail market, characterized by increasingly knowledgeable custom- ers, the strategy we have adopted seeks to innovate our product range through the development of a wide range of turnkey solutions for more responsible and efficient energy use, the so-called “New Downstream”, shifting consumption to the most efficient supplier of electricity. Enel Energia was once again the leading Italian operator in the energy market, with about 5.1 million electricity customers and 3.3 million natural gas customers at the end of 2013. Similarly, Enel Servizio Elettrico remained the leading operator in the enhanced protection market, with 22.4 million custom- ers at December 31, 2013 (down 1.2 million compared with 2012 due to the gradual liberalization of the market). The improvement in the quality of customer service perceived by customers enabled the two compa- nies to hold first and second place in the ranking prepared by the Authority for Electricity and Gas (the Authority) of the best contact centers in the industry for the third year in a row. This performance was achieved through the rationalization of systems and integrated management of customers, without neglecting a constant focus on internal efficiency. Quality is a distinguishing factor in developing the New Downstream segment. The new product of- fering, launched as a pilot project under the Enel Green Solution brand, has enabled Enel customers to improve the efficiency of their homes. Our strategy and the actions of management are reflected in a gross operating margin of €866 mil- lion, an increase of 42.2% compared with 2012 and 54% compared with 2011. Infrastructure and Networks Italy The strong operational and financial performance of the Infrastructure and Networks Division in 2013 confirms Enel’s leadership in electricity distribution, with a total of 31.7 million customers served and 230 TWh of power distributed. Last year, the Division had revenues of €7,698 million and a gross op- erating margin of €4,008 million, an increase of 10.6% compared with 2012. The great commitment to operational excellence produced a further improvement in the service qual- ity, easily outperforming the targets set by the Authority. The number of interruptions per customer declined from 3.7 in 2012 to 3.3 in 2013, while the total duration of outages per customer improved sharply, reaching an average of 41 minutes, compared with 46 in 2012. In 2013, Enel connected about 105 thousand renewable generation plants to the grid (1,800 MW). The total number of plants connected to our network has reached 540 thousand, with a capacity of 25,500 MW. In Italy, the automated remote management system for electronic meters executed more than 7 mil- lion contract transactions and more than 400 million remote readings. In Spain, the installation of electronic meters continued with the installation of more than 4 million units, with a goal of serving about 13 million customers in the coming years. In the field of smart grids, Enel confirmed its European leadership, chairing the “European Distribu- tion System Operators (EDSO) for Smart Grids” association, through which it develops the implemen- tation plans for pilot projects. During 2013, several projects were initiated with financing under the 7th Framework Programme of the European Commission, seeking to introduce smart grid and smart city technologies, including the evolvDSO, ADVANCED and Grid4EU projects. 12 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsInnovative projects also continued in Italy, such as the smart grid project in Isernia – with support from the Authority – and the projects of the Interregional Operational Plan for the southern regions funded by the Ministry for Economic Development. In the smart cities field, Enel has launched projects in Italy, in L’Aquila, and at the international level, in Santiago, Chile, initiatives that join the other projects of the Enel Group around the world (Malaga, Barcelona and Búzios in Latin America). An important contribution to the development of electric mobility was the signing of a number of agreements in 2013 with local and regional governments (Rome, Bari and the Region of Um- bria) and private companies (BMW). Enel’s charging infrastructure for electric vehicles now exceeds 1,200 points. The Public Lighting business area (Enel Sole) improved on the already positive results of the previous year and, thanks to developments in the Archilede® project and the extension of the CONSIP tender, has consolidated its leadership position in Italy and grew in Spain. In particular, thanks to the CONSIP “Servizio Luce 2“ agreement, some 200 thousand lighting points were taken under management in 2013, with total revenues of over €265 million. Last year also saw the consolidation of Enel Sole’s presence in Spain, as the company – together with Endesa Ingeniería – was awarded three long-term integrated management contracts (in Abarán, Rincón de la Victoria and Móra d’Ebre, for a total of more than 10 thousand lighting points). Iberia and Latin America In 2013, the Iberia and Latin America Division posted a gross operating margin of €6,746 million, a decrease of 6.7% compared with 2012. The decline was attributable to a fall of 18.7% in the margin achieved in Spain and Portugal, mainly as a result of regulatory and fiscal measures adopted in 2012 and 2013 by the Spanish government. However, the decline was partly offset by an improvement of 8.2% in the margin in Latin America and an increase in operating efficiency. Investments in Spain and Portugal declined, to about €849 million, while they increased in Latin America, reaching €1,332 million. Net financial debt also improved, largely as a result of the capital increase by the minority sharehold- ers of Enersis, who paid the increase with €1,796 million in cash. The operation, which was success- fully completed in March 2013, will help expand operations in the region with new investments, through both organic growth and the acquisition of non-controlling interests. In Spain, the €396 million in costs from the application of regulatory measures approved in 2012 were joined by the effects of other fiscal and regulatory measures approved during 2013, with an additional negative impact of €933 million on the gross operating margin. Despite the adverse effect of the additional measures, the gross operating margin in the Iberian peninsula only fell by €750 million compared with 2012, to €3,253 million. This was achieved thanks to the implementation of a targeted commercial strategy, with the launch and the strengthening of our value-added products and services, energy efficiency policies and the reduction of fixed costs. Other positive factors include increased hydroelectric generation and better margins in energy trad- ing operations. Unlike Spain (where the electricity demand in the peninsular area fell by 2.2% between 2012 and 2013), the Latin American countries in which the Division operates are characterized by rapid growth in electricity demand: Peru (+6.6%), Chile (+4.2% in the SIC, +3.8% in the SING), Argentina (+3.6%), Brazil (+3.4%) and Colombia (+2.4%). The distribution companies of the Division handled 61,512 GWh of power, with increases in Brazil (+4.4%), Chile (+4.4%), Peru (+2.7%), Argentina (+1.3%) and Colombia (+1.0%). 13 The gross operating margin of Latin American operations came to €3,493 million, an increase of 8.2% despite the adverse impact of drought in the region and the depreciation of local curren- cies against the euro (which led to a reduction of €350 million). Excluding this effect, the gross operating margin would have increased by 18%, confirming the region’s position as an important platform for growth. This rise in profitability was due, among other things, to the payment by the Argentine government of a portion of costs not transferred to rates from 2007 to September 2013 (€381 million) and to an improvement of the generation business in Chile. International In 2013, the International Division posted revenues of €7,737 million and a gross operating margin of €1,405 million, reaching the targets set out in the business plan despite the deterioration in the business environment. The past year was characterized by numerous critical issues in the countries in which the Division operates, with a decline in demand and electricity prices, increased competition in retail markets and increased regulatory pressure from governments. On the operational side, out- put amounted to 63.2 TWh, a slight decrease compared with 2012. The effect of this decline on the income statement was offset by the effective operational management of assets and the maximiza- tion of institutional and regulatory factors. Finally, retail sales totaled 45.7 TWh, a decrease from the previous year due to the combined effect of developments in sourcing in France and the decline in demand in Romania and Russia. In Slovakia, the Division achieved a gross operating margin of €708 million. The availability of nucle- ar facilities increased further, with an average load factor of 92.3%, making Slovenské elektrárne the world’s leading operator of VVER plants. Also in the nuclear field, work is continuing on construc- tion of new units at the Mochovce plant. Once completed, and following the changes introduced to ensure compliance with new safety requirements determined with stress tests, the plant will be one of the most advanced systems among those currently in operation in Europe. In Russia, Enel OGK-5 posted a gross operating margin of €399 million, an increase over the previous year thanks to higher prices and the initiatives taken to streamline and rationalize the cost structure, despite the decline in output attributable to the slowdown in demand and the concomitant entry into the market of our competitors’ new, more efficient units. The sales company RusEnergoSbyt, in which Enel holds a stake of 49.5%, has continued to diversify its commercial portfolio, achieving a gross operating margin for 2013 (pro-rated for the interest held by Enel) of about €112 million. In Romania, the three distribution companies continued their activities to modernize grids and im- prove service quality, bringing their performance parameters close to the benchmarks typical of the most advanced countries. This achievement was made possible by the implementation of infrastruc- ture and management initiatives based on the best practices adopted within the Enel Group. Includ- ing the performance of the electricity sales companies, the country posted a gross operating margin of €289 million, an increase of 25% over the previous year. In France, the termination of the agreement with EDF on the Flamanville 3 project, which gave Enel anticipated capacity to sell on the market, prompted Enel France to focus on reorganizing its com- mercial portfolio. The gradual reduction of that anticipated capacity to zero, to be completed by 2015, made it necessary to review the sourcing of power and reduce overhead costs in order to protect margins in an environment of declining market prices and rising sourcing costs. This laid the foundations for a more flexible structure, one able to exploit any opportunities that could arise in the current process of market liberalization. 14 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsRenewable Energy Division In 2013, the Renewable Energy Division continued to pursue its strategy of rapid growth, focused on emerging markets with abundant natural resources, strong growth in electricity demand and stable social and economic systems. At the same time, the Division continued to consolidate its presence in European markets. Net installed capacity at the end of 2013 amounted to 8.9 GW, an increase of 0.9 GW compared with 2012 (+11.0 %). Net Group electricity generation amounted to 29.5 TWh in 2013, an increase of 4.3 TWh (up 17.3%) on 2012, due primarily to the increase in installed capacity. The changes in capacity and output are reflected in an increase in the main financial aggregates. Division revenues amounted in 2013 to €2,827 million, an increase of 4.9% compared with 2012. The rise was mainly due to higher revenues from the sale of electricity, including incentives, thanks to increased production. The gross operating margin totaled €1,788 million, up 9.0% from the €1,641 million posted in 2012. The Division developed major projects during the year. In the United States, an agreement was reached with GE Capital to raise the Division’s stake in the Chisholm View (235 MW) and Prairie Rose (200 MW) wind farms to 75%. In the geothermal sector, the Cove Fort plant in the state of Utah (25 MW) entered service, while the wind segment saw the start of construction of the Origin facility (150 MW) in Oklahoma. In Latin America, and in particular Brazil in the states of Bahia, Pernambuco and Rio Grande do Norte, construction began on three new wind farms with a total installed capacity of 192 MW. In Chile, the Division completed and connected its first two wind farms to the grid: the Talinay plant, in the Coquimbo region (90 MW) and the Valle de los Vientos plant, in the region of Antofagasta (90 MW). In Mexico, construction began on two new wind farms totaling 202 MW. The Division also consolidated its presence in Europe during the year. In Romania and Greece, photovoltaic plants with 77 MW of capacity were built and connected to the grid. In Greece, ESSE, an equally held joint venture with Sharp, placed 15 MW of photovoltaic capacity into service. The Division strengthened its presence in Italy, thanks to the entry into service of two new photovoltaic plants at Serre Persano, in the province of Salerno, with a total installed capacity of 21 MW. In Sardinia, a project to convert a former Eridania sugar refinery into a 50 MW power plant was begun: the initiative is part of a broader plan to develop the locally sourced biomass generation industry in Italy. Finally, in South Africa, as part of the renewable energy tender organized by the government, the Division was awarded the right to enter into electricity supply contracts with the South African util- ity Eskom for a total of 513 MW, including 314 MW of photovoltaic projects and 199 MW of wind projects. The photovoltaic systems will use thin-film solar panels produced by the 3SUN factory in Catania, the equally held joint venture between Enel Green Power, Sharp and STMicroelectronics. The plant is expected to enter service in 2016. This important achievement places Enel Green Power among the leading renewable energy players in South Africa and also opens the way to possible future development opportunities for the Enel Group. Upstream Gas The year 2013 was marked by the sale of Enel’s stake in SeverEnergia, one of the largest gas fields in Russia, to Itera (Rosneft Group) for a total of $1.8 billion. This sale, which produced a gain of about €1 billion, and the concomitant signing of a long-term contract for the supply of gas to the power plants of Enel OGK-5 on particularly advantageous terms, confirmed the value and competitive advantage that a selective, focused presence in the upstream gas segment brings to the Group as a whole. 15 Enel’s activities are continuing in Algeria, where the Isarene project is being developed, with the start of production expected by the end of 2017. The field is estimated to have a plateau of about 3.5 bil- lion cubic meters. In addition, the second exploration period of the South East Illizi project will follow the two discoveries made in the first exploration period. Excellent results have been obtained also in Italy, where Enel has completed a seismic survey and so far identified a total of four exploration prospects that will be drilled over the next two years and ex- panded its portfolio with the submission of new applications for exploration permits. Engineering and Research During 2013, the Engineering and Research Division was involved in the refurbishment of the conven- tional and nuclear power plants of the Group and in supervision of the safety and performance of the nuclear assets of Endesa and Slovenské elektrárne. The Research unit, in particular, continued to pursue the Group’s strategic research programs. In Italy, the renovation of the port facilities at the Brindisi power plant was completed. Construction of a covered coal storage facility at the same site park is under way. In Sicily, at Porto Empedocle, work began on the partial conversion of the existing power plant from fuel oil to gas turbine systems. The construction of a regasification terminal within the port area also began. In Russia, at the Reftinskaya power station, the largest plant in the world for the dry transportation and storage of ash (DARS) was completed, as were environmental improvements and revamping of the first 10 units of the power plant. The environmental upgrading of other units is also under way. In Spain a feasibility study for the environmental upgrading and extension of the useful life of the Litoral coal-fired plant was carried out. In South America, the Division partnered with Endesa on a feasibility study for new coal-fired plants. With regard to the Nuclear area, the monitoring activities of the Nuclear Safety Oversight unit were strengthened through greater integration with the operating units of the Group’s nuclear facilities and by sharing best practices with other leading nuclear operators. At the nuclear power plants in Slovakia and Spain, engineering activities were begun to support the implementation of improvement measures identified during the stress testing. Finally, the team en- gaged in the engineering and construction of units 3 and 4 at the Mochovce nuclear power plant was strengthened further. In the field of renewables generation, the Research unit was involved in the study and experimen- tation of new technologies and solutions to improve the integration into the grid of the electricity produced by distributed generators. Supplementing this effort, work continued on developing new generation storage systems, aimed at optimizing investment and electricity flows on the grid. Finally, development work continued on creating energy efficiency solutions and value-added ser- vices for remote users, industrial districts and residential customers. Outlook The Group’s strategic priorities in the period covered by the 2014-2018 Business Plan respond to the expected structural evolution in the world’s macroeconomic conditions and in the energy industry. More specifically, the former will continue to move ahead at two speeds: on the one hand the Euro- pean countries, which are emerging slowly from the crisis; on the other, the emerging economies, especially those in Latin America, where electricity demand is still expanding rapidly. In this context, Enel expects the following main trends to drive the evolution of these scenarios: (i) the emerging markets will continue to fuel global growth; (ii) technological innovation will be one of the key factors driving trends in the energy sector; (iii) end users will be increasingly well-informed 16 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsabout technology and environmental matters; and (iv) regulatory systems will sharpen their focus on environmental issues and system costs. In the business plan, the Group confirms the increasingly important role of the emerging markets, with an investment policy targeted at consolidating its position and simplifying its corporate struc- ture. Renewables will expand substantially, with careful selection of high-return investment opportu- nities. Another area of action will be the retail market, energy efficiency and, more generally, value- added services, a segment with robust growth potential. In this area, as in the smart grid field, Enel intends to strengthen its leadership position, leveraging the key driver, technological innovation, and a geographically and technologically well-diversified asset portfolio which forms the foundation of the Group’s future development. Reducing debt and generating cash flows will also remain a top priority for the Group. And maximiza- tion of cash flows is precisely the goal of the plan for optimizing operating costs launched in 2013, which has already led to the identification of major opportunities for efficiency gains, with results that have easily exceeded expectations. These opportunities will continue to be pursued in the coming years, with a special focus on businesses in the mature markets. The Chief Executive Officer Fulvio Conti 17 Summary of results Sintesi dei risultati TOTAL NET GENERATION (TWh) Total 286.1 ELECTRICITY SOLD (TWh) Total 295.5 ELECTRICITY TRANSPORTED (TWh) Total 404.0 GAS SALES (billions of m3) Total 8.6 Abroad 213.2 Italy 72.9 Abroad 203.3 Italy 92.2 Abroad 230.0 Italy 174.0 Abroad 4.5 Italy 4.1 PERFORMANCE FIGURES FOR 2013 (compared with 2012) Revenues €80,535 million (-5.2%) Gross operating margin €17,011 million (+7.6%) Operating income €9,944 million (+46.1%) Net income €4,780 million 18 29% Coal NET ELECTRICITY GENERATION BY SOURCE 286.1 TWh 10% Oil and gas turbine 14% Nuclear Cicli combinati INVESTMENT BY BUSINESS SEGMENT €5,959 million International €924 million Iberia & Latin America €2,181 million Sales €99 million Generation & Energy Management €318 million Infrastructure & Networks €1,046 million Renewable Energy €1,307 million Other, eliminations & adjustments €84 million EnEl AnnuAl REpoRt 2013REpoRt on opERAtions Sintesi dei risultati TOTAL NET GENERATION (TWh) Total 286.1 ELECTRICITY SOLD (TWh) Total 295.5 ELECTRICITY TRANSPORTED (TWh) Total 404.0 GAS SALES (billions of m3) Total 8.6 Abroad 213.2 Italy 72.9 Abroad 203.3 Italy 92.2 Abroad 230.0 Italy 174.0 Abroad 4.5 Italy 4.1 PERFORMANCE FIGURES FOR 2013 (compared with 2012) Revenues €80,535 million (-5.2%) Gross operating margin €17,011 million (+7.6%) Operating income €9,944 million (+46.1%) Net income €4,780 million 29% Coal NET ELECTRICITY GENERATION BY SOURCE 286.1 TWh 10% Oil and gas turbine 14% Nuclear 14% Cicli combinati Gas combined cycle International €924 million Iberia & Latin America €2,181 million Sales €99 million Generation & Energy Management €318 million Infrastructure & Networks €1,046 million Renewable Energy €1,307 million Other, eliminations & adjustments €84 million INVESTMENT BY BUSINESS SEGMENT €5,959 million EMPLOYEES BY BUSINESS SEGMENT 71,394 International 11,830 Iberia & Latin America 22,994 Sales 3,687 Generation & Energy Management 5,699 Infrastructure & Networks 17,689 Renewable Energy 3,599 Other, eliminations & adjustments 5,896 80% Hydroelectric NET ELECTRICITY GENERATION RENEWABLES 93.1 TWh (33%) 33% Renewables 13% Wind INVESTMENT IN RENEWABLE ENERGY € 1,307 million 6% Geothermal 1% Biomass & cogeneration 48% Italy EMPLOYEES IN RENEWABLE ENERGY 3,599 EMPLOYEES BY GEOGRAPHICAL AREA 71,394 16% Iberian peninsula 18% Latin America 5% Russia 19 13% Other countries Performance data Revenues Revenues in 2013 amounted to €80,535 million, a decrease of €4,414 million (-5.2%) compared with 2012. The decline is essentially attributable to the con- traction in revenues from the sale of electricity, largely due to the decline in volumes sold, only partly offset by an increase in revenues from the transport of electricity and the sale of fuels. Revenues for 2013 also include the gain (€964 million) on the disposal of Artic Russia (and indirectly the stake held by the latter in SeverEnergia, a hydrocarbon extraction company in Russia), in the 4th Quar- millions of euro -5.2% 80,535 84,949 2013 2012 ter of 2013. Millions of euro Sales Generation and Energy Management Infrastructure and Networks Iberia and Latin America International Renewable Energy Other, eliminations and adjustments Total 20 2013 16,921 22,919 7,698 30,935 7,737 2,827 (8,502) 80,535 2012 restated Change 18,351 25,244 8,117 34,169 8,703 2,696 (12,331) 84,949 (1,430) (2,325) (419) (3,234) (966) 131 3,829 (4,414) -7.8% -9.2% -5.2% -9.5% -11.1% 4.9% 31.1% -5.2% EnEl AnnuAl REpoRt 2013REpoRt on opERAtions millions of euro +7.6% 17,011 Gross operating margin The gross operating margin for 2013 totaled €17,011 million, up 7.6% com- pared with 2012. The margin for 2013 includes the gain on the disposal of Artic 15,809 Russia, while that for 2012 reflects an adjustment (in the amount of €929 million) 2013 2012 made for comparative purposes only in compliance with the new version of IAS 19 upon first-time application. The adjustment mainly regards the recognition of charges for the transition-to-retirement plan for certain employees in Italy at the end of 2012. Excluding those items, the decline in the gross operating margin is mainly attributable to the expected contraction in the results achieved in Spain and conventional generation activities in Italy, only partly offset by the good per- formance of the Sales Italy business area, the Renewable Energy Division and Latin American operations, with the latter posting their result despite adverse developments in the exchange rates of local currencies against the euro. Millions of euro Sales Generation and Energy Management Infrastructure and Networks Iberia and Latin America International Renewable Energy Other, eliminations and adjustments Total 2013 866 1,176 4,008 6,746 1,405 1,788 1,022 2012 restated Change 609 1,091 3,623 7,230 1,650 1,641 (35) 257 85 385 (484) (245) 147 1,057 1,202 42.2% 7.8% 10.6% -6.7% -14.8% 9.0% - 7.6% 17,011 15,809 millions of euro Operating income +46.1% 9,944 6,806 2013 2012 Operating income came to €9,944 million in 2013, an increase of 46.1% com- pared with 2012 (€6,806 million), reflecting in part the adjustment associated with the first-time application of IAS 19 Revised. The change in depreciation, amortization and impairment losses reflects the effect of the difference in the impairment recognized in 2013 and 2012 on the goodwill of a number of cash generating units (€744 million in 2013 and €2,584 million in 2012). More spe- cifically, the impairment recognized in 2013 was entirely accounted for by the writedown of part of the goodwill of the “Enel OGK-5” cash generating unit to reflect the expected contraction in estimated future cash flows, as a result of the continuing slowdown in economic growth and the consequent decline in the forecast growth in prices in the medium term in the Russian market. In this regard, an impairment loss of €112 million had already been recognized in 2012 following the emergence of the first signs of change in outlook and a deterioration in the profitability of that CGU. In addition, the impairment losses recognized in 2012 included impairment of €2,392 million on the goodwill of the “Endesa-Iberia” CGU. 21 Millions of euro Sales Generation and Energy Management Infrastructure and Networks Iberia and Latin America International Renewable Energy Other, eliminations and adjustments Total Net income 2013 362 554 3,028 3,836 85 1,171 908 9,944 2012 restated Change 103 505 2,629 1,675 978 1,081 (165) 6,806 259 49 399 2,161 (893) 90 1,073 3,138 - 9.7% 15.2% - -91.3% 8.3% - 46.1% Net income pertaining to shareholders of the Parent Company amounted to €3,235 million in 2013, compared with €238 million the previous year. The increase is essentially attributable to the gain on the disposal of Artic Russia, the difference in the impairment losses recognized in respect of goodwill in 2013 and 2012, the adjustment booked on first-time application of IAS 19 Revised (equal to €627 millions of euro 6.000 5.000 4.000 3.000 2.000 1.000 0 4,780 1,545 3,235 1,442 1,204 238 million net of tax effects and non-controlling interests) and the improvement in 2013 2012 financial performance. Earnings per share €0.34 Earnings per share €0.03 Group Non-controlling interests Financial data Net capital employed Net capital employed, including net assets held for sale of €221 million, amounted to €92,701 million at December 31, 2013 and was financed by equity pertaining to shareholders of the Parent Company and non-controlling interests of €52,839 million and net financial debt of €39,862 million. At December 31, 2013, the debt/ equity ratio came to 0.75 (0.82 at December 31, 2012). millions of euro 10.000 92,701 -2.5% 95,035 52,839 39,862 52,087 42,948 5.000 8.000 6.000 4.000 2.000 0 Net financial debt came to €39,862 million, a decrease of €3,086 million compared with December 31, 2012. More specifically, cash flows from operations, the disposal of a number of non-strategic assets and the capital increase carried out by the Chilean subsidiary Enersis were only partially used for capital expenditure in the period and the payment of dividends. 2013 2012 Group shareholders’ equity per share €3.82 Group shareholders’ equity per share €3.80 Net ﬁnancial debt Shareholders’ equity (including non-controlling interests) 22 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions millions of euro -30.5% 7,241 Cash flow from operations 10,415 Cash flow from operations amounted to €7,241 million in 2013, down €3,174 mil- lion compared with the previous year. 2013 2012 millions of euro Capital expenditure -15.8% 5,959 7,075 2013 2012 Millions of euro Sales Generation and Energy Management Infrastructure and Networks Iberia and Latin America International Renewable Energy Other, eliminations and adjustments Total Capital expenditure amounted to €5,959 million in 2013 (of which €5,346 million in respect of property, plant and equipment), a decrease of €1,116 million compared with 2012. 2013 99 318 1,046 2,181 924 1,307 (2) 84 5,959 2012 restated Change 97 403 1,497 2,497 (1) 1,161 1,257 163 (3) 7,075 2 (85) (451) (316) (237) 50 (79) (1,116) 2.1% -21.1% -30.1% -12.7% -20.4% 4.0% -48.5% -15.8% (1) The figure for 2012 does not include €73 million regarding units classified as “held for sale”. (2) The figure for 2013 does not include €1 million regarding units classified as “held for sale”. (3) The figure for 2012 does not include €1 million regarding units classified as “held for sale”. Operations Net electricity generated by Enel (TWh) Electricity transported on the Enel distribution network (TWh) Electricity sold by Enel (TWh) (1) Gas sold to end users (billions of m3) Employees at year-end (no.) (2) Italy Abroad Total Italy Abroad Total 2013 213.2 174.0 203.3 4.5 72.9 230.0 92.2 4.1 286.1 404.0 295.5 8.6 2012 220.4 175.7 214.5 4.4 74.4 238.5 102.3 4.3 294.8 414.2 316.8 8.7 34,451 36,943 71,394 36,205 37,497 73,702 (1) Excluding sales to resellers. (2) Includes 37 in units classified as “held for sale” at December 31, 2013 and at December 31, 2012. 23 Net electricity generation by source (2013) 14% 14% 10% 33% 29% Net electricity generated by Enel in 2013 fell by 8.7 TWh (-3.0%), with a con- traction in output abroad (-7.2 TWh) and a decline in generation in Italy (-1.5 TWh). More specifically, an increase in hydroelectric generation (+6.2 TWh), at- tributable to an increase in water availability, and in generation from other re- newables (+3.3 TWh), thanks to the entry into service of new wind plants, were more than offset by the contraction in conventional thermal generation (-17.4 TWh) and in nuclear generation (-0.8 TWh). Renewables Coal Oil and gas turbine Nuclear Gas combined cycle Electricity transported on the Enel distribution network came to 404 TWh, a decrease of 10.2 TWh (-2.5%), largely due to the fall in electricity demand in Italy and Spain. Electricity sold by geographical area (2013) 7% 31% Electricity sold by Enel in 2013 decreased by 21.3 TWh (-6.7%), mainly attribut- able to a decline in amounts sold in Italy (-10.1 TWh) and the Iberian peninsula (-6.6 TWh), only partly offset by an increase in sales in Latin America (+1.8 TWh). 21% 8% At December 31, 2013, Enel Group employees numbered 71,394 (73,702 at the end of 2012). The Group’s workforce contracted by 2,308 employees in 2013, attributable to the balance between new hirings and terminations (for a net decrease of 2,336), partially offset by the change in the scope of consolidation, 33% largely attributable to the acquisition of PowerCrop (an increase of 28). Italy Iberian peninsula Russia Latin America Other countries Employees by geographical area (at December 31, 2013) 18% 5% 13% 16% Italy Iberian peninsula Russia Latin America Other countries Sales Generation and Energy Management Infrastructure and Networks Iberia and Latin America International Renewable Energy 48% Other, eliminations and adjustments Total Employees (no.) 2013 3,687 5,699 17,689 22,994 11,830 (1) 3,599 5,896 71,394 2012 3,674 6,043 18,632 22,807 12,652 3,512 6,382 73,702 (1) Of which 37 in units classified as “held for sale” at December 31, 2013 and at December 31, 2012. 24 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions Restatement of the balance sheet and the income statement The main impacts of the application, as from January 1, 2013 with retrospective effect, of the new ver- sion of “IAS 19 - Employee benefits” on the balance sheet and income statement figures reported for comparative purposes only in these consolidated financial statements are as follows: > as the corridor approach may no longer be used, all actuarial gains and losses are recognized di- rectly in equity. Accordingly, the amortization accruing in 2012 in respect of the excess gains and losses outside the corridor, as quantified at December 31, 2012, was eliminated from the income statement (€19 million). In addition, the actuarial gains and losses not recognized in application of the previous method were recognized in equity, with a consequent adjustment of the respective defined-benefit obligation and the net plan assets recognized in the balance sheet; > as the recognition of past service cost in the income statement may no longer be deferred, the portion not recognized at December 31, 2012 was recognized as an increase in the defined-benefit obligation, posted to equity for the amount pertaining to previous years and to profit or loss for the amount accruing for 2012. More specifically, the amount recognized in the income statement involved €932 million in respect of charges for the transition-to-retirement plan established in 2012 for certain employees in Italy; > in application of the new standard, interest income on plan assets is recognized in substitution of the expected return on those assets. That interest is no longer reported under financial income but rather is offset against the financial expense associated with the benefit plans. In all cases, the theoretical tax effects were calculated and amounts pertaining to non-controlling interests were allocated. In addition, in 2013, the Group adopted a new accounting treatment as part of the project to har- monize the treatment of the recognition and presentation of the various types of environmental cer- tificates (CO2 allowance, green certificates, energy efficiency certificates, etc.). The new approach is based on the business model of the companies involved in the incentive mechanisms for environmen- tal certificates and led to a number of reclassifications in the consolidated income statement. Finally, as a result of the definitive allocation of the purchase prices of the Kafireas pipeline, Stipa Nayaá and Eólica Zopiloapan, companies operating in the Renewable Energy Division, which was com- pleted after December 31, 2012, the balance-sheet accounts at that date have been restated to reflect the measurement at fair value of the net assets acquired. For more information, please see note 4 of these consolidated financial statements. The following tables present the effects on the revenues, gross operating margin and operating income of the Group’s divisions. 25 Revenues Millions of euro Sales Generation and Energy Management Infrastructure and Networks Iberia and Latin America International Renewable Energy Other, eliminations and adjustments Total Gross operating margin Millions of euro Sales Generation and Energy Management Infrastructure and Networks Iberia and Latin America International Renewable Energy Other, eliminations and adjustments Total Operating income Millions of euro Sales Generation and Energy Management Infrastructure and Networks Iberia and Latin America International Renewable Energy Other, eliminations and adjustments Total 2012 18,351 25,237 8,117 34,169 8,703 2,696 (12,384) 84,889 2012 689 1,271 4,138 7,212 1,650 1,681 97 16,738 2012 183 685 3,144 1,657 978 1,121 (33) 7,735 New environmental certificates policy - 7 - - - - 53 60 IAS 19/R effect (80) (180) (515) 18 - (40) (132) (929) IAS 19/R effect (80) (180) (515) 18 - (40) (132) (929) 2012 restated 18,351 25,244 8,117 34,169 8,703 2,696 (12,331) 84,949 2012 restated 609 1,091 3,623 7,230 1,650 1,641 (35) 15,809 2012 restated 103 505 2,629 1,675 978 1,081 (165) 6,806 26 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsSustainability indicators ISO 14001-certified net efficient capacity (% of total) Average efficiency of thermal plants (%) Total specific emissions of CO2 from net generation (gCO2/kWheq) “Zero-emission” generation (% of total) Injury frequency rate (1) Serious injury rate (2) Serious and fatal injuries at Enel Serious and fatal injuries at contractors Average hours of training per employee Verified violations of the Code of Ethics 2013 94.0 39.8 391 46.7 1.42 0.07 13 27 39.8 27 2012 92.6 39.9 418 42.4 1.98 0.10 15 34 44.8 41 Change 1.4 (0.1) (27) 4.3 (0.56) (0.03) (2) (7) (5.0) (14) 1.5% -0.3% -6.5% 10.1% -28.3% -30.0% -13.3% -20.6% -11.2% -34.1% (1) The indicator is calculated as the ratio between the total number of injuries and the number of hours worked, in millions (INAIL standard). (2) The indicator is calculated as the ratio between the number of days lost for injuries and the number of hours worked, in thousands (INAIL standard). The proportion of ISO 14001-compliant capacity was equal utable to constant and intensive information, training and to 94.0% at December 31, 2013, an increase of 1.5% on awareness-raising activities conducted in order to dissemi- the previous year. The rise reflects new certifications of the nate a culture of safety at all levels and to promote the adop- combined-cycle plant at Pego, the diesel plant on Ibiza, the tion of safe behavior, as well as the ongoing implementation combined-cycle plant at Marcinelle and new wind farms of of measures to enhance workplace health and safety stand- Enel Green Power. ards and management processes. In 2013 the average efficiency of thermal plants was in line Serious and fatal injuries involving Enel personnel decreased with that of the previous year. by 13.3% compared with 2012, even though there were 6 The decrease in specific emissions of CO2 is attributable to in- creased renewables generation. fatal accidents involving Enel employees. Serious and fatal injuries involving the employees of contractors working for In 2013, 46.7% of Enel’s generation came from zero emis- Enel fell by 20.6% compared with 2012, thanks to ongoing sions resources, an increase of 10.1% on 2012. The increase implementation of measures to enhance workplace health is due both to the contingent improvement in water condi- and safety in all stages of the tendering process. tions in 2013 compared with 2012, with availability above The average hours of training per employee declined by the average for the last five years, and to the structural fac- 11.2% owing to the greater focus on specific segments of the tor of the increase in renewables capacity during the year. workforce, although a number of large-scale projects were The 940 MW of new renewables capacity installed in 2013 continued. confirm our commitment to expanding carbon-free genera- As regards the Code of Ethics, the number of reports received tion, which will continue in the coming years. in 2013 was broadly in line with 2012, while verified viola- The injury frequency and severity rates declined by 28.3% tions declined. and 30.0% compared with 2012. The improvement is attrib- 27 Overview of the Group’s operations, performance and financial position Definition of performance indicators In order to present the results of the Group and analyze its Net current assets: calculated as the difference between “Cur- financial structure, Enel has prepared separate reclassified rent assets” and “Current liabilities” with the exception of: schedules that differ from those envisaged under the IFRS- > “Long-term financial receivables (short-term portion)”, EU adopted by the Group and presented in the consolidated “Receivables for factoring advances”, “Securities”, “Finan- financial statements. These reclassified schedules contain cial receivables and cash collateral” and “Other financial different performance indicators from those obtained di- receivables”; rectly from the consolidated financial statements, which > “Cash and cash equivalents”; management feels are useful in monitoring Group perfor- > “Short-term loans” and the “Current portion of long- mance and representative of the financial performance of term loans”. the Group’s business. In accordance with Recommendation CESR/05-178b, published on November 3, 2005, the criteria Net assets held for sale: calculated as the algebraic sum of used to calculate these indicators are described below. “Assets held for sale” and “Liabilities held for sale”. Gross operating margin: an operating performance indica- Net capital employed: calculated as the algebraic sum of tor, calculated as “Operating income” plus “Depreciation, “Net non-current assets” and “Net current assets”, provi- amortization and impairment losses”. sions not previously considered, “Deferred tax liabilities” and “Deferred tax assets”, as well as “Net assets held for Group net ordinary income: this is Group net income pro- sale”. duced by ordinary operations. Net financial debt: a financial structure indicator, deter- Net non-current assets: calculated as the difference between mined by “Long-term loans”, the current portion of such “Non-current assets” and “Non-current liabilities” with the loans and “Short-term loans” less “Cash and cash equiva- exception of: > “Deferred tax assets”; lents”, “Current financial assets” and “Non-current finan- cial assets” not previously considered in other balance- > “Securities held to maturity”, “Financial investments in sheet indicators. More generally, the net financial debt of funds or portfolio management products at fair value the Enel Group is calculated in conformity with paragraph through profit or loss”, “Securities available for sale” and 127 of Recommendation CESR/05-054b implementing “Other financial receivables”; Regulation 809/2004/EC and in line with the CONSOB in- > “Long-term loans”; structions of July 26, 2007, net of financial receivables and > “Post-employment and other employee benefits”; long-term securities. > “Provisions for risks and charges”; > “Deferred tax liabilities”. 28 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsMain changes in the scope of consolidation In the two periods under review, the scope of consolidation changed as a result of the following main transactions. 2012 2013 > acquisition, on January 13, 2012, of an additional 49% of > acquisition, on March 22, 2013, of 100% of Parque Eólico Rocky Ridge Wind Project, which was already a subsidiary Talinay Oriente, a company operating in the wind genera- (consolidated line-by-line) controlled through a 51% stake; tion sector in Chile; > acquisition, on February 14, 2012, of the remaining > acquisition, on March 26, 2013, of 50% of PowerCrop, a 50% of Enel Stoccaggi, a company in which the Group company operating in the biomass generation sector; in already held a 50% interest. As from that date the com- view of the joint control exercised over the company to- pany has been consolidated on a line-by-line basis (pre- gether with another operator, the company is consolidated viously consolidated proportionately in view of the joint on a proportionate basis; control exercised); > disposal, on April 8, 2013, of 51% of Buffalo Dunes Wind > acquisition, on June 27, 2012, of an additional 50% of a Project, a company operating in the wind generation sector number of companies in the Kafireas wind power pipeline in the United States; in Greece, which had previously been included under “Elica > acquisition, on May 22, 2013, of 26% of Chisholm View 2” and accounted for using the equity method in view of Wind Project and Prairie Rose Wind Project, both operating the 30% stake held; as from that date the companies have in wind generation in the United States, in which the Group therefore been consolidated on a line-by-line basis; previously held an interest of 49%. Following the acquisi- > acquisition, on June 28, 2012, of 100% of Stipa Nayaá, tion, the two companies have been consolidated on a line- a Mexican company operating in the wind generation by-line basis rather than using equity method accounting; sector; > acquisition, on August 9, 2013, of 70% of Domus Energia > disposal, on August 2, 2012, of the entire capital of Water (now Enel Green Power Finale Emilia), a company operating & Industrial Services Company (Wisco), which operates in in the biomass generation sector; the waste water treatment sector in Italy; > acquisition, on October 31, 2013, of 100% of Compañía > disposal, on October 9, 2012, of the entire share capital of Energética Veracruz, a company operating in the develop- Endesa Ireland, a company operating in the generation of ment of hydroelectric plants in Peru; electricity; > disposal, on November 13, 2013, of the 40% stake in Artic > acquisition, on October 12, 2012, of the additional 58% Russia, with the consequent deconsolidation of the interest of Trade Wind Energy, a company in which the Group had held by the latter in SeverEnergia; held a stake of 42%; as a result of the purchase, the com- > acquisition, in November and December 2013, of nine pany is no longer consolidated using the equity method companies (representing three business combinations) op- but is consolidated on a line-by-line basis; erating in the development of wind power projects in the > acquisition, on December 21, 2012, of 99.9% of Eólica Zo- United States; piloapan, a Mexican company operating in the wind gen- > disposal, on December 20, 2013, of the remaining stake in eration sector. Enel Rete Gas, which had previously been accounted for us- ing the equity method. The balance-sheet figures at December 31, 2013 exclude (unless otherwise indicated) assets and liabilities held for sale, which essentially include Marcinelle Energie and other smaller companies that, on the basis of the status of ne- gotiations for their sale, fall within the scope of IFRS 5. 29 Group performance Millions of euro Total revenues Total costs Net income/(charges) from commodity risk management 2013 80,535 63,146 (378) 2012 restated 84,949 69,178 38 GROSS OPERATING MARGIN 17,011 15,809 Depreciation, amortization and impairment losses OPERATING INCOME Financial income Financial expense 7,067 9,944 2,453 5,266 9,003 6,806 2,185 5,197 Total financial income/(expense) (2,813) (3,012) Share of income/(expense) from investments accounted for using the equity method INCOME BEFORE TAXES Income taxes NET INCOME FROM CONTINUING OPERATIONS NET INCOME FROM DISCONTINUED OPERATIONS NET INCOME (Group and non-controlling interests) Net income pertaining to shareholders of Parent Company Net income pertaining to non-controlling interests Revenues Millions of euro Electricity sales and transport and contributions from Electricity Equalization Fund and similar bodies Gas sold and transported to end users Gains on the disposal of assets Remeasurement at fair value after changes in control Other services, sales and revenues Total 86 7,217 2,437 4,780 - 4,780 3,235 1,545 2013 67,285 4,451 944 21 7,834 80,535 88 3,882 2,440 1,442 - 1,442 238 1,204 2012 restated 71,322 4,402 6 16 9,203 84,949 Change (4,414) (6,032) (416) 1,202 (1,936) 3,138 268 69 199 (2) 3,335 (3) 3,338 - 3,338 2,997 341 -5.2% -8.7% - 7.6% -21.5% 46.1% 12.3% 1.3% 6.6% -2.3% 85.9% -0.1% - - - - 28.3% Change (4,037) 49 938 5 (1,369) (4,414) -5.7% 1.1% - 31.2% -14.9% -5.2% Revenues from electricity sales and transport and contri- an increase in revenues from sales on electricity exchanges, butions from Electricity Equalization Fund and similar which more than offset the decline in sales under bilateral bodies in 2013 amounted to €67,285 million, down €4,037 contracts entered into by the generation company; million compared with 2012 (-5.7%). The decrease is attribut- > a decline of €1,243 million in revenues from electricity able to the following factors: trading, reflecting a decline in volumes handled; > a decline of €3,621 million in revenues from the sale of > a decrease of €401 million in revenues from contributions electricity to end users, of which €2,111 million on regu- from the Electricity Equalization Fund and similar bodies, lated markets and €1,510 million on free markets. The essentially attributable to the fall in revenues from extra- decrease is essentially due to the decline in quantities of peninsular generation in Spain, reflecting lower volumes electricity sold as a result of weakening demand, partly generated and the negative effects of the entry into force offset by a rise in revenues from the wholesale electricity of Royal Decree Law 20/2012 starting from the 2nd Half business (€648 million); the latter is mainly attributable to of 2012; 30 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions > an increase of €580 millions in revenues from the trans- million in respect of Trade Wind Energy, €4 million in respect port of electricity, due essentially to the increase in rev- of Sociedad Eólica de los Lances and €1 million in respect enues from the transport of electricity for other operators. of Enel Stoccaggi. In all three of these cases, the gain re- Revenues from gas sold and transported to end users the Group prior to acquiring additional interests giving the amounted to €4,451 million, up €49 million (1.1%) com- Group full control of those companies. fers to the remeasurement of the net assets already held by pared with the previous year. This performance essentially reflects both the increase in quantities sold and the increase Income from other services, sales and revenues in 2013 in average sales prices in Spain and Portugal due to develop- amounted to €7,834 million (€9,203 million in 2012), a de- ments in the international energy market and the revision of crease of €1,369 million (-14.9%) compared with the previ- a number of rate components. ous year. The fall is essentially attributable to the following factors: Gains on the disposal of assets amounted to €944 million > a decrease of €1,651 million in revenues from the sale of in 2013 and mainly regard the gain on the disposal of Artic Russia and, indirectly, the stake held in SeverEnergia (€964 other goods, mainly due to lower sales of CO2 emissions allowances and other environmental certificates; million), and the sale of 51% of the Buffalo Dunes Wind Pro- > the recognition in 2012 by the Authority for Electricity ject (€20 million). These gains were partly offset by a partial and Gas (Resolution 157/2012) of the right to be reim- adjustment (€43 million) of the result of the disposal of cer- bursed for charges incurred by the Group as a result of tain renewable generation assets to Acciona in 2009, as part the termination of the Electrical Worker Pension Fund of Enel’s acquisition of an additional 25.01% of Endesa. (FPE) as from January 1, 2000, in the amount of €615 million; The gain from remeasurement at fair value after changes > the payment of a government grant of €381 million to the in control amounted to €21 million in 2013 (€16 million Argentine distribution company Edesur under the provi- in 2012). The gain is mainly attributable to the remeasure- sions of Resolución 250/2013 concerning the Mecanismo ment at fair value of the net assets attributable to the Group de Monitoreo de Costos; (totaling 49% of the company) following the loss of control > an increase of €696 million in revenues from the sale of of the Buffalo Dunes Wind Project, in accordance with the fuels for trading, including revenues for shipping services, provisions of IFRS 3 Revised. In 2012, the gains included €11 essentially due to an increase in volumes handled in Italy. Costs Millions of euro Electricity purchases Consumption of fuel for electricity generation Fuel for trading and natural gas for sale to end users Materials Personnel Services, leases and rentals Other operating expenses Capitalized costs Total 2013 2012 restated 28,297 30,080 6,883 5,096 1,577 4,596 15,310 2,837 (1,450) 63,146 8,653 4,840 3,123 5,789 15,666 2,774 (1,747) 69,178 Change (1,783) (1,770) 256 (1,546) (1,193) (356) 63 297 (6,032) -5.9% -20.5% 5.3% -49.5% -20.6% -2.3% 2.3% -17.0% -8.7% 31 Costs for electricity purchases in 2013 amounted to million) of the termination of the transition-to-retirement €28,297 million, a decrease of €1,783 million (-5.9%). The plan after no employees opted to participate and the fact decrease is essentially attributable to the combined effect that a significant number of those entitled to participate in of a decline in costs purchases of electricity through bilat- that plan instead have opted to participate in the mecha- eral contracts (€1,166 million) and lower costs for electric- nism provided for under Article 4 of the Fornero Act, as the ity purchases on domestic and foreign markets (€1,228 latter offers better financial and organizational conditions, million), largely connected with the decrease in demand. making the earlier plan unattractive. These factors were partially offset by an increase in pur- chases on electricity exchanges (€608 million). The Enel Group’s workforce at December 31, 2013 num- bered 71,394 employees (73,702 at December 31, 2012), Costs for the consumption of fuel for electricity genera- about 52% of whom were employed abroad. tion in 2013 amounted to €6,883 million, a decrease of The Group’s workforce decreased by 2,308 during the year, €1,770 million on the previous year (-20.5%). The decrease reflecting the balance between new hirings and termina- reflects the decline in volumes of electricity from thermal tions (a decrease of 2,336) and the change in the scope generation and an improvement in the fuel mix, associated of consolidation, essentially attributable to the acquisition with a decrease in the unit prices of raw materials. of PowerCrop (28 employees). At December 31, 2013, the Costs for the purchase of fuel for trading and natural gas sale, comprising the Belgian company Marcinelle Energie, for sale to end users came to €5,096 million, an increase was 37. of €256 million (5.3%) compared with 2012. The rise is The change, compared with December 31, 2012, breaks largely attributable to natural gas and developments in its down as follows: number of employees in units classified as asset held for average purchase price, which is correlated with changes in the prices of petroleum products. Costs for materials amounted to €1,577 million in 2013, a decrease of €1,546 million compared with 2012, mainly as a result of a decline in costs for provisioning CO2 emissions allowances and environmental certificates. Balance at December 31, 2012 Change in scope of consolidation Hirings Terminations Balance at December 31, 2013 (1) 73,702 28 2,612 (4,948) 71,394 (1) Includes 37 in units classified as “held for sale” (37 at December 31, 2012). Personnel costs in 2013 totaled €4,596 million, a decrease of €1,193 million (-20.6%) compared with 2012. Costs for services, leases and rentals in 2013 amounted More specifically, the decline reflected the recognition in to €15,310 million, a decrease of €356 million (-2.3%) com- 2012 – partly as a result of the restatement carried out for pared with 2012. The change is essentially attributable to comparative purposes only in the first-time application of the decrease in electricity transport costs (€218 million), re- IAS 19 Revised – of charges in the amount of €970 million lated to the decline in consumption in the main markets in in respect of the transition-to-retirement plan established which the Group operates. Another factor was the decrease for certain employees in Italy at the end of 2012, as well as in operating costs of electrical systems (€93 million), includ- lower personnel costs associated to the decline in the av- ing fees for transport capacity use rights in respect of the erage workforce for the year. In addition, the agreements Energy Markets Operator (EMO). signed on September 6, 2013 implementing the frame- work agreement of May 9, 2013, laying out the approach Other operating expenses in 2013 amounted to €2,837 to be taken in activating the measures provided for in Ar- million, an increase of €63 million compared with the previ- ticle 4, paragraphs 1-7-ter, of Law 92/2012 (the Fornero ous year (2.3%). More specifically, the rise is mainly attribut- Act) led to the recognition of a net expense of €858 million able to an increase in taxes and duties, largely associated (taking account of the partial reversal of certain liabilities with taxes on emissions in Spain, following the entry into in respect of other benefits previously awarded such em- force of Law 15/2012 in that country, and greater charges ployees in the amount of €38 million). These charges, how- for emissions, mainly offset by the reduction in provisions ever, were more than offset by the positive effect (€1,028 for risks and charges (€383 million). 32 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsCapitalized costs amounted to €1,450 million in 2013 The share of income/(expense) from investments ac- (€1,747 million in 2012), with the decrease mainly attribut- counted for using the equity method showed net income able to a decline in investments. of €86 million in 2013, largely in line with the previous year. Net income/(charges) from commodity risk manage- Income taxes for 2013 amounted to €2,437 million (€2,440 ment showed net charges of €378 million in 2013 (net in- million in 2012) equal to 33.8% of taxable income, com- come of €38 million in the previous year). More specifically, pared with 62.9% in 2012. More specifically, the change in the net charges for 2013 include €264 million of net realized the tax burden in 2013 reflects the recognition in 2012 of charges for the period (€219 million of net income in 2012) the impairment losses on goodwill with no corresponding and net unrealized charges from the fair value measure- tax benefit and the effect of greater essentially tax-exempt ment of derivatives positions open at the end of the year in capital gains in 2013. the amount of €114 million (€181 million in 2012). Depreciation, amortization and impairment losses to- taled €7,067 million in 2013, a decrease of €1,936 million (-21.5%). The decrease is attributable to a decrease in im- pairment losses on assets, net of any writebacks, in the amount of €1,817 million, a decline in depreciation and amortization of €187 million, partially offset by an increase of €68 million in net impairment losses on receivables. More specifically, the decrease in impairment losses is essentially attributable to the effect of the impairment recognized in the two years examined here on goodwill. In 2012, impair- ment losses, net of any writebacks, were recognized in the total amount of €2,819 million, essentially in respect of the impairment of goodwill of the cash generating units Ende- sa-Iberia (€2,392 million), Enel OGK-5 (€112 million) and Endesa Ireland (€67 million), as well as the adjustment to estimated realizable value of the net assets of Marcinelle En- ergie (€145 million). Impairment losses in 2013 amounted to €1,002 million and include €744 million in respect of the partial writedown of the goodwill of the Enel OGK-5 cash generating unit. Operating income in 2013 amounted to €9,944 million, an increase of €3,138 million compared with the previous year (46.1%), taking account of the decrease in depreciation, amortization and impairment losses noted above. Net financial expense in 2013 totaled €2,813 million, a decrease of €199 million compared with the previous year (€3,012 million). The fall is mainly attributable to a decrease in financial expense in respect of the accretion of provisions for employee benefits and the positive impact of exchange rate differences. These factors were partly offset by a decrease in income from equity investments, which in 2012 included the gain on the disposal of the interest in Terna, as well as by an increase in net charges on derivatives transactions. 33 Analysis of the Group’s financial position Millions of euro Net non-current assets: - property, plant and equipment and intangible assets - goodwill - equity investments accounted for using the equity method - other net non-current assets/(liabilities) Total Net current assets: - trade receivables - inventories - net receivables due from Electricity Equalization Fund and similar bodies - other net current assets/(liabilities) - trade payables Total net current assets Gross capital employed Sundry provisions: - post-employment and other employee benefits - provisions for risks and charges and net deferred taxes Total provisions Net assets held for sale Net capital employed Total shareholders’ equity Net financial debt at Dec. 31, 2013 at Dec. 31, 2012 restated Change 99,445 15,015 647 (1,236) 113,871 11,533 3,586 (2,567) (4,530) (13,004) (4,982) 108,889 (3,696) (12,713) (16,409) 221 92,701 52,839 39,862 103,399 (3,954) 15,910 1,115 (962) (895) (468) (274) 119,462 (5,591) 11,719 3,338 (2,435) (5,295) (13,903) (6,576) (186) 248 (132) 765 899 1,594 112,886 (3,997) (4,542) (13,618) (18,160) 309 95,035 52,087 42,948 846 905 1,751 (88) (2,334) 752 (3,086) -3.8% -5.6% -42.0% 28.5% -4.7% -1.6% 7.4% 5.4% -14.4% -6.5% 24.2% -3.5% -18.6% -6.6% 9.6% -28.5% -2.5% 1.4% -7.2% Property, plant and equipment and intangible assets (in- quisition of control of a number of minor companies of the cluding investment property) came to €99,445 million at Renewable Energy Division. December 31, 2013, a decrease of €3,954 million. The de- crease is essentially attributable to depreciation, amortiza- Equity investments accounted for using the equity method tion and impairment losses for the year (€5,632 million) and amounted to €647 million, down €468 million compared exchange rate losses (€3,970 million), partly offset by invest- with December 31, 2012. The decrease reflects the disposal ments (€5,959 million) and changes in the scope of consoli- in the 4th Quarter of 2013 of the interests held in SeverEner- dation (€593 million). The latter are largely accounted for by gia and Enel Rete Gas (€395 million), following their reclas- acquisitions of a number of companies operating in renewa- sification under assets held for sale. bles generation in the United States. Other net non-current liabilities at December 31, 2013 Goodwill amounted to €15,015 million, a decrease of €895 amounted to €1,236 million, an increase of €274 million com- million compared with December 31, 2012. The reduction pared with December 31, 2012 (net liabilities of €962 million). mainly reflects impairment losses of the Enel OGK-5 cash The change is attributable to the following factors: generating unit (€744 million) and the net loss recognized > an increase of €196 million in net non-current financial from the translation at current exchange rates of goodwill liabilities, mainly due to the adjustment of the fair value expressed in currencies other than the euro, in particular that of the investments in Echelon and Bayan Resources (-€54 on the CGUs associated with acquisitions in Russia. These ef- million) and the fair value of financial derivatives (-€213 fects were only partly offset by the recognition (for some on million). More specifically, the latter change reflects the a provisional basis) of the goodwill associated with the ac- increase in net assets in respect of cash flow hedge deriva- 34 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions tives on interests rates, which was more than offset by the > a decrease of €899 million in trade payables. decrease in the net fair value of analogous derivatives on exchange rates. These negative factors were partly offset Sundry provisions, totaling €16,409 million, fell by €1,751 by the increase in deferred financial charges (€70 million); million compared with 2012. This change is connected with > an increase of €78 million in net other non-current liabili- the following factors: ties, mainly due to the increase in sundry tax liabilities aris- > a decrease of €846 million in provisions for post-employ- ing in respect of higher taxes on emissions in Spain follow- ment and other employee benefits, mainly due to the ter- ing the entry into force of Law 15/2012. mination of the transition-to-retirement plan after no em- ployees opted to participate and the fact that a significant Net current assets came to a negative €4,982 million at De- number of those entitled to participate in that plan instead cember 31, 2013, an increase of €1,594 million compared have opted to participate in the mechanism provided for with December 31, 2012. This change is due to the follow- under Article 4, paragraphs 1-7-ter, of Law 92/2012 (the ing factors: Fornero Act), as the latter offers better financial and organi- > a decrease of €186 million in trade receivables, essentially zational conditions, making the earlier plan unattractive; correlated with developments in sales; > a decrease of €601 million in provisions for risks and > an increase of €248 million in inventories, mainly asso- charges. The decline is essentially attributable to the ciated with greater quantities of green certificates and net reduction in the provision for nuclear decommis- other environmental certificates, which more than off- sioning of plants in Slovakia and Spain. For the latter, set the decline in stocks of gas and other fuels as a result the reduction was connected with the remeasurement of the decline in generation; of the liabilities following recent regulatory changes in > a decrease of €132 million in net receivables due from Spain, partly offset by a rise in the provision for early re- Electricity Equalization Fund and similar bodies reflecting tirement incentives. The latter increase reflected the rec- the application of equalization mechanisms to electric- ognition of the liability in respect of the company-level ity purchases; union agreements signed in September 2013 in imple- > an increase of €765 million in other current assets less mentation of the framework agreement of May 9, 2013, related liabilities. This change is due to the following fac- governing the approach to be taken in implementing tors: the measures of Law 92/2012, partly offset by utiliza- - an increase of €522 million in net income tax receiva- tion of the provision, essentially for the early retirement bles; the rise is essentially associated with income tax plan at the Spanish companies; payments in the amount of €2,606 million, partially off- > a decrease of €304 million in net deferred tax liabilities, set by the recognition of current taxes (net of adjust- mainly due to the reversal of a portion to profit or loss ments for previous years) totaling €2,280 million; and exchange rate differences on the net deferred taxes - an increase of €143 million in net current assets, attrib- of companies that use a currency other than the euro. utable to the rise in receivables for grants to be received in respect of green certificates in the amount of €142 Net assets held for sale amounted to €221 million at De- million and other receivables and payables totaling cember 31, 2013 (€309 million at December 31, 2012), and €395 million, mainly in respect of the receivable for the comprise the net assets of Marcinelle Energie and other mi- government grant received by the Argentine distribu- nor companies that in view of the decisions taken by man- tion company Edesur under the provisions of Resolución agement meet the requirements of IFRS 5 for classification 250/2013 concerning the Mecanismo de Monitoreo de as assets held for sale. Costos. This factor was partly offset by a decline in net tax receivables other than current income taxes in the Net capital employed at December 31, 2013 came to amount of €394 million, essentially in respect of VAT €92,701 million and was funded by shareholders’ equity in Italy and taxes and surtaxes on the consumption of pertaining to the shareholders of the Parent Company and electricity and gas; non-controlling interests in the amount of €52,839 million - an increase of €76 million in net current financial as- and net financial debt of €39,862 million. At December 31, sets, attributable to an increase of €60 million in the 2013, the debt/equity ratio was 0.75 (0.82 at December fair value of derivatives; 31, 2012). 35 Analysis of the financial structure Net financial debt Net financial debt and changes in the period are detailed in the table below. Millions of euro Long-term debt: - bank loans - bonds and preference shares - other loans Long-term debt Long-term financial receivables and securities Net long-term debt Short-term debt: Bank loans: - short-term portion of long-term bank debt - other short-term bank debt Short-term bank debt Bonds and preference shares (short-term portion) Other loans (short-term portion) Commercial paper Cash collateral and other financing on derivatives Other short-term financial payables Other short-term debt Long-term financial receivables (short-term portion) Factoring receivables Financial receivables and cash collateral Other short-term financial receivables Cash and cash equivalents and short term securities at Dec. 31, 2013 at Dec. 31, 2012 restated Change (4,995) -37.6% 8,287 41,483 1,343 51,113 (4,951) 46,162 1,788 150 1,938 2,649 253 2,202 119 58 13,282 41,509 1,168 55,959 (3,576) 52,383 714 283 997 3,115 228 2,914 691 82 (2,977) (263) (1,720) (512) (8,047) (5,318) (288) (1,402) (521) (9,933) 5,281 7,030 (1,749) (26) 175 (4,846) (1,375) (6,221) 1,074 (133) 941 (466) 25 (712) (572) (24) 2,341 25 (318) 9 1,886 3,943 3,135 -0.1% 15.0% -8.7% -38.5% -11.9% - -47.0% 94.4% -15.0% 11.0% -24.4% -82.8% -29.3% -24.9% 44.0% 8.7% -22.7% 1.7% 19.0% 22.6% 33.2% -7.2% - Cash and cash equivalents and short-term financial receivables (13,519) (17,462) Net short-term debt NET FINANCIAL DEBT Net financial debt of “assets held for sale (6,300) 39,862 (10) (9,435) 42,948 (3,086) (10) - Net financial debt amounted to €39,862 million at Decem- > the reclassification to current liabilities of €650 million by ber 31, 2013, a decrease of €3,086 million compared with Slovenské elektrárne; December 31, 2012: the decrease of €6,221 million in net > the early repayment of the 2009 credit facility in the long-term debt was partly offset by an increase of €3,135 amount of €610 million (with a nominal value of €617 million in net short-term debt. million), falling due in 2014, by Enel SpA and Enel Finance More specifically, long-term bank loans totaled €8,287 mil- International; lion, a decrease of €4,995 million, mainly due to: > the early repayment of credit lines in the amount of €345 > reduced borrowing on long-term revolving credit fa- million (with a nominal value of €350 million), maturing cilities (€341 million by Endesa and €100 million by Enel in 2017, by Enel Finance International; SpA); 36 > the early repayment of the 2012 credit facility in the EnEl AnnuAl REpoRt 2013REpoRt on opERAtions amount of €3,167 million (with a nominal value of €3,200 bles came to €13,519 million, a decrease of €3,943 million million), maturing in 2017, by Enel Finance International. on the end of 2012, mainly reflecting a decrease in liquidity These factors were partially offset by drawings on lines held with banks and short-term securities in the amount of financing by Enel Green Power Latin America in the of €1,886 million and a decrease in the current portion of amount of €217 million, EIB loans to Enel Distribuzione to- long-term financial receivables in the amount of €2,341 taling €270 million and to Enel Green Power International million. totaling €170 million. The €10 billion five-year revolving credit line established Among major transactions in 2013, on January 15, 2013, in April 2010 by Enel SpA and Enel Finance International Enel SpA renegotiated a bilateral revolving credit facility in was undrawn at December 31, 2013. At the same date, the the overall amount of €500 million falling due 2014, and committed credit lines obtained by Enel SpA and Enel Fi- on February 8, 2013 Enel SpA and Enel Finance Interna- nance International were also undrawn. tional obtained a forward starting revolving credit facility totaling about €9.4 billion falling due in April 2018. This Bonds and preference shares amounted to €41,483 million, credit facility will replace the current revolving credit line a decrease of €26 million on the end of 2012, mainly attrib- of €10 billion, starting from the expiry date of that facility, utable to private placements totaling €479 million by Enel which is contractually scheduled for 2015. On July 18, 2013 Finance International and issues of the following hybrid fi- Enel SpA repaid a bilateral revolving credit facility early in nancial instruments by Enel SpA: the amount of €500 million, maturing in 2014. The Com- > €1,250 million fixed-rate 6.50%, maturing January 10, pany also renegotiated a bilateral revolving credit facility 2074 with a call option exercisable at January 10, 2019; in the overall amount of €800 million into the following > £400 million fixed-rate 7.75%, maturing September 10, tranches: €400 million maturing in 2015 and €400 million 2075 with a call option exercisable at September 10, 2020; maturing in 2016. > $1,250 million fixed-rate 8.75%, maturing September 24, 2073 with a call option exercisable at September 24, 2023. These effects were partly offset by the reclassification to short term of the current portion of a bond issued by Enel SpA in 2007 in the amount of €1,000 million, a bond issued by Enel Finance International in 2009 in the amount of $1,250 million and bonds issued by Endesa in the amount of €586 million. Net short-term debt showed a net positive position of €6,300 million at December 31, 2013, an increase of €3,135 million on the end of 2012, the result of an increase in short-term bank debt of €941 million, essentially due to an increase in the short-term portion of credit lines and bank loans in the amount of about €1,074 million, a decrease of €3,943 million in cash and cash equivalents and short-term financial receivables and a decrease in other short-term debt in the amount of 1,749 million. Commercial paper includes issues by Enel Finance Interna- tional, Endesa Latinoamérica and Endesa Capital in the to- tal amount of €2,202 million. Finally, cash collateral paid to counterparties in over-the-counter derivatives transactions on interest rates, exchange rates and commodities totaled €1,720 million, while cash collateral received from such counterparties amounted to €119 million. Cash and cash equivalents and short-term financial receiva- 37 Cash flows Millions of euro Cash and cash equivalents at the start of the period (1) Cash flows from operating activities Cash flows from investing/disinvesting activities Cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the period (2) 2013 9,933 7,241 (4,147) (4,544) (426) 8,057 2012 restated 7,072 10,415 (6,588) (995) 29 9,933 Change 2,861 (3,174) 2,441 (3,549) (455) (1,876) (1) Of which cash and cash equivalents equal to €9,891 million at January 1, 2013 (€7,015 million at January 1, 2012), short-term securities equal to €42 million at January 1, 2013 (€52 million at January 1, 2012) and cash and cash equivalents pertaining to assets held for sale in the amount of zero at January 1, 2013 (€5 million at January 1, 2012). (2) Of which cash and cash equivalents equal to €8,030 million at December 31, 2013 (€9,891 million at December 31, 2012), short-term securities equal to €17 million at December 31, 2013 (€42 million at December 31, 2012) and cash and cash equivalents pertaining to assets held for sale in the amount of €10 million at December 31, 2013 (none at December 31, 2012). Cash flows from operating activities in 2013 amounted to lion (up €1,021 million on the previous year, reflecting the €7,241 million, a decrease of €3,174 million with respect previously announced disposal plan) and regarded the to the previous year as a result of increased use of cash disposal of the 40% stake in Artic Russia and of 51% of the connected with the change in net current assets, which Buffalo Dunes Wind Project. was only partly offset by the improvement in operating Cash flows generated by other investing/disinvesting ac- income. tivities amounted to €614 million. They were essentially attributable to the proceeds from the sale of the non-stra- Cash flows from investing/disinvesting activities absorbed tegic investments in Medgaz, Enel Rete Gas, Endesa Gas funds in the amount of €4,147 million in 2013, compared T&D and other smaller interests. with €6,588 million in 2012. Cash requirements in respect of investments in property, Cash flows from financing activities absorbed cash in the plant and equipment and in intangible assets, totaling amount of €4,544 million, compared with €995 million in €5,960 million, fell by €1,189 million in reflection of the 2012. The change is essentially due to repayments of loans, selective investment policy. Cash used in investments in which offset the effects of the capital increase at the Chile- entities or business units, net of cash and cash equivalents an subsidiary Enersis paid in cash by non-controlling share- acquired, amounted to €210 million, up €28 million. Invest- holders and the issue of hybrid financial instruments. ments in entities or business units in the period were largely accounted for by the acquisition of 100% of Parque Eólico In 2013, cash flows from operating activities in the amount Talinay Oriente, a company operating in the wind genera- of €7,241 million were used to cover the cash requirements tion field in Chile, the acquisition of 50% di PowerCrop, a of financing activities in the amount of €4,544 million and company operating in the biomass generation sector, the of investing activities in the amount of €4,147 million. The acquisition of an additional 26% of Chisolm View Wind Pro- difference is reflected in the decrease in cash and cash ject and Prairie Rose Wind Project, both operating in wind equivalents, which at December 31, 2013 came to €8,057 generation in the United States, in which the Group had million compared with €9,933 million at the end of 2012 previously held 49%, and other smaller acquisitions. (including the liquidity pertaining to net assets held for The disposal of entities or business units, net of cash and sale in the amount of €10 million). This decrease was also cash equivalents sold, generated cash flows of €1,409 mil- affected by exchange rate losses (€426 million). 38 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsResults by business area The representation of performance by business area pre- ods under review, taking account of the operational model sented here is based on the approach used by manage- adopted by the Group as described above. ment in monitoring Group performance for the two peri- Results by business area for 2013 and 2012 Results for 2013 (1) Millions of euro Sales GEM Infra. & Networks Iberia & Latin America Revenues from third parties 16,699 18,878 3,669 30,825 Revenues from other segments 222 4,041 Total revenues 16,921 22,919 Net income/(charges) from commodity risk management Gross operating margin Depreciation, amortization and impairment losses Operating income Capital expenditure (82) 866 504 362 99 (165) 1,176 622 554 318 4,029 7,698 - 4,008 980 3,028 1,046 110 30,935 (148) 6,746 2,910 3,836 2,181 Other, eliminations and adjustments Renewable Energy Total 2,337 1,024 80,535 490 2,827 21 1,788 617 1,171 1,307(2) (9,526) (8,502) - 80,535 - (378) 1,022 17,011 114 908 84 7,067 9,944 5,959 Int’l 7,103 634 7,737 (4) 1,405 1,320 85 924 (1) Segment revenues include both revenues from third parties and revenue flows between the segments. An analogous approach was taken for other income and costs for the period. (2) Does not include €1 million regarding units classified as “held for sale”. Results for 2012 restated (1) (2) Millions of euro Sales GEM Infra. & Networks Iberia & Latin America Revenues from third parties 18,170 18,869 3,820 33,708 Revenues from other segments 181 6,375 Total revenues 18,351 25,244 Net income/(charges) from commodity risk management Gross operating margin Depreciation, amortization and impairment losses Operating income Capital expenditure 17 609 506 103 97 131 1,091 586 505 403 4,297 8,117 - 3,623 994 2,629 1,497 461 34,169 (161) 7,230 5,555 1,675 2,497 (3) 1,161 Other, eliminations and adjustments Renewable Energy Total 2,264 103 84,949 432 (12,434) - 2,696 (12,331) 84,949 Int’l 8,015 688 8,703 57 (6) 1,650 1,641 672 978 560 1,081 1,257 - (35) 130 (165) 163 (4) 38 15,809 9,003 6,806 7,075 (1) Segment revenues include both revenues from third parties and revenue flows between the segments. An analogous approach was taken for other income and costs for the period. (2) The figures have been restated as a result of the change, with retrospective effect, in the accounting treatment of employee benefits under IAS 19/R, and in the accounting policy used for environmental certificates. (3) Does not include €73 million regarding units classified as “held for sale”. (4) Does not include €1 million regarding units classified as “held for sale”. 39 1 Sales Operations Electricity sales Millions of kWh Free market: - mass-market customers - business customers (1) - safeguard market customers Total free market Regulated market - enhanced protection market customers TOTAL (1) Large customers and energy-intensive users (annual consumption greater than 1 GWh). Average number of customers 2013 2012 Change 25,913 9,265 1,721 36,899 54,827 91,726 26,011 13,258 2,020 41,289 60,328 101,617 (98) (3,993) (299) (4,390) (5,501) (9,891) Free market: - mass-market customers - business customers (1) - safeguard market customers Total free market 2013 2012 Change 4,693,080 4,045,330 647,750 38,566 37,558 45,640 41,832 (7,074) (4,274) 4,769,204 4,132,802 636,402 Regulated market - enhanced protection market customers 23,050,677 23,899,698 (849,021) TOTAL 27,819,881 28,032,500 (212,619) (1) Large customers and energy-intensive users (annual consumption greater than 1 GWh). -0.4% -30.1% -14.8% -10.6% -9.1% -9.7% 16.0% -15.5% -10.2% 15.4% -3.6% -0.8% Electricity sold in 2013 amounted to 91,726 million kWh, deterioration of macroeconomic conditions in Italy and the down 9,891 million kWh on the previous year. More specifi- ongoing shift of customers from the regulated system to the cally, this decline in sales to all types of customer reflects the free market. Gas sales and customers Gas sales (millions of m3) - mass-market customers (1) - business customers Total sales 2013 2012 Change 3,394 707 4,101 3,440 902 4,342 (46) (195) (241) Average number of customers 3,245,996 3,158,532 87,464 (1) Includes residential customers and microbusinesses. -1.3% -21.6% -5.6% 2.8% 40 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsGas sales in 2013 amounted to 4,101 million cubic meters, a de- affecting all categories of customer and mainly reflecting the ad- crease of 241 million cubic meters (5.6%) on the previous year, verse economic climate in Italy. Performance Millions of euro Revenues Gross operating margin Operating income Employees at year-end (no.) Capital expenditure 2013 2012 restated Change 16,921 18,351 (1,430) 866 362 3,687 99 609 103 3,674 97 257 259 13 2 -7.8% 42.2% - 0.4% 2.1% Revenues amounted to €16,921 million, a decrease of €1,430 million, an increase of €257 million compared with 2012 million compared with 2012 (-7.8%), as a result of the follow- (42.2%). More specifically, the change is attributable to: ing main factors: > an increase of €167 million in the margin on the regu- > a decrease of €1,098 million in revenues on the regulated lated electricity market, essentially attributable to the electricity market, mainly associated with the decline in reduction in operating costs, including the effects of quantities sold (-5.5 TWh), a reduction in revenues from the recognition in 2012 of the charge for the transition- the rate component covering generation costs and a de- to-retirement plan (€73 million), which more than offset crease in revenues for the sales service. Another factor the impact of the decline in quantities sold, the reduction was the decrease in revenues from services provided to in revenues for the sales service and the decrease in rev- the distributor and the related reimbursements for ser- enues for services provided to the distributor under Au- vice interruptions, pursuant to Resolution 333/2007 of thority Resolution 333/2007; the Authority for Electricity and Gas (€62 million). These > an increase of €90 million in the margin on the free mar- effects were only partially offset by the recognition of ket for electricity and gas, due essentially to the rise in prior-year items totaling €90 million connected with the the unit margins on both commodities, which more than equalization mechanism for purchases; offset the decrease in amounts sold and greater costs es- > a decrease of €195 million in revenues on the free elec- sentially linked to customer acquisition. In addition, 2012 tricity market, essentially due to the decrease in quantities included the charge for the transition-to-retirement plan sold (-4.4 TWh); in the amount of €12 million. > a decrease of €76 million in revenues from sales to end us- ers on the natural gas market, mainly due to the decrease Operating income for 2013, after depreciation, amortiza- in quantities sold. tion and impairment losses of €504 million (€506 million in 2012), amounted to €362 million, an increase of €259 million The gross operating margin for 2013 amounted to €866 compared with 2012. Capital expenditure Capital expenditure amounted to €99 million, broadly in line with 2012 (€97 million). 41 2 Generation and Energy Management Operations Net electricity generation Millions of kWh Thermal Hydroelectric Other resources Total net generation - of which Italy - of which Belgium 2013 42,728 18,285 9 61,022 59,649 1,373 2012 49,623 14,348 9 63,980 62,797 1,183 Change (6,895) 3,937 - (2,958) (3,148) 190 -13.9% 27.4% - -4.6% -5.0% 16.1% In 2013, net electricity generation by the Division amounted ence in the contribution of the Marcinelle plant in Belgium, to 61,022 million kWh, a decrease of 4.6% compared with which is operated under a tolling agreement and entered 2012. The change was reflected in a sharp reduction in con- service in the 2nd Quarter of 2012. ventional thermal generation in Italy, which contracted by In these conditions, the improvement in water availability 7,085 million kWh (-14.6%), attributable to the decline in boosted hydroelectric generation, which expanded by 3,937 demand for electricity and the increasing weight of renewa- million kWh. bles in the national energy mix, partially offset by the differ- Contribution to gross thermal generation Millions of kWh High-sulfur fuel oil (S>0.25%) Low-sulfur fuel oil (S<0.25%) Total fuel oil Natural gas Coal Other fuels TOTAL 2013 2012 Change 426 165 591 9,616 35,106 696 0.9% 849 1.6% (423) -49.8% 0.4% 1.3% 20.9% 76.3% 1.5% 455 1,304 13,913 37,379 553 0.9% 2.5% 26.2% 70.3% 1.0% (290) (713) (4,297) (2,273) 143 -63.7% -54.7% -30.9% -6.1% 25.9% 46,009 100.0% 53,149 100.0% (7,140) -13.4% Gross thermal generation in 2013 totaled 46,009 million kWh, More specifically, the decline in gas generation was due a decrease of 7,140 million kWh (-13.4%) compared with 2012. to the reduction in the use of that fuel in combined-cycle The decrease was seen across all the major fuel types and was plants, while the decrease in generation from coal is at- essentially connected with the decline in weight of conventional tributable to the reduction in the use of certain units of thermal generation in the Italian fuel mix, in an environment of the Brindisi Sud plant and technical stoppages for mainte- falling demand for electricity as a result of the recession in Italy. nance at the Torrevaldaliga Nord plant. 42 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions Net efficient generation capacity MW Thermal plants (1) Hydroelectric plants Alternative resources Total at Dec. 31, 2013 at Dec. 31, 2012 Change 24,629 12,177 41 36,847 24,687 12,168 41 36,896 (58) 9 - -0.2% 0.1% - (49) -0.1% (1) Of which 3,631 MW unavailable due to long-term technical issues (1,640 MW at December 31, 2012). Performance Millions of euro Revenues Gross operating margin Operating income Employees at year-end (no.) Capital expenditure 2013 22,919 1,176 554 5,699 318 2012 restated Change 25,244 (2,325) 1,091 505 6,043 403 85 49 (344) (85) -9.2% 7.8% 9.7% -5.7% -21.1% Revenues for 2013 amounted to €22,919 million, a decrease specifically, the reduction in personnel costs reflects the of €2,325 million (-9.2%) compared with 2012. The decline is impact of the recognition in 2012 of charges (€185 mil- largely attributable to the following factors: lion) in respect of the transition-to-retirement plan es- > a decrease of €1,220 million in revenues from trading on in- tablished at the end of 2012 (most for the past service ternational electricity markets, essentially due to a decrease cost recognized in retrospective application of IAS 19 in quantities handled (-9.1 TWh); Revised) and the net positive impact in 2013 of the ter- > a decrease of €1,326 million in revenues from the sale of CO2 mination of that plan and the recognition of charges for emissions allowances and green certificates; the obligations assumed in implementation of Article 4 > the impact of the recognition in 2012 of revenues for grants of Law 92/2012; due to new entrants in the emissions trading system for the > a reduction of €21 million in the generation margin, es- Torrevaldaliga Nord plant in the amount of €44 million; sentially due to a decline in the amount of electricity > an increase of €13 million in revenues from electricity sales, generated and higher costs for compliance with envi- mainly due to higher revenues from sales on the power ex- ronmental restrictions, partially offset by the effects of changes as a result of an increase in volumes traded, only a more advantageous generation mix, characterized by partially offset by a decline in revenues from the sale of greater utilization of hydroelectric plants, as well as the electricity within the Group as a result of a change in the higher margin on dispatching services; procedures for sourcing electricity adopted by the other di- > a reduction of €179 million in the margin on natural gas visions beginning in 2013; sales and trading. > an increase of €310 million in revenues from fuel trading, essentially attributable to transactions in natural gas. Operating income amounted to €554 million, an increase of €49 million (9.7%) on the €505 million posted in 2012. The The gross operating margin for 2013 amounted to €1,176 performance reflects: million, an increase of €85 million (7.8%) on the €1,091 mil- > a decrease of €110 million in depreciation, mainly attrib- lion registered in 2012. The change is attributable to: utable to the end of the useful life of certain generation > a decrease of €285 million in operating expenses, es- plants and the revision in 2012 of the useful lives of assets sentially due to a reduction in personnel costs (€261 mil- previously classified as to be relinquished free of charge lion) and lower net provisions for risks and charges. More following the enactment of Law 134/2012; 43 > an increase of €146 million in impairment losses, the com- in 2013 for a number of generation plants and fuel storage bined effect of the writeback recognized in 2012 on the facilities in view of their expected future use by the Group. Mercure biomass plant and the impairment losses posted Capital expenditure Millions of euro Generation plants: - thermal - hydroelectric - alternative resources Total generation plants Other investments in property, plant and equipment and intangible assets TOTAL 2013 2012 Change 210 76 5 291 27 318 247 113 22 382 21 403 (37) (37) (17) (91) 6 (85) -15.0% -32.7% -77.3% -23.8% 28.6% -21.1% Capital expenditure came to €318 million, of which €291 mil- taling €71 million), the completion of the coal conversion of lion in respect of generation plants. The main investments in the Torrevaldaliga Nord plant and other work on the Termini 2013 included €210 million for the continuation of work at Imerese and Porto Empedocle plants. thermal plants, including sundry works at the Brindisi plant (to- 3 Infrastructure and Networks Operations Electricity distribution and transport networks Medium-voltage lines at year-end (km) Low-voltage lines at year-end (km) 2013 349,386 782,624 2012 347,927 777,039 Total electricity distribution network (km) 1,132,010 1,124,966 Change 1,459 5,585 7,044 Electricity transported on Enel’s distribution network (millions of kWh) (1) 230,032 238,505 (8,473) 0.4% 0.7% 0.6% -3.6% (1) The figure for 2012 reflects a more accurate determination of amounts transported. The electricity distribution network expanded by 7,044 km, Italy in 2013 amounted to 230,032 million kWh, a decrease essentially due to the connection of self-generators to dis- of 3.6% compared with the previous year. tribution grids. Energy transported on the Enel network in 44 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsPerformance Millions of euro Revenues Gross operating margin Operating income Employees at year-end (no.) Capital expenditure 2013 7,698 4,008 3,028 17,689 1,046 2012 restated Change 8,117 3,623 2,629 18,632 1,497 (419) 385 399 (943) (451) -5.2% 10.6% 15.2% -5.1% -30.1% Revenues in 2013 amounted to €7,698 million, a decrease of with Resolution 122/2013, noted above, and the positive €419 million (-5.2%) on the previous year. The change was es- impact of equalization mechanisms; sentially attributable to: > a decrease of €642 million in personnel costs, due es- > the impact of the recognition in the 3rd Quarter of 2012 of sentially to the recognition in 2012 of a charge of €523 the reimbursement entitlement for charges incurred follow- million (mainly in retrospective application of IAS 19 Re- ing the elimination of the Electrical Worker Pension Fund vised) in respect of the transition-to-retirement plan es- (FPE), as provided for in the Authority’s Resolution 157/2012, tablished for certain employees at the end of 2012 and in the amount of €615 million; the net positive impact of the termination of that plan in > a €260 million decrease in connection fees; the 3rd Quarter of 2013 and the recognition of a charge > a €38 million decrease in revenues from the sale of electronic for the obligations assumed in implementation of Article meters and associated services to the Iberia and Latin Amer- 4 of Law 92/2012; ica Division; > a reduction of €256 million in provisions for litigation as a > an increase of €389 million in rate revenues. More specifi- result of the redetermination of estimates of certain forms cally, the increase is attributable to the rise in distribution and of risk; transmission rates following application of Authority Resolu- > a €260 million decrease in connection fees; tion 122/2013, as well as the positive impact of equalization > an increase of €90 million in the margin on white certifi- mechanisms in the amount of €190 million; cates; > an increase of €59 million in grants from the Electricity Equali- > the impact of the Authority’s reimbursement of charges zation Fund for the sale of white certificates. for the elimination of the FPE. The gross operating margin amounted to €4,008 million, an Operating income, after depreciation, amortization and increase of €385 million (10.6%), essentially the effect of: impairment losses of €980 million (€994 million in 2012), > an increase of €294 million in the margin on the transport of amounted to €3,028 million, an increase of €399 million on electricity, largely due to the increase in rates implemented the previous year (15.2%). Capital expenditure Millions of euro Electricity distribution networks Other investments in property, plant and equipment and intangible assets Total 2013 997 49 1,046 2012 1,447 50 1,497 Change (450) (1) (451) -31.1% -2.0% -30.1% Capital expenditure in 2013 amounted to €1,046 million, policy for work on the low- and medium-voltage grids for a decrease of €451 million on the previous year. The decline improvements in service quality, in line with the standards is mainly due to a reduction in investment in connections set by the Authority in Resolution 198/2011. to customers and generation plants and a more selective 45 4 Iberia and Latin America Operations Net electricity generation Millions of kWh Thermal Nuclear Hydroelectric Wind Total net generation (1) - of which Iberian peninsula - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which other countries 2013 65,936 25,967 40,379 145 2012 73,538 26,967 39,850 153 132,427 140,508 69,690 15,743 4,992 19,874 12,747 8,529 852 77,386 15,139 5,183 19,559 13,251 9,060 930 Change (7,602) (1,000) 529 (8) (8,081) (7,696) 604 (191) 315 (504) (531) (78) -10.3% -3.7% 1.3% -5.2% -5.8% -9.9% 4.0% -3.7% 1.6% -3.8% -5.9% -8.4% (1) The figure for 2012 reflects a more accurate determination of amounts. Net electricity generation by the Division in 2013 amount- sion’s hydroelectric plants operated. In Latin America, net ed to 132,427 million kWh, a decrease of 8,081 million electricity generation posted a net decrease of 307 million kWh compared with 2012. kWh, mainly as a result of lower hydroelectric generation More specifically, in 2013, net electricity generation in associated with drought conditions over the entire area, the Iberian peninsula decreased by 7,696 million kWh only partially offset by the increase in thermal output in (-9.9%) as a result of the decline in conventional thermal Brazil and Chile, the latter following the entry into service generation (-23.8%), reflecting the fall in demand and the of the Bocamina II plant. improvement in the water conditions in which the Divi- Contribution to gross thermal generation Millions of kWh High-sulfur fuel oil (S>0.25%) Natural gas Coal Nuclear fuel Other fuels Total 2013 2012 Change 7,789 25,547 28,442 27,063 6,400 8.2% 26.8% 29.9% 28.4% 6.7% 8,541 28,471 35,167 28,166 5,667 8.1% 26.9% 33.2% 26.5% 5.3% (752) (2,924) (6,725) (1,103) 733 95,241 100.0% 106,012 100.0% (10,771) -8.8% -10.3% -19.1% -3.9% 12.9% -10.2% Gross thermal generation by the Division in 2013 amounted compared with the previous year (-10.2%). The decline was to 95,241 million kWh, a decrease of 10,771 million kWh attributable to lower coal and gas generation in Spain as a 46 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsresult of the developments in net generation noted above. In increased, and there was also an increase in coal generation Latin America, natural gas generation by the Fortaleza plant as a result of the entry into service of the Bocamina II plant. Net efficient generation capacity MW Thermal Nuclear Hydroelectric Wind Total net efficient capacity - of which Iberian peninsula - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which other countries at Dec. 31, 2013 at Dec. 31, 2012 Change 21,306 3,556 13,334 78 38,274 22,160 4,403 977 5,912 2,878 1,821 123 21,166 3,535 13,305 78 38,084 22,067 4,403 972 5,905 2,866 1,748 123 140 21 29 - 190 93 - 5 7 12 73 - 0.7% 0.6% 0.2% - 0.5% 0.4% - 0.5% 0.1% 0.4% 4.2% - Net efficient generation capacity at December 31, 2013 with the end of 2012. The Edegel thermal plant in Peru was amounted to 38,274 MW, an increase of 190 MW compared one of the major new plants to enter service. Electricity distribution and transport networks High-voltage lines at year-end (km) Medium-voltage lines at year-end (km) Low-voltage lines at year-end (km) Total electricity distribution network (km) Electricity transported on Enel’s distribution network (millions of kWh) - of which Iberian peninsula - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru 2013 31,463 274,161 334,984 640,608 159,968 98,456 14,953 18,799 13,030 8,274 6,456 2012 31,193 274,663 332,145 638,001 161,131 101,407 14,758 18,000 12,485 8,193 6,288 Change 270 (502) 2,839 2,607 (1,163) (2,951) 195 799 545 81 168 0.9% -0.2% 0.9% 0.4% -0.7% -2.9% 1.3% 4.4% 4.4% 1.0% 2.7% At December 31, 2013, the size of the electricity distribution kWh, a decrease of 1,163 million kWh, reflecting the de- network of the Iberia and Latin America Division had in- cline in demand in the Iberian Peninsula, which was only creased by 2,607 km, with the change mainly concentrated partially offset by the rise in demand in Latin America, no- in the South American countries. table in Brazil and Chile. Energy transported in 2013 amounted to 159,968 million 47 Electricity sales Millions of kWh Free market Regulated market Total - of which Iberian peninsula - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru 2013 101,816 55,819 157,635 96,123 14,953 18,799 13,030 8,274 6,456 2012 108,586 53,904 162,490 102,765 14,758 18,000 12,485 8,193 6,289 Change (6,770) 1,915 (4,855) (6,642) 195 799 545 81 167 -6.2% 3.6% -3.0% -6.5% 1.3% 4.4% 4.4% 1.0% 2.7% Electricity sales to end users in 2013 totaled 157,635 mil- was only partly offset by an increase in sales in Latin America lion kWh, a decrease of 4,855 million kWh compared with (+1,787 million kWh) caused by the increase in electricity de- 2012. The reduction in amounts sold in the Iberian peninsula mand in the area, especially in Brazil and Chile. (-6,642 million kWh) as a result of the continuing recession Performance Millions of euro Revenues Gross operating margin Operating income Employees at year-end (no.) Capital expenditure 2013 30,935 6,746 3,836 22,994 2,181 2012 restated Change 34,169 7,230 1,675 22,807 2,497 (1) (3,234) (484) 2,161 187 (316) -9.5% -6.7% 129.0% 0.8% -12.7% (1) Does not include €73 million regarding units classified as “held for sale” at December 31, 2012. The table below shows performance by geographical area. Millions of euro Revenues Gross operating margin Operating income Europe Latin America Total 2013 21,225 9,710 2012 restated 23,367 10,802 Change (2,142) (1,092) 30,935 34,169 (3,234) 2013 3,253 3,493 6,746 2012 restated 4,003 3,227 7,230 Change (750) 266 (484) 2013 1,415 2,421 3,836 2012 restated (398) 2,073 1,675 Change 1,813 348 2,161 Revenues in 2013 decreased by €3,234 million, due to: - a decline in revenues attributable to the change in the > a decrease of €2,142 million in revenues in Europe, essen- scope of consolidation with the sale of Endesa Ireland tially the result of: on October 1, 2012, and the shut-down in December - the decline in demand for electricity, which had an ad- 2012 of the Garoña nuclear power plant; verse impact of amounts generated and sold on the - a net decrease in rate revenues from electricity distri- end user market; bution as result of the provisions of Royal Decree Law - the decline in grants from extra-peninsular generation, 9/2013; which in addition to the contraction in generation vol- > a decrease of €1,092 million in revenues in Latin America, umes also reflected the impact of the entry into force, as essentially the result of: from the 2nd Half of 2012, of Royal Decree Law 20/2012; - a reduction in revenues in Brazil due to the entry into 48 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsforce of the provisional Medida 579/2012 and the sub- of Royal Decree Law 20/2012 as from the 2nd Half of sequent Decree 7891/2013, which suspended the rebill- 2012 and Law 15/2012 as from January 1, 2013) and in ing to end users of certain costs incurred by electricity the margin on electricity distribution; distributors (€164 million); - a reduction of €147 million in the margin on unregu- - a reduction of €514 million in revenues caused by the lated businesses, due to the increase in taxes intro- amendment of the Argentine regulatory framework duced in Spain on generation and sales activities concerning the fuel used in generation plants, which (€473 million), partially offset by a more favorable is procured by CAMMESA. The cost of fuel for these generation mix due to improved water conditions and plants was recognized as a direct reduction in revenues the positive impact of the reduction in fixed costs; from electricity sales; > an increase of €266 million in the gross operating mar- - adverse developments in the exchange rates of local gin in Latin America (which reflects the negative impact currencies against the euro. of the appreciation of the euro against local currencies, totaling €350 million), essentially attributable to: These factors were only partially offset by the recognition of - the effect of the government grant to the Argentine a government grant of €381 million to the Argentine com- distribution company Edesur; pany Edesur under Resolución 250/13 relating to the Mecan- - higher generation margins, notably in Chile, Argen- ismo de Monitoreo de Costos. tina and Colombia, mainly due to higher sales prices and lower provisioning costs. The gross operating margin amounted to €6,746 million, a decrease of €484 million (-6.7%) compared with 2012, the Operating income in 2013 amounted to €3,836 mil- result of: lion, an increase of €2,161 million compared with 2012. > a decrease of €750 million in the gross operating mar- The change reflects the impact of the impairment loss of gin in Europe, essentially attributable to: €2,392 million recognized in December 2012 on the good- - a decrease of €645 million in the margin on regulated will of the Endesa-Iberian peninsula cash generating unit businesses, reflecting the reduction in the margin on and the impairment of €67 million on the net assets held extra-peninsular generation in Spain (which in addi- for sale in respect of Endesa Ireland, which was recognized tion to the decline in volumes of power generated to align its value with the estimated sale price. was also adversely impacted by the entry into force Capital expenditure Millions of euro Generation plants: - thermal - hydroelectric - nuclear - alternative resources Total generation plants Electricity distribution networks Other investments in property, plant and equipment and intangible assets TOTAL 2013 2012 Change 332 366 128 2 828 929 424 2,181 372 406 148 5 931 1,199 367 2,497 (1) (40) (40) (20) (3) (103) (270) 57 (316) (1) Does not include €73 million regarding units classified as “held for sale” at December 31, 2012. -10.8% -9.9% -13.5% -60.0% -11.1% -22.5% 15.5% -12.7% 49 Capital expenditure amounted to €2,181 million, a decrease €427 million in Latin America, also including investments on of €316 million compared with the previous year. In particular, plants operated on a concession basis). Investment in genera- capital expenditure in 2013 concerned work on the distribution tion plants (€828 million) focused primarily on the construction network (€929 million, of which €502 million in Europe and of the El Quimbo hydroelectric plant in Colombia. 5 International Operations Net electricity generation Millions of kWh Thermal Nuclear Hydroelectric Other resources Total net generation - of which Russia - of which Slovakia 2013 43,802 14,624 4,759 59 63,244 41,901 21,343 2012 46,687 14,411 4,105 28 65,231 44,511 20,720 Change (2,885) 213 654 31 (1,987) (2,610) 623 -6.2% 1.5% 15.9% 110.7% -3.0% -5.9% 3.0% Net generation in 2013 amounted to 63,244 million kWh, a the use of conventional generation plants and a number of decrease of 1,987 million kWh compared with 2012. The de- planned stoppages at combined-cycle plants. cline is mainly attributable to the decline in output for Enel These effects were only partially offset by an increase in hy- OGK-5 (-2,610 million kWh), which was affected by a drop droelectric generation by Slovenské elektrárne thanks to the in demand for electricity in Russia, a selective reduction in more favorable water conditions during the year. Contribution to gross thermal generation Millions of kWh High-sulfur fuel oil (S>0.25%) Natural gas Coal Nuclear fuel Total 2013 2012 Change 120 23,159 23,027 15,720 0.2% 37.3% 37.1% 25.4% 257 24,646 24,411 15,495 0.4% 38.0% 37.7% 23.9% (137) (1,487) (1,384) 225 62,026 100.0% 64,809 100.0% (2,783) -53.3% -6.0% -5.7% 1.5% -4.3% Gross thermal generation in 2013 decreased by 2,783 million kWh, to 62,026 million kWh, compared with 64,809 million kWh in 2012. The decline is essentially due to lower natural-gas and coal-fired output in Russia for the reasons noted above. 50 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions Net efficient generation capacity MW Thermal plants (1) Nuclear plants Hydroelectric plants Alternative resources Total net efficient capacity (1) - of which Russia - of which Slovakia - of which Belgium (1) at Dec. 31, 2013 at Dec. 31, 2012 Change 10,742 1,814 2,329 27 14,912 9,107 5,399 406 10,706 1,816 2,329 7 14,858 9,052 5,400 406 36 (2) - 20 54 55 (1) - 0.3% -0.1% - - 0.4% 0.6% - - (1) Includes 406 MW in units classified as “held for sale” at December 31, 2013 and at December 31, 2012. Net efficient generation capacity increased by 54 MW in 2013, virtually unchanged from the previous year. Electricity distribution and transport networks High-voltage lines at year-end (km) Medium-voltage lines at year-end (km) Low-voltage lines at year-end (km) Total electricity distribution network (km) Electricity transported on Enel’s distribution network (millions of kWh) 2013 6,586 34,923 49,397 90,906 13,996 2012 6,586 34,956 48,852 90,394 14,606 Change - (33) 545 512 (610) - -0.1% 1.1% 0.6% -4.2% At December 31, 2013, the size of the electricity distribu- connections installed during the year. tion network (located entirely in Romania) showed an in- Electricity transported decreased by 4.2%, going from crease of 512 km, essentially regarding new low-voltage 14,606 million kWh to 13,996 million kWh in 2013. Electricity sales Millions of kWh Free market Regulated market Total - of which Romania - of which France - of which Russia - of which Slovakia Change 2013 35,770 9,932 45,702 8,754 8,068 24,755 4,125 2012 41,109 10,914 52,023 9,158 13,077 25,562 4,226 (5,339) (982) (6,321) (404) (5,009) (807) (101) -13.0% -9.0% -12.2% -4.4% -38.3% -3.2% -2.4% Electricity sold by the International Division in 2013 amount- sult of exiting the Flamanville 3 project at the end of ed to 45,702 million kWh, a decrease of 6,321 million kWh 2012, and to a decrease in the availability of supplies (-12.2%) compared with 2012. The decline is attributable to: from EDF; > a reduction of 807 million kWh in sales in the Russian > a decrease of 101 million kWh in sales in Slovakia and market, largely in the free market; one of 404 million kWh in Romania, the latter due to > a decrease of 5,009 million kWh in sales by Enel France, improved weather conditions, which helped reduce largely due to a reduction in volumes available as a re- electricity consumption. 51 Performance Millions of euro Revenues Gross operating margin Operating income Employees at year-end (no.) Capital expenditure 2013 7,737 1,405 85 11,830 (1) 924 2012 restated Change 8,703 1,650 978 12,652 1,161 (966) (245) (893) (822) (237) -11.1% -14.8% -91.3% -6.5% -20.4% (1) Includes 37 in units classified as “held for sale” at December 31, 2013 and at December 31, 2012. The table below shows performance by geographical area. Millions of euro Central Europe South-eastern Europe Russia Total Revenues 2012 restated 4,551 1,029 3,123 8,703 2013 3,488 1,116 3,133 7,737 Gross operating margin Operating income Change (1,063) 87 10 2013 605 289 511 2012 restated 900 231 519 Change 2013 (295) 58 (8) 360 154 (429) 85 2012 restated 530 203 245 978 Change (170) (49) (674) (893) (966) 1,405 1,650 (245) Revenues for 2013 amounted to €7,737 million, a decrease > a decrease of €8 million in the gross operating margin in of €966 million on the previous year (€8,703 million). This Russia, where the impact of the depreciation of the ruble performance reflected the following factors: against the euro was only partially offset by higher aver- > a decrease of €1,063 million in revenues in central Europe, age sales prices for electricity; largely attributable to the fall in revenues in Slovakia > an increase of €58 million in the gross operating margin (€722 million), as a result of a decline in volumes sold, and in south-eastern Europe, mainly due to higher sales and in France (€342 million), due to the decrease in available distribution rates and lower sourcing costs in Romania. capacity; > an increase of €10 million in revenues in Russia, essentially Operating income in 2013 amounted to €85 million, a de- as a result of higher average sales prices for electricity; crease of €893 million on the previous year, reflecting an > a rise of €87 million in revenues in south-eastern Europe. increase of €648 million in depreciation, amortization and impairment losses. The latter change mainly regards im- The gross operating margin amounted to €1,405 million, pairment losses of €744 million recognized in 2013 on the a decrease of €245 million compared with 2012 (€1,650 mil- goodwill of the Enel OGK-5 CGU to reflect the expected con- lion). The fall is associated with the following factors: traction in estimated future cash flows as a result of the con- > a decrease of €295 million in the gross operating mar- tinuing slowdown in economic growth and the consequent gin in central Europe, mainly attributable to generation decline in the forecast growth in prices in the medium term. in Slovakia (€128 million), essentially due to a decline in An analogous impairment loss of €112 million had been amounts of electricity generated; posted in 2012. 52 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions Capital expenditure Millions of euro Generation plants: - thermal - hydroelectric - nuclear - alternative resources Total generation plants Electricity distribution networks Other investments in property, plant and equipment and intangible assets TOTAL 2013 2012 Change 196 7 594 - 797 96 31 924 333 10 654 6 1,003 136 22 1,161 (137) (3) (60) (6) (206) (40) 9 (237) -41.1% -30.0% -9.2% -100.0% -20.5% -29.4% 40.9% -20.4% Capital expenditure amounted to €924 million, a de- tribution plant in Romania, on generation plants in Russia crease of €237 million on the previous year, essentially at- and nuclear plants in Slovakia. tributable to lower capital expenditure on electricity dis- 6 Renewable Energy Operations Net electricity generation Millions of kWh Hydroelectric Geothermal Wind Other resources Total - of which Italy - of which Iberian peninsula - of which France - of which Greece - of which Romania and Bulgaria - of which United States and Canada - of which Panama, Mexico, Guatemala and Costa Rica - of which Brazil and Chile 2013 10,921 5,581 12,169 782 29,453 13,248 4,924 362 566 1,166 5,360 2,703 1,124 2012 9,836 5,492 8,985 801 25,114 11,639 4,341 364 476 671 3,899 2,801 923 Change 1,085 89 3,184 (19) 4,339 1,609 583 (2) 90 495 1,461 (98) 201 11.0% 1.6% 35.4% -2.4% 17.3% 13.8% 13.4% -0.5% 18.9% 73.8% 37.5% -3.5% 21.8% Net electricity generation by the Division totaled 29,453 mil- (+17.3%). Of the total increase, 2,730 million kWh is attrib- lion kWh, a rise of 4,339 million kWh on the previous year utable to greater generation abroad, mainly due to greater 53 wind generation in the United States and Canada (+1,350 mil- hydroelectric generation in Panama (-448 million kWh), which lion kWh), the Iberian peninsula (+634 million kWh), Romania was affected by poor water conditions in that country. Power (+484 million kWh) and Mexico (+321 million kWh). The in- generation in Italy in 2013 increased by 1,609 million kWh crease is essentially due to the entry into service of new plants compared with 2012, reflecting an increase in hydroelectric and, for the Iberian peninsula, more favorable weather condi- generation (+1,299 million kWh due to more favorable water tions. These factors were only partially offset by a decline in conditions) and wind power (+205 million kWh). Net efficient generation capacity MW Hydroelectric plants Geothermal plants Wind plants Other resources Total - of which Italy - of which Iberian peninsula - of which France - of which Greece - of which Romania and Bulgaria - of which United States and Canada - of which Panama, Mexico, Guatemala and Costa Rica - of which Brazil and Chile at Dec. 31, 2013 at Dec. 31, 2012 Change 2,623 795 5,122 343 8,883 3,076 1,908 186 290 576 1,683 715 449 2,634 769 4,316 282 8,001 3,044 1,864 166 248 540 1,239 715 185 (11) 26 806 61 882 32 44 20 42 36 444 - 264 -0.4% 3.4% 18.7% 21.6% 11.0% 1.1% 2.4% 12.0% 16.9% 6.7% 35.8% - 142.7% Total net efficient capacity showed an increase of 882 accounted for by a number of plants in North America (25 MW, of which 850 MW outside of Italy. More specifically, MW). Finally, the expansion of net installed capacity in the increase in installed wind capacity mainly regards new plants powered by other resources reflects the entry into plants in North America (434 MW), Chile (180 MW) and service of a number of solar plants, mainly in Italy, Greece Spain (84 MW); the rise in geothermal capacity is mainly and Romania. Performance Millions of euro Revenues Gross operating margin Operating income Employees at year-end (no.) Capital expenditure 2013 2,827 1,788 1,171 3,599 1,307 (1) 2012 restated 2,696 1,641 1,081 3,512 1,257 Change 131 147 90 87 50 4.9% 9.0% 8.3% 2.5% 4.0% (1) The figure for 2013 does not include €1 million in investments regarding units classified as “held for sale”. 54 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions The table below shows performance by geographical area. Millions of euro Italy and the rest of Europe Iberia and Latin America North America Total Revenues 2012 restated 1,601 792 303 2013 1,599 864 364 Change (2) 72 61 2013 1,045 497 246 2012 restated 947 497 197 Change 2013 2012 restated Change 98 - 49 769 263 139 693 272 116 76 (9) 23 90 2,827 2,696 131 1,788 1,641 147 1,171 1,081 Gross operating margin Operating income Revenues increased by €131 million (4.9%), going from €2,696 an increase of €147 million (9.0%) compared with 2012. The million to €2,827 million. The change is due to: change reflects: > an increase of €72 million in revenues in the Iberian penin- > an increase of €98 million in the margin posted in Italy sula and Latin America, due to the increase in output, main- and the rest of Europe, mainly as a result of the increase ly in Chile, Mexico and Guatemala; in volumes generated thanks to improved water and wind > an increase of €61 million in revenues in North America; availability and the concomitant increase in the number of excluding the gain on the disposal of 51% of the Buffalo plants in service. These factors were joined by the effect of Dunes Wind Project (€20 million) and the remeasurement the recognition in 2012 of a charge of €40 million (mainly at fair value of the remaining assets and liabilities of that in retrospective application of IAS 19 Revised) in respect of company pertaining to the Group following the sale (€20 the transition-to-retirement plan established for certain em- million), the increase in revenues amounted to €21 million, ployees at the end of 2012 and the net positive impact of mainly due to the rise in output; the termination of that plan in the 3rd Quarter of 2013 and > a decrease of €2 million in revenues in Italy and the rest of the recognition of a charge for the obligations assumed in Europe, essentially attributable to: implementation of Article 4 of Law 92/2012; - a decline of €142 million in revenues from the sale of pho- > a rise of €49 million for the North America area; excluding tovoltaic panels, of which €83 million as a result of the exit the non-recurring items discussed under revenues, the mar- from the scope of consolidation of Enel.si, which was sold gin increased by €9 million, mainly due to the rise in output. to the Sales Italy business area; - an increase of €78 million in revenues in Italy from the Operating income amounted to €1,171 million, an increase sale of green certificates; of €90 million, after a rise in depreciation, amortization and - an increase of €103 million in revenues in the rest of Eu- impairment losses of €57 million owing to greater impairment rope, essentially due to the sale of green certificates and losses recognized on the photovoltaic manufacturing plants in the expansion of installed wind capacity in Romania. Italy, on a number of geothermal generation plants in Nicara- gua and a number of specific projects in North America and The gross operating margin amounted to €1,788 million, the Iberian peninsula. Capital expenditure Millions of euro Generation plants: - hydroelectric - geothermal - alternative resources Total generation plants Other investments in property, plant and equipment and intangible assets TOTAL 2013 108 226 935 1,269 38 1,307 (1) 2012 127 214 878 1,219 38 1,257 Change (19) 12 57 50 - 50 (1) The figure for 2013 does not include €1 million in investments regarding units classified as “held for sale”. -15.0% 5.6% 6.5% 4.1% - 4.0% 55 Capital expenditure in 2013 totaled €1,307 million, up €50 (€54 million) and Italy (€44 million); hydroelectric plants in million compared with the previous year. Italy, Brazil, Costa Rica, Guatemala and North America (€108 Investments mainly regarded wind farms in Iberia and Latin million); and geothermal plants in Italy and North America America (€590 million), North America (€132 million) and It- (€226 million). aly and Europe (€82 million); photovoltaic plants in Romania 7 Other, eliminations and adjustments Operations Hydrocarbon reserves and annual output Hydrocarbon reserves: Proven reserves (1P) of hydrocarbons at the end of the year (millions of barrels of oil equivalent) - of which proven reserves (1P) of natural gas at the end of the year (billions of m3) Proven and probable reserves (2P) of hydrocarbons at the end of the year (millions of barrels of oil equivalent) - of which proven and probable reserves (2P) of natural gas at the end of the year (billions of m3) Annual output: Hydrocarbon output (millions of barrels of oil equivalent) - of which natural gas (billions of m3) 2013 2012 Change 18 2 46 6 29 3.9 917 117 (899) (115) 1,490 (1,444) 187 12 1.7 (181) 17 2.2 In 2012, the Upstream Gas Function initiated the process of nership with Repsol (as the operator) and GDF Suez; certifying the reserves of the assets it had under develop- > in Egypt, where the Group has a 10% share, in partner- ment, for which the Function used an independent certifier, ship with Total (as the operator) and BG, in exploration DeGolyer & McNaughton. On the basis of the assessment activities in an offshore field off the Nile Delta; performed in 2012 and taking account of the disposal of the > in Italy, through Enel Longanesi Development, where the stake held in SeverEnergia in 2013, Enel’s share is equal to Group has 12 exploration applications, 5 permits and 1 18 million barrels of oil equivalent of proven reserves and concession application. In 2013, continuing its studies, 46 million barrels of oil equivalent of proven and probable the Group entered a joint venture with Mac Oil, acquir- reserves. Projects under development at the end of 2013 are ing 70% of the exploration permit for Montottone, in the located: Marche region, and submitted two new applications for > in Algeria, where the Group is participating in hydrocarbon offshore exploration permits in the Gulf of Taranto and exploration and production licenses with a stake of 18.4% the Adriatic Sea. The authorization procedure for the ap- of the “Isarene” permit in partnership with Petroceltic In- plication for the hydrocarbon extraction concession at ternational and Sonatrach (a Algerian state-owned com- Bagnacavallo is pending, with production expected to pany) and 13.5% of the “South-East Illizi” permit in part- begin at the end of 2016. 56 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsPerformance Millions of euro Revenues (net of eliminations) Gross operating margin Operating income Employees at year-end (no.) Capital expenditure 2013 2,885 1,022 908 5,896 84 2012 restated 2,017 (35) (165) 6,382 163 (1) Change 868 1,057 1,073 (486) (79) 43.0% - - -7.6% -48.5% (1) The figure does not include €1 million regarding units classified as “held for sale” at December 31, 2012. Revenues, net of eliminations, in 2013 amounted to the gain on the sale of Artic Russia, the factors impacting €2,855 million, an increase of €868 million on the previ- operating expenses in the two years being reviewed and a ous year (+43.0%). Excluding the gain recognized by the reduction of €16 million in depreciation, amortization and Upstream Gas Function on the disposal of Artic Russia, and impairment losses. indirectly the interest held by the latter in SeverEnergia, equal to €964 million, revenues declined by €96 million. The performance is essentially attributable to: Capital expenditure > a decrease of €107 million in revenues in the Services Capital expenditure in 2013 amounted to €84 million, a and other activities area, mainly associated with ICT ser- decrease of €79 million compared with the previous year. vices and other support and staff services provided by Investments in 2012 mainly regarded the acquisition of min- the Parent Company to other Group companies; eral interests by the Upstream Gas Function. > an increase of €34 million in revenues from engineering activities, largely attributable to engineering activities for the construction of the conventional island of the Mochovce nuclear power plant in Slovakia and activities for the Porto Empedocle regasification terminal for liq- uefied natural gas. The gross operating margin for 2013 amounted €1,022 million, an increase of €1,057 million compared with 2012, essentially due to the capital gain discussed above. Ex- cluding that gain, the gross operating margin rose by €93 million. More specifically, the contraction in the margin on certain services provided to other Group divisions was more than offset by the effect of the recognition in 2012 of a charge of €136 million (mainly in retrospective appli- cation of IAS 19 Revised) in respect of the transition-to-re- tirement plan established for certain employees at the end of 2012 and the net positive impact of the termination of that plan in the 3rd Quarter of 2013 and the recognition of a charge for the obligations assumed in implementation of Article 4 of Law 92/2012. Operating income for 2013 totaled €908 million, a rise of €1,073 million compared with 2012, taking due account of 57 Significant events in 2013 8 January LaGeo: Paris Court of Appeal upholds ruling of International Court of Arbitration 11 February Forward starting revolving credit facility On January 8, 2013, the Court of Appeal of Paris upheld On February 11, 2013, Enel SpA signed a 5-year revolving the ruling of the International Court of Arbitration (Inter- credit facility amounting to about €9.4 billion, which will national Chamber of Commerce) concerning the interna- replace the €10 billion revolving credit facility (currently not tional arbitration proceeding brought by Enel Green Power drawn) scheduled to expire in April 2015. against Inversiones Energéticas (INE), its partner in LaGeo, The new forward starting revolving credit facility, which may a joint venture for the development of geothermal energy be used by Enel and/or its Dutch subsidiary Enel Finance In- in El Salvador. The judges rejected the appeal lodged by INE ternational (with a Parent Company guarantee), is intended asking for the ruling in favor of Enel Green Power to be void- to give the Group’s treasury operations a highly flexible in- ed, confirming that the ruling had been issued at the end strument to manage working capital. Accordingly, the credit of a fair trial. The decision of the Court of Appeal reaffirms facility is not part of Enel’s debt refinancing program. A large Enel Green Power’s right to allocate investments in LaGeo group of national and international banks participated in to share capital through the subscription of newly issued the transaction, including Mediobanca in the role of Docu- shares in the joint venture. mentation Agent. The cost of the new credit facility will vary in relation to Enel’s credit rating. At the current rating level, 58 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsit is equal to a spread of 170 basis points over Euribor, with for those Eni stations that have installed renewable energy commitment fees of 40% of the applicable spread. generation systems (e.g. photovoltaic panels). 26 March Acquisition of PowerCrop 29 March Enersis capital increase On March 26, 2013, Enel Green Power and SECI Energia On March 29, 2013, the capital increase of Enel’s Chilean signed the final agreement for the purchase of 50% of Pow- subsidiary, Enersis, was successfully completed with the erCrop, the Maccaferri Group company dedicated to con- subscription of all of the 16,441,606,297 new shares is- verting former Eridania sugar refineries to the production sued, corresponding to a total of about $6 billion, of which of energy from biomass. around $2.4 billion in cash. As a result of the full subscrip- With the acquisition, Enel Green Power has entered into a tion of the Enersis capital increase and the completion of broad partnership with SECI Energia to develop the genera- the transaction, the subsidiary Endesa will continue to hold tion of energy from locally-sourced biomass with the con- (directly and through the wholly-owned subsidiary Endesa struction of five high-efficiency plants (Russi, Macchiareddu, Latinoamérica) around 60.6% of the share capital of Enersis. Castiglion Fiorentino, Fermo and Avezzano) with a total in- Following the operation, Enersis represents the Enel Group’s stalled capacity of 150 MW. Once built, these plants will be sole investment vehicle in Latin America for the generation, capable of generating up to 1 billion kWh. These will provide distribution and sale of electricity (with the exception of the employment for the former sugar refinery workers, restoring assets currently held by Enel Green Power or any future as- growth opportunities to some of the most important agri- sets the latter may develop in the renewable energy sector cultural districts in Italy, which will have a significant eco- in that geographical area). Thanks to the successful capital nomic impact on these areas. increase, Enersis now has the resources necessary to pursue a major development plan, strengthening its presence in the markets in which it already operates. 27 March Agreement with Eni on e-mobility On March 27, 2013, Eni and Enel signed a letter of intent to collaborate on strategic, technological, logistical and com- 8 April Disposal of Buffalo Dunes Wind Project mercial opportunities for e-mobility. On April 8, 2013, Enel Green Power North America (EGP-NA) Through this agreement, Eni and Enel will develop a pro- signed an equity partnership agreement with EFS Buffalo gram for testing electric vehicle charging options, specifi- Dunes, a subsidiary of GE Capital, to finance the develop- cally the installation of charging stations using Enel technol- ment of the Buffalo Dunes wind farm, in Kansas (United ogy at Eni service stations and locations. States). The working group will have six months to find the best so- The project, which will involve a total investment of about lutions for charging electric vehicles at service stations, with $370 million, of which EGP-NA will contribute about $180 testing to begin in selected areas by the end of 2013. million, is scheduled to be completed by the end of 2013. The experiment will involve installing “fast charge” stations The plant will have a total installed capacity of 250 MW and at certain Eni service stations. Fast charge stations are capa- the project is supported by a long-term power purchase ble of recharging a vehicle using direct current and alternat- agreement. ing current in 20-30 minutes. The agreement also provides Under the provisions of the accord, EFS Buffalo Dunes sub- for the study of possible applications of Enel technology sequently acquired 51% of the project from EGP-NA, which used in smart grids to maximize the use of renewable energy retains the remaining 49% stake. EGP-NA, which will also 59 be the project manager for Buffalo Dunes, has an option to The protocol devotes particular attention to the use of increase its holding by 26%, which can be exercised on spe- geothermal heat, to support the creation of value in the cific dates by 2014. heating sector, with opportunities for the establishment The exercise of that option would not necessarily involve of new business zones in geothermal areas. The agree- the acquisition of control, which is also linked to possible ment also provides for the creation of a geothermal en- changes in the absolute value of share capital and dilutive ergy hub that, drawing on the experience of local authori- effects. 18 April Agreement with UNCEM for the development of energy efficiency ties in geothermal areas and existing resources such as the Geothermal Area Development Consortium (COSVIG), the Enel Research Center, universities, the Tuscan Regional Economic Planning Institute (IRPET) and the regional re- newable energy technology district, can transfer know how and pursue research projects and advanced special- ized initiatives aimed at creating competence centers in both the geothermal areas and the Enel experimental area On April 18, 2013, Enel Sole and the National Union of in Livorno. Mountain Communities (UNCEM) signed a protocol of un- derstanding in Rome for the development of energy ef- ficiency practices. The agreement provides for direct co- operation between Enel Sole and UNCEM to identify and implement activities connected with energy savings and efficiency in the participating mountain communities, in- cluding projects for the refurbishment and enhancement 9 May Framework agreement regulating the provisions of Article 4, paragraphs 1-7-ter, of Law 92/2012 in the Enel Group of public lighting with a view to reducing energy consump- On May 9, 2013, Enel SpA and the representatives of the tion and CO2 emissions, such as the installation of smart lighting systems using innovative technologies and energy FILCTEM, FLAEI and UILTEC trade unions signed an agree- ment governing the implementation of the provisions of audits. The cooperation initiative will also involve artistic Article 4, paragraphs 1-7-ter, of Law 92/2012 (the “Fornero lighting and design projects to enhance the historical and Act”) within the Enel Group. The agreement, taking account artistic heritage of mountain communities using sustain- of the role that the Company plays in the Italian economy able systems. 2 May Protocol of understanding with the Region of Tuscany for the development of geothermal energy and the cost reduction targets set out in the business plan, provides for the activation of the measures envisaged in Ar- ticle 4 in order to reduce personnel to an appropriate level without undue disruption. In application of the agreement, the Group has begun to seek expressions of interest among its personnel whose seniority and contribution history potentially qualify them for the mechanism envisaged under Article 4, with the On May 2, 2013, the Region of Tuscany and Enel signed a survey completed by August 31, 2013. At the completion new protocol of understanding to further develop geother- of that phase, each Group company conducted an assess- mal energy in Tuscany, with a view to addressing issues con- ment of the appropriateness of the expressions of interest cerning the green economy and reducing energy costs. The in terms of their number and geographical and organiza- agreement, which follows up on the framework agreement tional distribution. on geothermal energy of December 20, 2007, and the imple- Following these assessments, on September 6, 2013, the menting agreement of April 20, 2009, is a major step forward main Italian companies of the Group signed an agreement in fostering the social and economic growth of the areas with with the unions FILCTEM, FLAEI and UILTEC implementing geothermal resources, including both the traditional area of the framework agreement of May 9, 2013, in which Enel Larderello and the Amiata area, where the new Bagnore 4 and the unions set out the procedures for implementing the plant will complete the plans for the addition of 112 MW of measures provided for in Article 4, paragraphs 1-7-ter, of the new capacity provided for in the 2007 agreement. Fornero Act. The company-level implementing agreements 60 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsspecify, for each company, the number of employees po- The option to acquire the additional interests was envis- tentially eligible for early retirement, which for the Group aged in the original agreements between EGP-NA and the as a whole came to 5,328. Meanwhile the Group is complet- GE Capital subsidiaries. After closing, which came follow- ing the formal checks, with the competent social security ing approval by the Federal Energy Regulatory Commission, entities, to ascertain eligibility for the benefit scheme. At EGP-NA owns 75% of the Class A interest in both of the December 31, 2013, the plan saw the exit from employment companies that operate the wind farms, while GE Capital of 1,911 employees. retains a 25% stake. 9 May Launch of Enel Lab project 3 June Accord for the implementation of smart grids in Saudi Arabia On May 9, 2013, six young Italian companies and one On June 3, 2013, Advanced Electronics Company (AEC), ICT Spanish company were selected to join the first clean Europe and Enel signed a memorandum of understanding technology business incubator established by Enel. The for smart grid implementation in the Kingdom of Saudi seven companies selected proposed projects involving Arabia and the Gulf Cooperation Countries, namely Saudi renewable energy, smart grids, energy storage, automa- Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain tion, digitalization and communication system and en- and Oman. With decades of experience in Advanced Meter ergy efficiency. The winning start-ups were chosen from Infrastructures (AMI) and excellent working relationships a list of 13 Italian and Spanish finalists after a selection with local utility companies, AEC has joined forces with ICT process that started in July 2012, with the participation Europe and Enel (which has field-proven technology and of 215 companies. international expertise in smart metering and smart grids) The winning companies, in addition to receiving financial to support this evolving technology with local capabilities. assistance of up to €650,000 to help develop their pro- The memorandum has been signed with a prime focus on jects, will be able to grow within the Enel Group, which delivering world class performance in smart grids and pow- will support them with the engineering, technological, er distribution capabilities. legal and market skills that only a leading industry multi- national can offer. After an initial stage of development, the most promising companies can bring their projects to full maturity and possibly become part of the Enel world. 22 May Acquisition of a controlling interest in Chisholm View and Prairie Rose 19 June Agreement for the development of marine power generation On June 19, 2013, Enel Green Power and 40South Energy, a group of highly innovative companies operating in the field of marine energy at the international level, began the installation and commissioning of an initial R115 gen- On May 22, 2013, Enel Green Power North America (EGP- erator, with a nominal capacity of 150 kW and installed NA) signed an agreement to purchase an additional 26% capacity of about 100 kW, generating electricity from the of the Class A shares of the Chisholm View Wind Project, a energy produced by the waves of the sea around Punta company that operates the 235 MW Chisholm View wind Righini (Livorno). The new generator – designed and built farm, from the GE Capital Group for about $47 million. EGP- by 40South Energy – ensures full integration into the ma- NA also signed an agreement to purchase an additional rine environment and ease of maintenance, and accord- 26% of the Class A shares of the Prairie Rose Wind Project, a ing to initial estimates will enable the generation of about company that operates the 200 MW Prairie Rose wind farm, 220 MWh per year. from the same group for $34 million. After testing and assessment by the partners of the perfor- 61 mance of the system in the marine environment, Enel Green The Ministry of Defense and Cassa Depositi e Prestiti will be Power plans to strengthen collaboration with 40South En- responsible for the financial aspects of the accord, for the ergy on the international stage. In fact, in addition to the subsequent definition of the mechanisms for financing the sale of the first R115 generator to the Enel renewables com- projects developed, including through the involvement of pany and technological cooperation on testing, the agree- the subsidiaries of Cassa Depositi e Prestiti. ment envisages the possibility of installing more genera- tors in different marine environments. 21 June Letter of intent for disposal of Marcinelle Energie 1 July Sale of Enel.si by Enel Green Power to Enel Energia Following an agreement signed on June 17, 2013, be- tween Enel Green Power and Enel Energia, on July 1, 2013 On June 21, 2013, Enel and Gazprom signed a non-bind- the sale to the latter of the entire share capital of Enel.si ing letter of intent for the sale to the Russian company took effect. Enel.si operates in Italy, offering products and of 100% of Marcinelle Energie, which owns a 420 MW integrated solutions in the retail market for the installation combined-cycle gas turbine power plant in Belgium, for of distributed renewable generation systems and for en- €227 million, with the price to be adjusted for net finan- ergy savings and efficiency for end users, working through cial debt at closing. The letter of intent paves the way for a network of franchises, composed of more than 700 spe- a binding final agreement, whose final terms and condi- cialized installers. tions were to be agreed by the end of September 2013. The price paid by Enel Energia for the entire share capital of The agreement was subsequently extended for a further Enel.si amounted to about €81 million and was set, subject six months in order to settle a number of details in the to a price adjustment mechanism, on the basis of the enter- negotiations. As with similar transactions, the execution prise value as of December 31, 2012 and the net financial of the transaction is subject to the approval of the compe- position of the company at the same date. tent corporate bodies of the parties involved, as well as to The sale of the business forms part of the medium/long- the authorization of the competition and other authori- term strategy of the Renewable Energy Division, which is in- ties provided for by law. creasingly focused on expanding its business of developing, 27 June Joint agreement for the security of the electrical infrastructure of the Ministry of Defense On June 27, 2013, Enel, the Ministry of Defense and Cassa Depositi e Prestiti reached an agreement for the establish- ment of a working group tasked with conducting an analysis over the next 12 months of the security of the electrical infra- structure of a number of sites selected by the Ministry. The aim of the agreement is to begin a collaborative effort at the strategic and operational level among the parties to building and operating renewable generation plants. For the Sales Italy sector, which has a leading position in the sale of electricity and gas to households and businesses in the free and regulated markets in Italy, the acquisition is part of its strategy of broadening its commercial product range to the energy efficiency sector, covering the entire spectrum of retail and business customers’ energy use needs. 9 July Capital contribution agreement between Enel Green Power and EFS Buffalo Dunes with a syndicate headed by JP Morgan conduct research and analysis to minimize risks, reduce vul- On July 9, 2013, Enel Green Power North America Devel- nerabilities and enhance the reliability of the electrical in- opment (EGPD), a US subsidiary of Enel Green Power, and frastructure present at the selected sites. Subsequently, the EFS Buffalo Dunes, a GE Capital subsidiary, signed a capital parties will assess the possibility of extending the initiative contribution agreement with a syndicate led by JP Morgan. to other sites of strategic interest. Under the agreement, the syndicate will provide about 62 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions$260 million in financing for the Buffalo Dunes wind pro- early redemption clauses directly linked to the level of ject in Kansas, which will have an installed capacity of 250 the rating. MW. The syndicate also includes Wells Fargo Wind Hold- ings, Metropolitan Life Insurance Company and State Street Bank and Trust Company. When the syndicate disbursed the financing – subject to compliance with the specific requirements in the capital con- tribution agreement – the parties entered into a tax equity agreement for the Buffalo Dunes wind plant. The project is 9 August Conversion of Finale Emilia sugar beet refinery supported by a long-term power purchase agreement. On August 9, 2013, Enel Green Power and COPROB, the EFS Buffalo Dunes holds 51% of the wind project and EGPD leading sugar beet producer in the country, assisted by the holds the remaining 49%, as well as an option to acquire an financial advisor Valore e Capitale Srl, an investment bank- additional 26% on specified dates by the end of 2014. ing firm specializing in the renewable energy sector, signed 11 July Standard & Poor’s revises long-term rating to “BBB” and confirms short-term rating at “A-2” an agreement for the construction at Finale Emilia (Mod- ena) of a 12.5 MW power plant that will be fuelled by agri- cultural biomass. The project will be implemented through Enel Green Power’s acquisition of 70% of Domus Energia (now Enel Green Power Finale Emilia), formerly a COPROB Group company. The accord represents a further step in Enel Green Power’s On July 11, 2013, Standard & Poor’s announced that it had strategy for expansion in Italy’s biomass sector, as well as revised its long-term rating for Enel to “BBB” (from “BBB+”). enabling the COPROB Group to complete the complex The agency also maintained its short-term rating of “A-2” process of reorganizing and converting sugar refineries for the Company. The outlook is stable. closed in 2006, following the EU’s reform of the sugar The downgrade follows the similar action recently taken by market. Enel Green Power’s expertise in the renewable Standard & Poor’s for Italy’s sovereign debt rating, which energy sector, coupled with COPROB’s proven ability to reflected, among the other factors, the deterioration in supply the agricultural raw material, provide further as- macroeconomic conditions in the country. surances of the plant’s efficiency and productivity, all to The stable outlook reflects the agency’s expectations that the benefit of the development of the Modena area and Enel will achieve and maintain performance and financial in full compliance with the national targets for renewable targets commensurate with its current rating, as a result of resources. its continued deleveraging efforts, the large contribution of regulated activities and its good geographical and tech- nological diversification outside Europe. The downgrade did not have a significant impact on either the cost of outstanding debt or of new borrowing, partly due to the low volatility of spreads in the secondary market for bonds issued by Enel, whose prices already reflect the 29 August Enel Green Power awarded contracts for the supply of renewable energy in Brazil rating issued by Moody’s (“Baa2”), which is now in line with On August 29, 2013, following the 2013 Brazilian Reserve that of Standard & Poor’s (“BBB”). Auction, Enel Green Power was awarded the right to enter With regard to loans granted by the EIB, only some of them into three 20-year electricity supply contracts with the Bra- (in the total amount of about €2 billion) contain covenants zilian Camara de Comercialização da Energia Elétrica (CCEE) requiring the beneficiary companies of the Group to rene- to deliver power produced by three wind projects with a to- gotiate the agreements or, alternatively, provide specific tal capacity of 88 MW. The plants are located in the state of bank guarantees. The parties opted for the former solution, Bahia, where the company already has more than 146 MW which did not have a major impact on the cost of borrowing of capacity under construction. These new contracts repre- or result in the early repayment of the debt. sent an extension of the projects the company was already With regard to other major loan agreements, none have awarded in 2010 and 2012 public auctions in the same re- 63 gion. Once completed, the three new wind projects, requir- a price of 98.698 with an annual fixed coupon of 7.75% ing a total investment of about $163 million, will be able to (hedged with a euro swap at a rate of around 7%) until generate more than 400 GWh per year. the first early redemption date scheduled for September On September 4, 2013, Enel Green Power was awarded en- 10, 2020. As from that date and until maturity, the rate ergy supply contracts with three hydro projects with a total will be equal to the 5-year GBP swap rate plus a spread capacity of 102 MW in Brazil’s first “New Energy Auction” in of 566.2 basis points and interest rate step-up of 25 ba- 2013 for “A-5” power. The three plants, denominated Salto sis points from September 10, 2025 and an additional 75 Apiacás, Cabeza de Boi and Fazenda, are located close to- basis points from September 10, 2040. gether in the state of Mato Grosso in mid-western Brazil. The offering is being led by a syndicate of banks compris- Once operational, the hydro projects, whose completion will ing, for the euro tranche, Banca Imi, Banco Bilbao Vizcaya require a total investment of about $248 million, will be able Argentaria SA, BNP Paribas, Crédit Agricole-CIB Deutsche to generate around 490 GWh per year. Enel Green Power Bank, ING, JP Morgan, Mediobanca, Natixis, Société Géné- was awarded 30-year energy supply contracts providing for rale Corporate & Investment Banking, UniCredit Bank; and, the sale of a specified amount of power generated by the for the sterling tranche, Barclays, BNP Paribas, Deutsche three hydro plants to a pool of distribution companies op- Bank, HSBC, JP Morgan, The Royal Bank of Scotland, San- erating in the Brazilian regulated market. Enel Green Power tander Global Banking & Markets, and UBS Investment will adopt a highly innovative and sustainable approach to Bank. the construction of the new plants, supplying the worksites with renewable energy from the very start of the works. The On September 17, 2013, the Company launched a multi- company will build a thin-film photovoltaic system of about tranche international issue in the United States of non-con- 1.2 MW, which will supply part of the power required for the vertible bonds for institutional investors in the form of subor- construction works. Once the three plants are completed, dinated hybrid instruments with an average maturity of about the photovoltaic plant continue to operate, adding its own 60 years, denominated in US dollars (USD) in the amount of renewable power to the green energy produced by the new $1,250 million, equal to about €936 million on the issue date. hydro plants. 3 September Issues of hybrid financial instruments The transaction involves the issue of a $1,250 million bond maturing on September 24, 2073, at a price of 99.183 with a semi-annual fixed coupon of 8.75% (hedged with a euro swap at a rate of around 7.50%) until the first early redemption date scheduled for September 24, 2023. As from that date and un- til maturity, the rate will be equal to the 5-year USD swap rate plus a spread of 588.0 basis points and interest rate step-up of 25 basis points from September 24, 2028 and an additional 75 On September 3, 2013, Enel SpA launched a multi-tranche basis points from September 24, 2043. international issue of non-convertible bonds for institution- The offering is being led by a syndicate of banks comprising al investors in the form of subordinated hybrid instruments Barclays Capital Inc., Citigroup Global Markets Inc., Credit with an average maturity of about 60 years, denominated Suisse Securities (USA) LLC, Goldman, Sachs & Co, JP Mor- in euros and pounds sterling (GPB) in the total amount of gan Securities LLC, Merrill Lynch Pierce Fenner & Smith Inc., about €1.7 billion. Mitsubishi UFJ Securities (USA) Inc., Mizuho Securities USA The issue is structured in the following two tranches: Inc., and Morgan Stanley & Co. LLC. > €1,250 million maturing on January 10, 2074, issued at a price of 98.956 with an annual fixed coupon of 6.50% Both issues were carried out in execution of the resolution until the first early redemption date scheduled for Janu- of the Board of Directors of Enel of May 7, 2013. They form ary 10, 2019. As from that date and until maturity, the part of the measures to strengthen the financial structure rate will be equal to the 5-year euro swap rate plus a of the Enel Group set out in the business plan presented to spread of 524.2 basis points and interest rate step-up of the financial community on March 13, 2013. 25 basis points from January 10, 2024 and a further 75 The bonds, which have been listed on the Irish Stock Ex- basis points from January 10, 2039; change, have been assigned provisional ratings of “BB+” by > £400 million maturing on September 10, 2075, issued at Standard & Poor’s, “Ba1” by Moody’s and “BBB-” by Fitch. 64 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions 19 September Agreement for the supply of gas from Azerbaijan Under the new agreement, Enel’s contribution will mainly apply to the areas of flue gas purification, carbon capture and storage, pilot project analysis of distributed power generation in urban areas with innovative environmentally sustainable technologies, renewable energy generation On September 19, 2013, Enel Trade signed a 25-year and the implementation of a regulatory framework to fos- agreement with the Shah Deniz Consortium to purchase ter pilot cap and trade programs in China. part of the gas that will be produced by Stage 2 of the Shah Deniz field in Azerbaijan. The gas will be transport- ed to Italy through the Trans-Adriatic Pipeline (TAP). Gas supplies from Azerbaijan will be used by Enel to supply its Italian market. The agreement will enter force following the final investment decision on the Shah Deniz - Stage 2 project, which is scheduled to take place by the end of 31 October Award of right to contract renewable energy in South Africa 2013. The delivery of gas is due to start no earlier than On October 31, 2013, Enel Green Power (EGP) was award- 2019. Stage 2 development of the Shah Deniz field, which ed the right to enter into energy supply contracts with the lies some 70 km offshore in the Azerbaijan sector of the South African utility Eskom in the amount of 314 MW of Caspian Sea, will enable the production of 16 billion cubic solar projects and 199 MW of wind projects (for a total of meters of gas, adding to the 9 billion cubic meters already 513 MW) in the third round of the renewable energy tender produced by the field’s Stage 1. Thanks to Stage 2 of Shah sponsored by the South African government. Deniz, Azeri gas will be delivered to Europe for the first In accordance with the rules of the tender, EGP participat- time ever. The new gas will be transported through more ed with vehicle companies, retaining a controlling 60% than 3,500 km of pipelines running across Azerbaijan, stake, in partnership with major local players. The four Georgia, Turkey, Greece, Bulgaria, Albania and under the photovoltaic projects (Aurora, Tom Burke, Paleisheweul Adriatic Sea to Italy. 14 October Memorandum of understanding with Huaneng for cooperation in power generation and Pulida) will be in the Northern Cape, Western Cape, Free State and Limpopo regions, in areas boasting the highest concentration of solar radiation in the country. The two wind projects (Gibson Bay and Cookhouse) will be located in the Eastern Cape region in areas with abun- dant wind resources. Once completed, in 2016 the six projects, which will require a total investment of about €630 million, will generate On October 14, 2013, Enel signed a memorandum of more than 1,300 GWh per year, making an environmentally understanding with the China Huaneng Group (CHNG), sustainable contribution to meeting the country’s rising en- which operates in the energy sector, aimed at strength- ergy demand. ening cooperation on clean coal technologies, flue gas purification, enhancing the efficiency and performance of coal plants, renewable energy and distributed generation. The memorandum is a product of the cooperation pro- gram between Enel, the Chinese Ministry of Science and Technology and the Italian Ministry for the Environment launched in 2008 to boost the use of environmentally 13 November Agreement for the sale of SeverEnergia to Rosneft sustainable technologies in power generation. More spe- On September 24, 2013 Enel Investment Holding reached cifically, the memorandum is the follow-up to the signing an agreement with Itera, a wholly-owned subsidiary of in 2012 of another agreement between Enel and CHNG’s the Russian oil and gas company Rosneft, for the sale of Clean Energy Research Institute that launched coopera- its 40% stake in Artic Russia BV, which in turn owns 49% tion between the two groups on research in clean coal, of the share capital of SeverEnergia, giving Enel a weight- renewables and distributed generation. ed stake of 19.6% in the latter. The price for the interest 65 amounted to $1.8 billion, which was paid in cash upon closing. The transaction was completed following receipt of antitrust clearance and compliance with other normal conditions, including waivers received from the other par- ties involved in the transaction on November 13, 2013. 6 December Disposal of 14.8% of Enel Rete Gas to F2i and Ardian 26 November Cooperation agreement with Rosneft for joint development of projects in upstream segment of the hydrocarbon industry On December 6, 2013, Enel SpA and Enel Distribuzione signed with F2i SGR SpA (F2i), Ardian and F2i Reti Italia Srl an agreement for the sale of the remaining stake (equal to 14.8%) held by Enel Distribuzione in Enel Rete Gas. The price agreed amounted to €122.4 million, giving the overall company a valuation in line with its regulatory as- set base. The disposal is subject to the pre-emption rights On November 26, 2013 Enel and Rosneft signed a memo- of all the other shareholders of Enel Rete Gas, including F2i randum of understanding to team up in the international Reti Italia Srl (a company controlled by F2i and Ardian that upstream hydrocarbon sector. owns 85.1% of Enel Rete Gas SpA), which has undertaken Under the agreement Enel and Rosneft will partner to iden- to exercise them in favor of a newly formed company also tify commercial opportunities and to jointly develop pro- controlled by F2i and Ardian. jects in the exploration, production and transportation of The agreement also established that at the time of the hydrocarbons outside of Russia. More specifically, the two transfer of the holding, F2i Reti Italia would repay Enel (in companies will jointly pursue international expansion op- advance of the contractual due date in 2017) of the vendor portunities and will organize a series of meetings, seminars loan received from the latter in 2009 at the time of the dis- and workshops for exchanging information on exploration posal of 80% of Enel Rete Gas. and production activities and on their respective strategies On December 20, 2013, the transaction was closed. Pend- in the upstream sector. ing the expiration of the pre-emption rights of all the oth- The joint Enel/Rosneft working group will also analyze op- er shareholders of Enel Rete Gas (representing a total of portunities for partnering in Latin America, southern Eu- about 0.05% of the share capital) and having verified that rope, the Mediterranean basin and North Africa. the conditions precedent to the sale have been met, on 29 November Enel Green Power awarded long-term contracts to supply energy to Chile’s regulated market that date Enel Distribuzione also completed the transfer to F2i Reti Italia 2 of the proportional interest due to F2i Reti Italia for a price of around €122.3 million. Once the rights of pre-emption expire, Enel Distribuzione will sell the remaining shares of Enel Rete Gas to the other share- holders who have exercised these rights or, if the rights go unexercised, sell them to F2i Reti Italia 2, therefore raising On November 29, 2013, Enel Green Power awarded the the total expected amount of €122.4 million. right to enter into long-term energy supply contracts with Also on December 20, 2013, F2i Reti Italia repaid Enel a ven- a pool of distribution companies operating in Chile’s regu- dor loan amounting to about €177 million (including initial lated electricity market, providing up to 4,159 GWh for the principal and interest accrued but not yet paid). entire duration of the contracts. The energy supply, at a price of $128/MWh, will start in December 2013 and ter- minate in 2024. The power supply will initially be generat- ed by an existing plant and, later, by three new plants (two photovoltaic plants and one wind farm), that will have a total installed capacity of 161 MW and will be located in Chile’s Central Interconnected System. The new plants will be built and enter service by the end of the first half of 2015. 66 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsReference scenario Enel and the financial markets Gross operating margin per share (euro) Operating income per share (euro) Group net earnings per share (euro) Group net ordinary earnings per share (euro) Dividend per share (euro) (1) Group shareholders’ equity per share (euro) Share price - 12-month high (euro) Share price - 12-month low (euro) Average share price in December (euro) Market capitalization (2) (millions of euro) No. of shares outstanding at December 31 (millions) (1) Dividend authorized by the Shareholders' Meeting on May 22, 2014. (2) Calculated on average share price in December. Enel stock weighting in: - FTSE MIB index - STOXX Europe 600 Utilities index - Bloomberg World Electric index Rating: Standard & Poor’s Outlook Medium/long-term Short-term Outlook Medium/long-term Short-term Outlook Medium/long-term Short-term Moody’s Fitch (1) Figures updated to January 31, 2014. 2013 2012 restated 1.81 1.06 0.34 0.33 0.13 3.82 3.38 2.30 3.10 1.68 0.72 0.03 0.30 0.15 3.80 3.31 2.03 3.05 29,150 9,403 28,774 9,403 Current (1) at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2011 9.17% 7.61% 3.31% Stable BBB A-2 8.82% 7.61% 3.12% 11.02% 8.33% 3.17% 12.98% 8.25% 2.93% Stable Negative Watch Negative BBB A-2 BBB+ A-2 A- A-2 Negative Negative Negative Negative Baa2 P2 Baa2 P2 Baa2 P2 A3 P2 Watch Negative Watch Negative Watch Negative Stable BBB+ F2 BBB+ F2 BBB+ F2 A- F2 In 2013, the world’s macroeconomic systems expanded at The euro area saw its economy begin a weak recovery, with a relatively moderate pace, with variations depending on enduring signs of fragility. geographical area. For Italy, 2013 ended with a further contraction in GDP. The economy of the United States strengthened substan- However, in the 3rd Quarter of the year the decline in GDP tially. The improvement enabled the Federal Reserve to ta- under way since the summer of 2011 came to an end. per its securities purchases without increasing volatility on the financial markets. The general improvement in the advanced economies fos- In the emerging countries, economic growth differed con- tered a narrowing of risk premiums in both public- and pri- siderably: rapid in China and modest in the other develop- vate-sector debt markets and spurred a rise in the financial ing economies (notably in Brazil and Russia). markets. The strains on the sovereign debt of the southern 67 European countries eased significantly over the course of On June 27, 2013, Enel paid off the dividend on 2012 profits 2013. of €0.15 per share. The main European stock indices closed 2013 with substan- Finance held 31.2% of Enel, while institutional investors tial gains. The FTSE Italia All Share index in Italy ended the 41.9% and individual investors the remaining 26.9%. At December 31, 2013 the Ministry for the Economy and year with a gain of 18%. For further information we invite you to visit the Investor Rela- In this context share prices in the European utilities segment tions section of our corporate website (http://www.enel.com/ rose more moderately, posting a gain of about 7% with sig- en-GB/investor/), which contains financial data, presentations, nificant differences in the performance of the shares making on-line updates of the share price, information on corporate up the index (which ranged from a gain of more than 80% bodies and the regulations of shareholders’ meetings, as well by EDF to a loss of about 15% by RWE). as periodic updates on corporate governance issues. As regards Enel shares, the year ended with the stock price We have also created contact centers for private investors (which virtually unchanged from the end of the previous year at can be reached by phone at +39-0683054000 or by e-mail at €3.174, up 1% on the end of 2012. The decline in the price azionisti.retail@enel.com) and for institutional investors (phone: over the first nine months of 2013 was entirely reversed in +39-0683051; e-mail: investor.relations@enel.com). the final quarter of the year. 68 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsPerformance of Enel share price and the Bloomberg World Electric, STOXX Europe 600 Utilities and FTSE Italia All Share indices from January 1, 2013 to February 28, 2014 EURO 4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0 Jan. 13 Feb. 13 Mar. 13 Apr. 13 May 13 June 13 July 13 Aug. 13 Sep. 13 Oct. 13 Nov. 13 Dec. 13 Jan. 14 Feb. 14 Mar. 14 Enel Bloomberg World Electric STOXX Europe 600 Utilities FTSE Italia All Share 69 Economic and energy conditions in 2013 Economic developments The year 2013 was characterized by an improvement in the Banks’ demand for liquidity in 2013 caused 3-month Euribor global economic environment. The implementation of struc- to decline significantly over the year, posting an average of tural reforms in some European countries and the resumption 0.22%, well below that recorded in 2012 (0.57%). In foreign of exports in others gave rise to signs of recovery, reflected in a exchange markets, the euro/dollar rate rose from an average significant narrowing in the spread against the German Bund of 1.29 in 2012 to an average of 1.33 in 2013. The increase is and, in some cases, a return to positive GDP growth after years primarily attributable to flows of money toward the periph- of economic stagnation and widespread recession. In Europe, eral European countries and to the rise in 3-month Euribor 2013 confirmed the emergence from recession, with some above its level at the end of 2012 (0.19%). This level was countries that recorded GDP growth and others whose GDP higher than both USD Libor and the policy rate of the ECB. contracted but at a slower pace than the levels of 2012: Ire- In order to facilitate access to credit by institutional inves- land (0.5%), Spain (-1.2%), Italy (-1.8% compared with -2.5% tors and support the level of investment, the European Cen- in 2012), Greece (-3.6% compared with -6.4% in 2012) and tral Bank lowered its rate on main refinancing operations to Portugal (-1.5% compared with -3.2% the previous year). 0.25%. International stock market indices posted gains for In the United States (growth of 1.9% in 2013 compared with 2013 as a whole that were about twice those achieved the 2.8% in 2012), the easing of uncertainties related to the ta- previous year, thanks to their especially strong showing in pering of quantitative easing and the extension of negotia- the 2nd Half of the year following the publication of positive tions on the budget and the public debt helped buoy the fi- macroeconomic data and the continuation of expansionary nancial market, with a positive impact on the real economy monetary policies. For example, the US index rose by no less and employment. The countries of South America performed than 29.9% and that in Japan rose by 51.9%, with the latter well (Argentina 5.5%, Brazil 2.1%, Chile 4.0%, Colombia 4.0% undoubtedly boosted by the ultra-expansionary economic and Peru 5.0%), although towards the end of the year, growth policies put in place by the Japanese government. rates exhibited increased volatility due to the sudden with- The following table shows the growth rates of GDP in the drawal of cash inflows from the industrial economies. Similar main countries in which Enel operates through its subsidiaries. growth was also achieved in China (+7.7% in 2013), a country that is still grappling with environmental problems and ex- cess credit levels that could hinder future development. Oth- er strong performers included the United Kingdom (+1.9% in 2013), thanks to the continuation of robust expansion in the private and public consumption supporting the increas- ingly solid recovery in growth, and Japan (+1.7% in 2013), although that country experienced a weakening of private consumption and investment while public consumption and investment strengthened considerably. The eastern European Annual real GDP growth % Italy Spain Portugal Belgium Greece France Bulgaria Romania countries are still affected by significant social imbalances, Slovakia fragile institutional arrangements and economic models that will have to demonstrate their reliability in promoting a long period of sustained growth (GDP growth of 1.3% for Slovakia and 1.3% for Russia in 2013). In the 2nd Half of the year, inflation in Europe subsided from its average of 2.3% in 2012 to an average of 1.3% in 2013. More generally, the recovery has not remained confined to European countries but, albeit fragmented and uneven, it has involved both the industrial countries (+1.3%) and the emerg- ing economies (+4.7%). 70 Russia Argentina Brazil Chile Colombia Mexico Peru Canada USA 2013 -1.8 -1.2 -1.5 0.2 -3.6 0.2 0.8 3.5 1.3 1.3 5.5 2.1 4.0 4.0 1.3 5.0 1.8 1.9 2012 -2.6 -1.6 -3.2 -0.1 -6.4 - 0.8 0.7 1.8 3.4 1.9 1.0 5.6 4.2 3.9 6.3 1.7 2.8 Source: National statistical institutes and Enel based on data from ISTAT, INE, EUROSTAT, IMF, OECD and Global Insight. EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsDevelopments in the main market indicators Money market 1.60 1.55 1.50 1.45 1.40 1.35 1.30 1.25 1.20 1.15 1.10 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Jan. 2012 Mar. 2012 Jun. 2012 Sep. 2012 Dec. 2012 Feb. 2013 May. 2013 Aug. 2013 Nov. 2013 Euro/US dollar 3-month Euribor International commodity prices In 2013, despite the continuing weakness of macroeconomic The supply of oil expanded by about 1% in 2013, although this conditions, world oil consumption continued to grow rapidly, was less than the sharp rise seen in 2012. A major driver of the rising by 1.3% compared with 2012 (+1.1% between 2011 and expansion was output in North America, which grew by 8%, 2012), compared with an annual average of 0.8% in the 2008- continuing the trend that began in 2009 and bring American 2011 period. The rise was driven primarily by growing demand supply back to its levels of the early 1990s. Excluding the in- in the developing economies of non-OECD countries (+1.2 mil- crease in oil production in North America and the small fall in lion barrels/day), while demand in the OECD countries was vir- Europe and Africa, the output of non-OPEC countries has re- tually unchanged compared with 2012. mained essentially unchanged since 2010. 71 Commodity prices 700 600 500 400 300 200 100 0 Jan. 11 Mar. 11 May 11 Jul. 11 Sep. 11 Nov. 11 Jan. 12 Mar. 12 May 12 Jul. 12 Sep. 12 Nov. 12 Jan. 13 Mar. 13 May 13 Jul. 13 Sep. 13 Nov. 13 Zeebrugge gas (€/toe) API2 coal (€/toe) Brent (€/toe) Despite some signs of a partial easing of tensions in the economic recovery in Europe and the positive outlook Middle East, in 2013 the price of oil remained high at close for developments in 2014 are sparking an increase, albeit to $110/barrel. The recent agreement between six major a modest one, in prices. The market remains very weak, world powers and Iran, which commits the middle eastern mainly because of the sharp competition with the gas in country to shelve its efforts to enrich uranium beyond 5%, the United States and fears that over the medium term could lead to a review of the embargo on its petroleum the emerging countries will not be able to sustain growth products in the next few months. However, the market did rates in line with those observed since the 2000s. react to the news in any way, appearing more focused on short-term developments in fundamentals: although data Despite world economic developments, the growth in gas on stocks show that the US market is well supplied, Libyan consumption in 2013 was basically in line with the trends output continues to suffer from the disruptions caused by seen over the last decade, with no major differences be- its delicate domestic situation. The recovery in oil prices tween the advanced economies and the emerging coun- also led to increases in the prices of refined products. Both tries. The increase in demand was accompanied by an ex- European and North American prices for diesel and gaso- pansion of production in all three OECD macro areas. line rose by between 1% and 3%. In the Italian gas market, the combination of weak de- Finally, the appreciation of the euro against the dollar mand (especially for thermal generation) and the slight (+3% compared with 2012 ) caused oil prices expressed in increase in prices in northern Europe in 2013 caused the euros to fall. Italian spot price to converge towards that on European Developments in 2013 underscored the importance of exchanges. The spot price of natural gas at the Zeebrugge coal in the international energy mix, with an increase in hub in Europe rose from €25/MWh in 2012 to €27/MWh world consumption in all OECD countries except North in 2013, an increase of 8%, thus reducing the price differ- America, where coal was substituted by low-cost gas in ential with the Italian virtual gas trading point from €3/ electricity generation. MWh to €1/MWh. The average price of coal for delivery at the Amsterdam- The indexing of gas prices to those of petroleum products Rotterdam-Antwerp hub (ARA CIF CIM) fell below its lev- remains an important factor in European contracts, al- els in 2012, at $82/metric ton in 2013, about $10 less than though the strength of the link has been reduced in recent the previous year, continuing the downward trend under years with the steady weakening of demand, producing way since the peaks registered in 2010. The first signs of what can be increasingly characterized as a buyer’s market. 72 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsElectricity markets Electricity demand Developments in electricity demand GWh Italy Spain Portugal France Greece Bulgaria Romania (1) Slovakia Russia (2) Argentina Brazil Chile (3) Colombia Peru USA (4) (1) At September 30, 2013 and 2012. (2) Europe/Urals. (3) Figure for the SIC - Sistema Interconectado Central. (4) Net of grid losses. Source: Enel based on TSO figures. 2013 317,144 246,206 49,057 494,986 46,451 32,192 36,665 26,745 767,804 130,272 565,065 49,343 60,885 39,789 2012 328,220 251,850 50,495 489,520 50,290 32,463 39,202 26,842 769,418 125,705 546,595 47,340 59,435 37,321 3,689,294 3,686,777 Change -3.4% -2.2% -2.9% 1.1% -7.6% -0.8% -6.5% -0.4% -0.2% 3.6% 3.4% 4.2% 2.4% 6.6% 0.1% In Europe electricity demand decreased in the Mediterra- of electricity demand. In the rest of Europe, electricity de- nean countries, primarily due to the slowdown in indus- mand in 2013 expanded in France (+1.1%) and declined trial consumption. More specifically, in Italy (-3.4%), Spain slightly in Russia (-0.2%). Demand continued to rise rapidly (-2.2%), Greece (-7.6%) and Portugal (-2.9%) the nega- in Latin America, with significant increases in Colombia tive performance of the industrial sector and the macro- (+2.4%), Argentina (+3.6%) and Brazil (+3.4%) and even economic uncertainty had a decisive impact on the level larger gains in Chile (+4.2%) and Peru (+6.6%). 73 Italy Domestic electricity generation and demand Millions of kWh Net electricity generation: - thermal - hydroelectric - wind - geothermal - photovoltaic Total net electricity generation Net electricity imports Electricity delivered to the network Consumption for pumping Electricity demand 2013 2012 Change 182,528 52,515 14,886 5,305 22,146 277,380 42,153 319,533 (2,389) 317,144 207,331 43,260 13,333 5,251 18,631 287,806 43,103 330,909 (2,689) 328,220 (24,803) -12.0% 9,255 1,553 54 3,515 (10,426) (950) (11,376) 300 (11,076) 21.4% 11.6% 1.0% 18.9% -3.6% -2.2% -3.4% 11.2% -3.4% Source: Terna - Rete Elettrica Nazionale (monthly report - December 2013). Domestic electricity demand in 2013 decreased by 3.4% com- Net electricity generation in 2013 decreased by 3.6% or 10,426 pared with 2012, to 317,144 million kWh. Of total electricity million kWh to 277,380 million kWh. More specifically, in an en- demand, 86.7% was met by net domestic electricity genera- vironment of depressed electricity demand, the increase in hy- tion for consumption (86.9% in 2012) with the remaining droelectric generation (9,255 million kWh), mainly attributable 13.3% being met by net electricity imports (13.1% in 2012). to improved water availability conditions, and the rise on other Net electricity imports in 2013 declined by 950 million kWh, lion kWh and wind generation up 1,553 million kWh) as a result mainly as a result of the fall in demand and overcapacity on of the expansion in installed capacity in the country, led to a the domestic market. reduction in thermal generation of 24,803 million kWh. renewables generation (photovoltaic generation up 3,515 mil- Spain Electricity generation and demand in the peninsular market Millions of kWh Gross electricity generation - ordinary regime: - thermal - nuclear - hydroelectric Total gross electricity generation - ordinary regime Consumption for auxiliary services Electricity generation - special regime Net electricity generation Net electricity exports (1) Consumption for pumping Electricity demand 2013 64,882 56,827 33,970 155,679 (6,337) 110,823 260,165 (8,001) (5,958) 246,206 2012 Change 93,314 61,470 19,455 174,239 (7,889) 102,293 268,643 (11,770) (5,023) 251,850 (28,432) (4,643) 14,515 (18,560) 1,552 8,530 (8,478) 3,769 (935) (5,644) -30.5% -7.6% 74.6% -10.7% 19.7% 8.3% -3.2% 32.0% -18.6% -2.2% (1) Includes the balance of trade with the extra-peninsular system. Source: Red Eléctrica de España (Balance eléctrico diario Peninsular - December 2013 report). Volumes for 2012 are updated to October 2, 2013. 74 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions Electricity demand in the peninsular market in 2013 de- million kWh. Developments in the electricity market, and con- clined by 2.2% compared with 2012 to 246,206 million sequently in electricity generation, were entirely analogous kWh. Demand was entirely met by net domestic genera- to those in Italy, with a sharp decline in conventional thermal tion for consumption. generation (-30.5%) and nuclear output (-7.6%), essentially Net electricity exports in 2012 fell by 32.0% compared with 2012. improved water conditions compared with the previous year, due to higher hydroelectric generation (74.6%), owing to and higher output under the special regime (8.3%), as well as Net electricity generation in 2013 decreased by 3.2% or 8,478 lower market demand. Electricity generation and demand in the extra-peninsular market Millions of kWh Gross electricity generation - ordinary regime: - thermal Total gross electricity generation - ordinary regime Consumption for auxiliary services Electricity generation - special regime Net electricity generation Net imports Electricity demand 2013 2012 Change 13,175 13,175 (784) 1,050 13,441 1,269 14,710 14,399 14,399 (850) 1,021 14,570 570 15,140 (1,224) (1,224) 66 29 (1,129) 699 (430) -8.5% -8.5% 7.8% 2.8% -7.7% 122.6% -2.8% Source: Red Eléctrica de España (Balance eléctrico diario Extrapeninsulares - December 2013 report). Electricity demand in the extra-peninsular market in 2013 kWh and regarded trade with the Iberian peninsula. decreased by 2.8% compared with 2012 to 14,710 million kWh. Demand was almost entirely met by net domestic Net electricity generation in 2013 fell by 7.7% or 1,129 mil- generation for consumption. lion kWh as a result of lower thermal generation (-8.5%), which was only partially offset by greater output under Net electricity imports in 2013 amounted to 1,269 million the special regime. Electricity prices Electricity prices Average baseload price 2013 (€/MWh) Change in baseload price 2013-2012 Average peakload price (€/MWh) Change in peakload price 2013-2012 Italy Spain Russia Slovakia Brazil Chile Colombia 63.0 44.3 24.8 37.2 91.5 116.0 71.5 -16.6% -6.3% 4.3% -13.2% 38.5% -23.4% 43.0% 70.3 50.7 28.6 48.9 207.0 221.6 165.4 -17.6% -3.7% 4.0% -10.6% 20.2% -16.3% 45.9% 75 Developments in prices in the main markets Eurocents/kWh Final market (residential): (1) Italy France Portugal Romania Spain Slovakia Final market (industrial): (2) Italy France Portugal Romania Spain Slovakia 2013 2012 Change 15.0 10.1 12.1 8.9 17.5 13.8 11.2 7.7 10.2 9.0 11.7 12.4 14.5 9.9 11.1 8.0 17.7 14.0 11.9 8.1 10.5 8.3 11.6 12.7 3.4% 2.0% 9.0% 11.3% -1.1% -1.4% -5.9% -4.9% -2.9% 8.4% 0.9% -2.4% (1) Half-year price net of taxes - annual consumption of between 2,500 kWh and 5,000 kWh. (2) Half-year price net of taxes - annual consumption of between 500 MWh and 2,000 MWh. Source: Eurostat. Electricity price developments in Italy Power Exchange - PUN IPEX (€/MWh) Average residential user with annual consumption of 2,700 kWh (eurocents/kWh): price including taxes 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2013 2012 63.8 57.4 65.5 65.2 81.2 73.5 81.5 65.7 19.1 18.9 19.2 19.0 17.3 19.1 19.1 19.4 Source: Energy Markets Operator; Authority for Electricity and Gas. In Italy, the average uniform national sales price of electricity ers set by the Authority for Electricity and Gas rose by 1.7% in on the Power Exchange fell by 16.6% compared with 2012. 2013, mainly owing to the increase in the A3 rate component The average annual price (including taxes) for residential us- covering costs for incentives for renewable generation. 76 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions Natural gas markets Gas demand Millions of m3 Italy Spain 2013 70,087 28,662 2012 74,929 31,183 Change (4,842) (2,521) -6.5% -8.1% Demand for natural gas in 2013 fell in both Italy and Spain. climate and changes in the mix of generation sources, char- The decline is mainly attributable to the adverse economic acterized by the growing use of renewable energy. Italy Domestic gas demand Millions of m3 Residential and civil Industrial and services Thermal generation Other (1) Total 2013 30,061 16,651 21,224 2,151 70,087 2012 30,832 16,872 24,952 2,273 74,929 Change (771) (221) (3,728) (122) (4,842) -2.5% -1.3% -14.9% -5.4% -6.5% (1) Includes other consumption and losses. Source: Enel based on data from the Ministry for Economic Development and Snam Rete Gas. Domestic demand for natural gas in 2013 amounted to essentially the result of lower generation volumes, was 70,087 million cubic meters, a decrease of 6.5% on the compounded by a decrease in consumption for domestic previous year. and civil uses, attributable to the impact of colder weather The contraction in consumption for thermal generation, in 2012. Price developments Average residential user with annual consumption of 1,400 m3 (ceurocents/m3): price including tax Source: Authority for Electricity and Gas. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2013 2012 92.8 88.9 88.4 85.8 86.4 87.9 90.2 91.2 The annual average sales price of natural gas in Italy increased by 0.1% in 2013. 77 Regulatory and rate issues The European regulatory framework Internal Energy Market were published as Delegated Regulations of the European Commission on February 23, 2013. In February 2011, the European Council set an objective of The Regulation, commonly referred to as EMIR (European integrating European energy markets by 2014, with the in- Market Infrastructure Regulation), introduces new rules tention of creating a single market for electricity and gas, governing centralized clearing and risk mitigation for OTC offering consumers full freedom of choice in an environ- derivatives. Non-financial institutions are required to use ment of fair and competitive prices, promoting renewa- centralized clearing and adopt certain risk mitigation tech- bles and ensuring and improving the security of supply. niques only in cases in which the positions that they and To this end, the Council mandated the Commission, the other non-financial companies in the same group have Agency for the Cooperation of Energy Regulators (ACER) taken in OTC derivatives (only for those not used to hedge and the European networks of transmission system opera- commercial risk) exceed the specified clearing thresholds. tors for electricity and gas (ENTSO-E and ENTSO-G) to de- A number of the EMIR requirements came into effect start- velop European Network Codes. These Codes are intended ing from March 15, 2013. These include certain risk miti- to define a set of common, harmonized rules to facilitate gation techniques for OTC derivatives that are not subject the management of cross-border issues with a systematic, to centralized clearing obligations and a requirement for coordinated approach. In 2013, the process of developing non-financial institutions to monitor their OTC derivatives and approving numerous electricity network codes made positions to ensure that they do not exceed the clearing full progress in the three Market, System Operation and thresholds. Additional risk mitigation requirements took Grid Connection macro-areas. effect on September 15, 2013. In parallel, in order to achieve the public-interest objectives As from February 12, 2014, a daily reporting obligation for mentioned above, the Member States may independently all derivatives transactions carried out by European compa- undertake actions that, if not appropriately designed and nies took effect. coordinated at the European level, could have a distortive impact on the operation of the internal energy market. Ac- cordingly, with specific regard to electricity markets, in No- Emissions trading scheme vember 2013 the Commission published a package of non- Since 2005, Enel Group installations in Europe have been binding guidelines for Member States concerning public required to participate in the EU ETS, a market-based sys- intervention involving: i) the adequacy of generation ca- tem for reducing greenhouse gas emissions. Operators pacity; ii) support schemes for renewables and cooperation are expected to reduce their emissions by 21% by 2020 mechanisms; and iii) developing demand response. (compared with 2005 levels). On January 1, 2013 the third Regulation on over-the-counter derivatives, central counterparties and trade data repositories (EMIR) phase of implementation (2013-2020) began. This phase envisages a series of major changes introduced by Direc- tive 2009/29/EC and subsequent regulations in order to improve the efficiency, transparency and effectiveness of the system. The main change regards the method for allocating emis- sions allowances. The free allocation of allowances will gradually be replaced by an auction system. The power generation sector will be required to purchase 100% of its The main implementing measures for Regulation 648/2012 allowances through auctions as from January 2013. The pro- of the European Parliament and of the Council on OTC de- ceeds of the auctions are managed by the Member States, rivatives, central counterparties and trade repositories, who must however use at least 50% of the revenues to fi- which had entered force on August 16 of the previous year, nance projects involving low carbon technologies (carbon 78 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionscapture and storage, renewable resources, etc.). During 2013 the establishment of the Single European Un- ion Registry was finalized, replacing the national registries in accounting for emissions allowances and increasing the se- curity and transparency of the emissions allowance market. Regulation on the submission and publication of data in electricity markets In November 2013, a new Registries Regulation was ap- Following the comitology process, on June 15, 2013, the proved, defining the flexibility calculation rules (use of inter- Regulation on the submission and publication of data in national credits for compliance purposes) for the third phase. electricity markets (Commission Regulation 543/2013/EU) With the exception of “new entrants”, no additional flexibility was published. The regulation determines the minimum is envisaged for 2013-2020. However, it will be possible to use set of data on generation, transportation, consumption the residual flexibility from phase 2 until 2020. and balancing that must be made available to electricity Also in November last year, the monetization of the final market participants for subsequent central collection and tranche of 100 million EUAs of the New Entrant Reserve publication. The European Network of Transmission Sys- (NER 300) by the European Investment Bank (EIB) was be- tem Operators for Electricity (ENTSO-E) will be responsible gun. The proceeds will be used to finance pilot projects for establishing a central information transparency plat- in the innovative renewable resources field and in carbon form, which will aggregate and publish the data received capture and storage (CCS) technologies. from TSOs and other data providers. As regards the inclusion of international flights under the EU ETS in 2012, following numerous suits filed by a number of non-European airlines, the compliance obligation under the EU ETS was limited to European air space until a global solution for reducing emissions in the aviation sector can The 2030 climate and energy package be reached. On January 22, 2014, the European Commission published Finally, in December 2013, the Decision amending the ETS the 2030 climate and energy policy framework, composed Directive to formally authorize the European Commission of the following documents: to change the calendar of auctions for phase 3 was ap- > a communication on the European policy for climate proved, postponing (back-loading) the sale of 900 million and energy through 2030, envisaging: allowances in order to reduce the excess short-term supply - a binding EU-level target to reduce greenhouse gas on the carbon market. Industrial Emissions Directive emissions by 40% compared with 1990, with a larger reduction for the ETS sector (-43% compared with 2005); - a binding EU-level target to achieve 27% of final en- As part of the process of implementing the Industrial Emis- ergy consumption from renewables (not translatable sions Directive (Directive 2010/75/EU), the European Com- into national targets); mission is working to update the reference document on - no energy efficiency target; best available techniques for large combustion plants (BREF - a new governance framework based on national plans LCP), which includes the emissions levels associated with for competitive, secure and sustainable energy to en- the best available technologies to be considered in the per- sure greater harmonization of Member State policies; mitting process. In the 2nd Half of 2013, a consultation was > proposed legislation to introduce an automatic adjust- conducted on the first draft presented by the Commission. ment mechanism for the supply of allowances in the Eu- The completion of the review process scheduled for the end ropean Emissions Trading Scheme (EU ETS); of 2014 could be delayed until the early months of 2015. > a communication on energy prices to compare the com- ponents of final prices across the Member States and types of customer; > a communication on exploration and production of non- conventional hydrocarbons (in particular, shale gas). 79 The Italian regulatory framework Free-market operators are awarded contracts to provide safeguard services on a geographical basis through three- year auctions. Enel Energia was awarded contracts to pro- vide safeguard services to five of the twelve areas subject The current structure of the Italian electricity market is to auction for the 2011-2013 period (Umbria and Marche; the result of the liberalization process begun in 1992 with Sardinia; Campania; Basilicata and Calabria; Sicily). Directive 1992/96/EC, transposed into Italian law with In October 2013 the Authority revised the rules for award- Legislative Decree 79/1999. This decree provided for the ing and delivering the service as from 2014, reorganizing liberalization of electricity generation and sale; reserving the territories and reducing their number from twelve to transmission and ancillary services to an independent net- ten. The decree of the Minister for Economic Development work operator; the granting of concessions for distribution of November 6, 2013, confirmed the three-year duration of to Enel and other companies run by local governments; the the service. Following the new auction for the 2014-2016 unbundling of network services from other activities. period, Enel Energia was awarded five of the ten new areas The introduction of Directives 2003/54/EC and 2009/72/ (Veneto, Emilia Romagna and Friuli Venezia Giulia; Sardin- EC (transposed with Law 125/2007 and Legislative Decree ia; Campania and Abruzzo; Calabria; Sicily). 93/2011, respectively) in Italy lent further impetus to the By contrast, enhanced protection service is provided by process, particularly through the complete opening of sellers connected with distributors (Enel Servizio Elettrico the retail market and the confirmation of the total inde- for customers connected to Enel Distribuzione’s network). pendence of the national transmission network operator The prices and related terms are set by the Authority and (already provided for in the decree of the Prime Minister are updated quarterly based on criteria designed to ensure of May 11, 2004) by separating its ownership from that of that the operators’ costs are covered. other electricity operators. Operators set their own prices for free market services, The process of liberalizing the natural gas market began with the Authority’s role limited to setting rules to protect with Directive 1998/30/EC, transposed in Italy through both customers and operators. Legislative Decree 164/2000, calling for the liberalization In this role, the Authority has adopted a number of meas- of the import, production and sale of gas and the sepa- ures aimed at containing operators’ credit risk, which has ration of network infrastructure management from other risen in recent years due to the economic crisis and the lack activities through the establishment of distinct companies. of rules barring customers from switching suppliers solely As regards the model for unbundling transport from other to avoid paying their utility bills. non-network activities, with Resolution 515/2013/R/gas, the Authority mandated the transition to ownership un- bundling pursuant to Directive 2009/73/EC. Gas Sales Electricity Retail market Retail market Legislative Decree 164/2000 established that as from Janu- ary 1, 2003, all customers may freely choose their natural gas supplier on the free market. However, alongside this operators must offer a safeguard service to their customers (only for residential customers pursuant to Decree Law 69 of June 21, 2013), together As provided for by Directive 2003/54/EC, starting from July with their own commercial offers, at the regulated prices 1, 2007 all end users may freely choose their electricity sup- established by the Authority. plier on the free market or participate in regulated mar- If there is no company supplying this service, the continu- kets. Law 125/2007 identified these regulated markets as ity of supply for small customers not in arrears on bill pay- the “enhanced protection” market (for residential custom- ments (residential and other uses with an annual consump- ers and small businesses with low-voltage connections) tion of less than 50,000 standard cubic meters) and for and the “safeguard services” market (for large customers users involved in providing public services shall by ensured not eligible for enhanced protection services). by the supplier of last resort. If the customer is in arrears 80 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionswith bill payments or it is not possible for the supplier of services, which is the efficient management of the flow of last resort to provide service, supply continuity is ensured electricity on the grid to ensure that deliveries and withdraw- by the default distribution supplier selected annually, like als are balanced, electricity generated may be sold on a dedi- the supplier of last resort, through voluntary tenders for cated market, the Ancillary Services Market (ASM), where geographically-based contracts. For the period October 1, Terna procures the required resources from generators. 2013 - September 30, 2014, Enel Energia was awarded de- The Authority and the Ministry for Economic Develop- fault service contracts in all areas covered by the auction. ment are responsible for regulating the electricity market. On October 1, 2013, the reform of the financial terms and More specifically, with regard to dispatching services, the conditions applied to safeguard customers entered force. Authority has adopted a number of measures regulating More specifically, the Authority modified the procedures plants essential to the security of the electrical system. for determining raw material component (QE), which had These plants are deemed essential based on their geo- long been indexed to oil prices, indexing it fully to spot graphical location, their technical features and their impor- market prices and introduced graduality components to tance to the solution of certain critical grid issues by Terna. facilitate the transition to short-term provisioning policies. In exchange for being required to have electricity available In order to link prices more closely with costs, the Author- and providing binding offers, these plants receive special ity also increased the component covering retail sales costs remuneration determined by the Authority. (QVD) by 50%. Generation and Energy Management Electricity Generation and wholesale market Since the launch of the market in 2004, the regulations have provided for a form of administered compensation for generation capacity. In particular, plants that make their capacity available for certain periods of the year identified in advance by the grid operator to ensure the secure opera- tion of the national electrical system receive a special fee. In August 2011, the Authority published Resolution 98/2011, which establishes the criteria for introducing a market mechanism for compensating generation capac- ity that replaces the current administered reimbursement. This mechanism involves holding auctions through which Electricity generation was completely liberalized in 1999 Terna will purchase from generators the capacity required with Legislative Decree 79/1999 and can be performed by to ensure that the electricity system is adequately supplied anyone possessing a specific permit. in the coming years. The initial auctions will be held follow- The electricity generated can be sold wholesale on the or- ing approval by the Ministry for Economic Development of ganized spot market (IPEX), managed by the Energy Mar- the new mechanism developed by the Authority. kets Operator (EMO), and through organized and over- In order to cope with emergencies in the gas system, such the-counter platforms for trading forward contracts. The as the one that occurred between February 6 and 16, 2012, organized platforms include the Forward Electricity Market Decree Law 83/2012 – ratified with Law 134 of August 7, (FEM), managed by the EMO, in which forward electricity 2012 – requires the identification on an annual basis as contracts with physical delivery are traded. Trading can also from the 2012-2013 gas year of thermal generation plants be conducted in derivatives with electricity as their underly- that can contribute to the security of the system thanks ing are traded. The organized market for such transactions to the use of fuels other than gas. Such plants, which are is the forward market (IDEX), operated by Borsa Italiana, different from those essential to the electrical system, are while financial derivatives can also be negotiated on OTC entitled to reimbursement of the costs incurred in ensur- platforms. ing availability in the period from January 1 to March 31 of Generators may also sell electricity to companies engaged each gas year on the basis of the procedures established by in energy trading, to wholesalers that buy electricity for re- the Authority. sale at retail, and to the Single Buyer, whose duty is to en- sure the supply of energy to enhanced protection service customers. In addition, for the purposes of the provision of dispatching 81 Gas Wholesale market gas interconnectors. The exemption is granted upon the ex- plicit request of the companies involved and on the basis of an assessment of the benefits of the infrastructure for the system. The extraction, import (from EU countries) and export of nat- ural gas have been liberalized. According to the provisions of Legislative Decree 130/2010, operators cannot hold a market share that exceeds 40% of domestic consumption. This limit may be raised to 55% if the Infrastructure and Networks operator commits to creating 4 billion cubic meters in new storage capacity by 2015. Under this provision, the Ministry Electricity for Economic Development approved Eni’s proposed plan to create new storage in early 2011. Following the approval of Distribution and metering the Parliamentary committees and the positive opinion of the Enel Distribuzione provides distribution and metering within Authority, on March 6, 2013, the ministerial decree approving the Infrastructure and Networks Division under a 30-year the rules for the natural gas forward market was signed, with concession set to expire in 2030. operations beginning on September 2, 2013. The forward The distribution rates are set by the Authority at the start market completed the structure of the Italian wholesale mar- of each regulatory period (lasting 4 years) based on cover- ket, joining the spot trading platform (the “Gas Exchange”), ing the total cost of providing distribution and metering which has been operating since 2010, and the balance market services, considering operating costs and depreciation, and begun in December 2011 under the rules set by the Authority. provide an appropriate return on capital. To foster the integration of the Italian market with the Eu- The rate component covering operating costs is updated an- ropean market, in compliance with EU rules, in 2012 the Au- nually using a price-cap mechanism (i.e. based on the infla- thority, following the start of daily auctions for the release of tion rate and an annual rate of reduction of unit costs called contracted but unused capacity on the TAG (the gas intercon- the X-factor). The return-on-capital and depreciation com- nector between Austria and Italy), introduced mechanisms to ponents are revised each year to take account of new invest- foster the transit of spot gas through the Tarvisio entry point. ments, depreciation and the revaluation of existing assets In 2013, these measures were extended to the Passo Gries en- using the deflator for gross fixed capital formation. try point. Transport, storage and regasification For the first two years of the fourth regulatory period (2012- 2013) the Authority set a return-on-capital for distribution and metering activities for the period at 7.6%. For 2014- 2015, the Authority updated the rate to 6.4% on the basis of the yield on 10-year Italian government bonds (BTP). Transport, storage and regasification (of LNG) are subject to Increases of the WACC of 1% were envisaged for investments regulation by the Authority, which sets the rates for engaging as from 2012 and further increases (between 1.5% and 2%) in these activities at the start of each regulatory period (last- are also envisaged for certain categories of investments (for ing 4 years) and updates them annually over the same period example, medium-voltage lines in historical town centers, using established mechanisms. connection in areas with a high density of renewables gen- Storage is carried out under a concession (for a maximum of eration). The X-factor used in updating the operating costs 20 years) issued by the Ministry for Economic Development to component is 2.8% for distribution and 7.1% for metering. applicants that satisfy the requirements of Legislative Decree With Resolution 607/2013, the Authority amended the 164/2000. LNG activities are subject to the grant of a special regulatory treatment of one-off connection fees, establish- ministerial permit. Access to transport, storage and regasifica- ing that for the purposes of determining rates, they shall be tion capacity is provided through non-discriminatory mecha- considered as an adjustment of recognized capital employed nisms established by the Authority, in order to guarantee rather than as recognized operating expense, as they had third-part access (TPA). The Ministry for Economic Develop- been considered previously. ment may grant an exemption from the TPA rules to compa- Electricity distribution is also subject to service quality rules, nies that own storage or regasification plants or cross-border under which the Authority establishes the annual trend lev- 82 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsels for the following service continuity indicators for custom- ers connected to low-voltage service: Renewable Energy > duration of long service interruptions; In Italy, a variety of mechanisms, differing by resource and > number of long and short interruptions. size of plant, are used to encourage electricity generation Each year distributors receive bonuses or penalties depend- from renewable resources. The objectives and support in- ing on whether their actual performance as determined us- struments are established by Parliament in a manner consist- ing these efficiency indicators is better or worse than the ent with EU directives in this sector, while implementation established trend values. is handled by the Energy Services Operator (ESO), which is responsible for managing incentives for renewables. Energy efficiency White certificates Solar power incentives - Energy Account Photovoltaic plants receive incentive through the so- called Energy Account, which consists of the payment of Energy efficiency in final uses has been promoted in Italy feed-in premiums over and above the price of the electric- through the Energy Efficiency Certificate mechanism (white ity for power delivered to the grid over 20 years. certificates) launched on January 1, 2005 in accordance with With the ministerial decree of July 5, 2012, the incentive the provisions of the related decrees of July 20, 2004. system for photovoltaics was thoroughly overhauled in or- Those decrees, which were subsequently amended and der to ensure the more orderly growth of the sector and updated in 2007, set national energy savings targets for realign tariffs with European averages. The Fifth Energy the period 2005-2012. The targets must be achieved each Account is based on a system of comprehensive feed-in year by distribution companies. tariffs that have been reduced by an average of 40% from To demonstrate that they have achieved their targets and the previous system. The decree sets an annual ceiling on avoid penalties, distributors must deliver a number of cer- total incentives (including those already paid out under tificates at least equal to a specified percentage of their the previous Energy Accounts) of €6.7 billion, which was requirement to the Authority by May 31 of each year. reached on June 6, 2013. As a result the incentives under The Authority covers part of the costs incurred to achieve the Fifth Energy Account ended as from July 6, 2013. the target through a rate subsidy that in 2012 was equal to €86.98/toe for each certificate delivered. With a decree issued on December 28, 2012, the Ministry for Economic Development set new and rising energy sav- ings targets for the 2013-2016 period. Renewable resources other than solar power: green certificates and comprehensive tariffs In addition, for the 2013-2014 period only, the minimum The primary incentive mechanism used is green certificates percentage achievement obligation was reduced from (introduced with Legislative Decree 79/1999). Under this 60% to 50%. The Ministry has established that the re- system, electricity producers and importers are required to sidual obligation can be covered over the subsequent two deliver a share of renewable energy. This obligation can be years (rather than in the following year, as provided for satisfied by purchasing green certificates from renewables under the previous decrees). generators. With Resolution 13/2014, the Authority revised the pro- The amount of the incentive depends upon the market cedure for determining the rate grant as from 2013, us- value at which operators can purchase green certificates ing the general criteria set out in the ministerial decree to meet their obligation. This market value is set within a of December 28, 2012. More specifically, the Authority range. The maximum value is equal to the price at which established a provisional grant at the start of each year the ESO places the certificates it holds on the market (cal- and a definitive grant paid to distributors calculated at the culated as provided for in Article 2(148) of Law 244/2007), end of each year on the basis of prices in trades on the which came to €114.46/MWh of renewables generation in organized market. The provisional grant for 2013 was set 2013. The minimum price is equal to the price at which the at €96.43/toe. ESO withdraws green certificates exceeding the required share from the market. For the years in the period from 83 2012 to 2015, that price is set at 78% of the difference Following an appeal lodged by a number of associations between an pre-set amount (€180/MWh) and the average of renewables generators, the Regional Administrative sale price for electricity for the year. For 2013, the green Court of Lombardy voided provisions establishing fees for certificate withdrawal price was €89.28/MWh. unbalancing charged to owners of plants powered with Legislative Decree 28/2011, transposing Directive 2009/28/ unschedulable resources. EC, and the associated ministerial decree of July 6, 2012, After an appeal by the Authority, the Council of State, which substantially revised existing incentive mechanisms for postponed any decision on the substance of the resolution, plants that will enter service as from January 1, 2013. specified that the provisions of Resolution 281/2012 neces- More specifically, small plants (with a capacity of up to sary to ensure system security remained in force. 5 MW, as well as hydroelectric plants up to 10 MW and In implementation of the order of the Council of State, the geothermal plants up to 20 MW) will receive incentives Authority issued a resolution clarifying that, as from Oc- through a comprehensive feed-in tariff mechanism, with tober 2013, imbalancing fees shall apply as necessary to rates (set in the decree) differentiated by type and size of ensure system security. For imbalances in previous months, the plant. Larger plants will qualify for comprehensive in- settlement will be defined only after the Council of State centives established on the basis of Dutch auctions run by has ruled on legitimacy of Resolution 281/2012, which is the ESO. Plant owners must submit bids for a percentage expected to be issued in 2014. reduction from the opening price, equal to the compre- hensive rate for the last capacity bracket for small plants. The green certificates mechanism will be gradually elimi- nated through: > the progressive reduction of the mandatory share to zero by 2015; > the provision of incentives to plants already participat- ing in the green certificate system through rates equiva- lent to the current withdrawal value of certificates (as from 2015). In order to ensure control of incentive costs, the decree of July 6, 2012 sets a ceiling of €5.8 billion on aggregate annual cost – including plants already receiving incentives through the green certificate system – of incentives for re- sources other than solar power. Imbalancing for non-schedulable plants In addition to direct incentives (special rates and green certificates), non-schedulable renewable resources were exempt from fees for imbalancing (the difference between actual power delivered to the grid and planned power de- liveries defined on the basis of energy markets). With the increase in non-schedulable renewable resource plants – essentially photovoltaic and wind – the Authority, with Resolution 281/2012, decided to eliminate the previous exemption from imbalancing payments as from January 1, 2013, in order to foster better programming and integra- tion of such plants into the national electrical system. In 2013, deductibles are envisaged to enable a gradual transi- tion to the new rules. 84 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsIberia and Latin America Spain General information of the Spanish and Portuguese markets was completed in July 2007 with a market-splitting mechanism where the in- terconnection is operated jointly. The hourly rate corresponds to the marginal price from the intersection of the supply and demand curves. The volumes of energy sold through bilateral contracts are not used in calculating the price, although they must still be reported to OMEL. All plants with an output of more than 50 MW are required to sell their electricity on the The Spanish electricity system is mainly governed by Law wholesale market. REE (Red Eléctrica de España) is the system 54/1997, which was amended by Law 17/2007 and Royal operator and is responsible for the technical management Decree Law 13/2012, among other acts, which transposed and monitoring of the transmission network. In order to re- the provisions associated with the European Union’s “Third duce the rate deficit, Law 15/2012 introduced a package of Energy Package”. The regulatory framework guidelines are as fiscal measures, including a tax on generation and one on the follows: storage of fuel and residual by-products of nuclear power > electricity generation is conducted in under free market generation, a fee for using continental waters in hydroelec- conditions; tric generation equal to 22% of the revenues generated (the > transport, distribution and renewables generation in the fee is reduced by 90% for plants with a capacity equal to or island and extra-peninsular areas, as well as the technical less than 50 MW and for pumping plants with a capacity of and financial operation of the system, are regulated; more than 50 MW), environmental taxes (“centesimo verde”) > regulated activities are remunerated on the basis of the on the consumption of natural gas, coal, fuel oil and diesel costs of an efficient and well-managed company. The law fuel and a general tax on electricity generation equal to 7% establishes the regulated return for the first regulatory of total revenues. period (until 2019), linking it to the yield on 10-year gov- ernment securities plus 200 basis points for transport and distribution in the island and extra-peninsular areas and plus 300 basis points for renewables generation, high-effi- ciency cogeneration and generation from waste; National coal subsidy (intervention in the operation of the wholesale market) > the associated parameters applicable to regulatory cycles In September 2010, the European Commission granted the of 6 years; Spanish government’s request to subsidize the use of do- > final markets are entirely liberalized; starting from July 1, mestic coal by power plants. In February 2011, a ministerial 2009, consumers that satisfy certain conditions may opt to resolution was published establishing the main parameters be served by a Comercializadora de Referencia (CRs) – for- for application of this mechanism, which should terminate on merly CURs (Comercializadora de Ultimo Recurso) – which December 31, 2014. apply the Precio Voluntario para el Pequeño Consumidor (PVPC) – formerly the TUR (Tarifa de Ultimo Recurso) – set by the government; Capacity payment > connection fees are uniform across the country and are re- The capacity payment mechanism, whose remuneration adds ceived by distributors who perform this service on behalf to that for activities carried out in the wholesale market, is of the electricity system. divided into three parts: Wholesale market > reimbursement for investments in plants in service from January 1998; > reimbursement for investments in improving the environ- All sales of electricity by generation companies are conduct- ment (installation of desulphurization technologies and ed through the bidding system managed by the market op- other devices for reducing the environmental impact of erator, OMEL (Operador del Mercado Eléctrico), which was coal plants); formed in December 1997, since it operates the wholesale > reimbursement for capacity availability. market, MIBEL (Mercado Ibérico de Electricidad), that covers Following the enactment of Royal Decree Law 9/2013, the entire Iberian peninsula (Spain and Portugal). Integration the amount compensated for the first category is equal to 85 €10,000/MW per year, with a doubling of the period initial- panies based on a percentage set by the government. On ly set at 10 years, but will be eliminated for plants entering February 7, 2012, the Tribunal Supremo ruled that the cost service as from January 1, 2016; for the second, it is €7,875/ of the social bonus should not be borne by electricity com- MW per year over 10 years; for the third and final category, it panies. In applying the court’s decision, ministerial order is €5,150/MW per year for combined-cycle (CCGT), coal and IET/843/2012, issued on April 25, 2012, modified the settle- gas-fueled plants and reservoir-based hydroelectric plants ment system and determined that the mechanism would be and pumping plants that meet certain criteria on availability. financed through the access fee. The latter value is multiplied by availability coefficients based Following the reform of July 2013, we are awaiting the adop- on the technology employed. tion of a royal decree governing the retail market, a royal de- The cost of the capacity payments is covered by a rate com- cree reforming the mechanism for setting the energy com- ponent set periodically by the government and imposed on ponent of the PVPC and a royal decree reforming the bono all end users. social mechanism, containing the following key measures: Following the reform of July 2013, we are awaiting adoption > the definition of the portion of electricity at regulated pric- of a royal decree to govern the capacity payment mechanism es linked to the exchange price, with the abolition of the and mothballing. The general lines of the new mechanism Cesur auctions; provide for: > the possibility of expanding the number of Comercializa- > the grant of subsidies for investment through auctions, if dores de Ultimo Recurso (CUR); capacity adequacy is considered an issue; > the reintroduction of the financing of the bono social mech- > the restriction of the availability mechanism to com- anism by companies or groups operating in the generation, bined-cycle plants and coal plants with remuneration distribution and sale of electricity in proportion to the sum proportionate to the hourly thermal capacity and a pen- of connection points and number of customers served. alty mechanism for unavailability. The mechanism will be financed by generators in proportion to their schedulable contribution to peak demand. Retail market. TUR and the social bonus Regulated costs, access rates and rate deficit Under the current regulatory system, the main “regulated costs” of the Spanish electricity system pertain to remu- neration for transport and distribution networks, financial All end users have formally been participants in the free mar- resources for the authorities that manage the system (regu- ket since July 1, 2009. However, consumers with a contrac- lator, market operator, etc.), extra costs arising from extra- tual committed capacity of 10 kW or less are entitled to be peninsular generation, subsidies for the special regime (régi- charged the rate of last resort (Tarifa de Ultimo Recurso or men especial, i.e. renewable resources, electricity generation TUR, now replaced by the Precio Voluntario para el Pequeño from waste and cogeneration) and the energy savings and Consumidor or PVPC), which is established and regulated efficiency plan. by the government and whose energy component is deter- In order to cover these costs, all customers pay an access rate mined through quarterly auctions (Cesur). set by the government annually (it may be adjusted quarterly Under the provisions of Royal Decree 485/2009, the Ministry to take account of changing market conditions). Royal De- sets the rate of last resort to be charged by suppliers of last cree 1544/2011, published in November 2011, also requires resort. The Royal Decree also identifies the companies, includ- producers to pay an access rate for energy delivered into the ing Endesa, with sufficient resources to act as the supplier of system of €0.5/MWh (in addition to paying for energy deliv- last resort. ered, pumping plants pay equally for the 30% of electricity Royal Decree Law 6/2009 also introduced a social measure consumed). (the social bonus), available starting from July 1, 2009 to all Over the years, access rate receipts have not covered actual customers who meet certain income conditions set out in regulated system costs. This situation created a rate deficit. the decree. The social bonus is equal to the difference be- Royal Decree Law 6/2009 set out a solution for reducing the tween the TUR (now the PVPC) and a reference rate. The annual deficit, with the goal of completely eliminating it by social bonus is applied to customer bills by the sales com- 2013, through the introduction of annual ceilings. In 2010, panies and the related cost is borne by the generation com- since the access rate levels approved continued to not re- 86 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsflect the actual cost of regulated activities, Royal Decree Law which created the implementing mechanisms. 14/2010 introduced a new deficit reduction path with the The main feature of the extra-peninsular regulatory system is following limits: €5.5 billion for 2010, €3 billion for 2011 and that electricity generation is subject to regulated prices, un- €1.5 billion for 2012. On December 31, 2012, with Royal De- like on the Iberian peninsula. This remuneration was set so cree Law 29/2012, the government eliminated the cap for as to cover the costs of the activity and provide a return on 2012 (permitting the securitization of the entire deficit that capital employed. In order to receive the comprehensive rate, will result) and the explicit reference to the “cost reflectivity” generation companies receive an indemnity corresponding of rates as from January 1, 2013 (i.e. the adequacy of the ac- to the difference between the two values, in addition to the cess rates to cover “regulated costs”). The cumulative deficit market price for electricity sold. at December 31, 2013 reached €25 billion. Indemnities were to be financed from the State budget start- Through 2013, the deficit was divided among five electric ing from 2013. During the transitional period (2009-2013), companies: Endesa, Iberdrola, Gas Natural Fenosa (respon- Royal Decree Law 6/2009 established a hybrid system under sible for 93% of the total), Hidroeléctrica del Cantábrico which extra-peninsular generation is financed by gradually and E.ON. increasing the portion covered by the general State budget Royal Decree Law 6/2009 established a new financing mech- and decreasing that borne by the electricity system. anism through which electric companies may sell their receiv- Royal Decree Law 9/2013 then set the contribution from the ables to FADE (Fondo de Amortización del Déficit Eléctrico), State budget at 50%, but Law 24/2013 established an excep- which places them on the debt market. In January 2011, FADE tion for 2013, funding all financing through the electrical set- was formed with the support of the government, with the se- tlement system. curitization of the entire deficit generated up to 2012. Following the reform of July 2013, we are awaiting the adop- Law 24/2013 introduced a number of principles concern- tion of a royal decree overhauling the remuneration system, ing the economic and financial sustainability of the electri- introducing competitive auctions to determine the remuner- cal system: ation of fuel costs, modifying the reference values for logistics > revenues must be sufficient to cover all costs. The latter costs and limiting remuneration to plants with a regulatory will be financed with the access rates and financial mecha- useful life of less than 25 years. Law 24/2013 also established nisms established by the regulations, with partial financing that for the first regulatory period (until the end of 2019) from the state budget; fixed costs would be remunerated with a spread of 200 basis > any rules that entail an increase costs or a reduction in rev- points over the average yield of government securities in the enues must include an equivalent offset to ensure balance; two previous years. > as from January 1, 2014, any annual deficits may not ex- With regard to the island electrical systems, on October 30, ceed annual system revenues by more than 2.5% (or a cu- 2013, Law 17/2013 was published in the official bulletin. The mulative 5%). In addition, any deficits that are not offset legislation addresses the security of supply and the promo- by rate increases will be financed by all operators partici- tion of competition in the island and extra-peninsular electri- pating in the settlement system in proportion to their re- cal systems. The main aspects of the law regard: ceivable; > promotion of more efficient generation capacity: new > in any case, if the access rate includes components cor- plants may be admitted to the remuneration regime for the responding to prior-year deficits, rate levels may not be extra-peninsular electrical system (SEIE) for reasons of pro- decreased. The extra-peninsular electricity system curement efficiency and security, a status previously limited to cases where the demand coverage ratio was not satisfied; > promotion of the entry of new operators: operators that hold more than 40% of the installed capacity will not be able to benefit from the SEIE remuneration system Article 12 of the law governing the electricity industry sub- or from incentives for new plants. Exceptions are estab- jects the supply of electricity to extra-peninsular regions (the lished for renewable power plants that have successfully Balearic and Canary Islands) to common regulation based passed through the competitive process, that hold a li- on the specific characteristics of their geographical loca- cense or that are entered in the pre-assignment registry, tion. This special regulation was established by Royal Decree or investments in modernization and efficiency enhance- 1747/2003 and the Ministerial Order of March 30, 2006, ment that do not involve an increase in capacity or for 87 which no other agent has demonstrated an interest; muneration based on an explicit RAB and a rate of return > ownership of pumping stations used to ensure the security equal to the average yield on Spanish government securi- of supply and the system as a whole, as well as the integra- ties during the previous two years plus a spread of 200 basis tion of unschedulable renewables generators, shall pass to points. The rate of remuneration is defined in nominal pre- system operators without prejudice to the ownership struc- tax terms, while O&M costs are recognized on the basis of ture of plants already in operation. In other cases, projects standard values (costs) corrected by efficiency coefficients. will be approved using competitive procedures. Despite the For investments, a system-level ceiling has been established foregoing, companies that hold a concession for the use of at 0.12% of GDP, with a requirement for approval by the water resources or an administrative authorization but do autonomous communities. not yet have a permit to enter service will retain ownership subject to the presentation of and compliance with a work plan and payment of a guarantee equal to 10% of the in- vestment. As with the electrical system, regasification plants will be transferred to the system operator within six months; Law establishing the Comisión Nacional de los Mercados y la Competencia > the new remuneration mechanism for new plants will be es- Law 3/2013 reforms the architecture of the supervisory tablished by the Ministry of Energy in order to reduce gen- and regulatory bodies, centralizing functions with a new eration costs and congestion; agency, the Comisión Nacional de los Mercados y la Com- > the fuel cost will be calculated on a competitive basis in ac- petencia (CNMC), which incorporates the functions of a cordance with the criteria of transparency, objectivity and number of entities, including the Comisión Nacional de non-discrimination; la Competencia (CNC) and the energy industry regulator > oversight by the Ministry and the system operator: the Di- (CNE). The Commission will have both general functions, rección General de Política energética y Minas (DGPE) may such as safeguarding and fostering competition, and more reduce the remuneration due to operators if it should find specific duties in certain sectors and regulated markets. a substantial reduction in plant availability or in the plant With regard to the energy industry, the CNMC will exer- quality indices. Distribution cise supervisory and control functions over the electricity and natural gas segments, while other functions, such as settlement operations in the electrical system, have been transferred to the Ministry of Energy. The Commission be- Royal Decree 222/2008, published in February 2008, establish- gan operations on October 7, 2013. es the policies for remunerating distribution activities to ensure adequate service, offering incentives to improve service quality and reduce losses. Latin America Each year, the competent Ministry sets the remuneration to The Division operates in Latin America (Argentina, Brazil, be paid based on a proposal of the Comisión Nacional de la Chile, Colombia and Peru) through Endesa. Each country has Energía. The remuneration is adjusted annually by comparing its own regulatory framework, the main features of which the investments made with the Modelo de Red de Referencia, are described below for the various business activities. a technical reference tool that calculates the grid’s ideal devel- opment. Royal Decree Law 13/2012 reduced the remuneration of distribution for 2012 and called for a reformulation of the Generation system, which culminated in the reform of July 2013. More spe- Under the regulations established by the competent au- cifically, Royal Decree Law 9/2013 and the royal decree imple- thorities (regulatory authorities and ministries) in the vari- menting the detailed regulations established: ous countries, operators are free to make their own decisions > a transitional period with remuneration based on an implicit concerning investment in generation. Only in Argentina, fol- regulatory asset base (RAB) and a rate of return equal to the lowing the change in energy policy in recent years, is there a average yield on Spanish government securities registered regulatory framework that envisages greater public control during the previous three months plus a spread of 100 basis of investments. In Brazil plans for new generation capacity points (for July-December 2013) or 200 basis points (for 2014); are imposed by ministerial order, and this capacity is devel- > the introduction of a regulatory period until 2019 with re- oped through auctions open to all. 88 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsAll of the countries have a centralized dispatching system lations governing prices and network access. Distribution with a system marginal price. Usually, the merit order is cre- rates are revised every four years (Chile, Peru and the region ated based on variable production costs that are measured of Brazil served by Coelce) or five years (Colombia and the periodically, with the exception of Colombia, where the merit region of Brazil served by Ampla). As a result of the Ley de order is based on the bids of market operators. Emergencia Económica (the economic emergency law) of Currently, in Argentina and Peru regulatory measures are in 2002, no rate reviews have yet been conducted in Argentina, place governing the formulation of the spot market price. despite rules mandating such revisions every five years. In Argentina, the measure, adopted in 2002 following the In Chile, Brazil and Peru, distribution companies hold auc- economic and energy crisis that affected that country, is tions to procure electricity for regulated market customers, based on the assumption that there are no restrictions on while in Colombia sales companies negotiate prices directly the supply of gas in the country. Nevertheless, in view of with generation companies, passing through the average the current financial challenges faced by the wholesale market price to end users. In general, all countries have im- market, the government has announced its intention to plemented a remuneration approach based on the RAB and modify the existing regulatory framework and, in 2013- a rate of return tied to the WACC, which ensures remunera- 2014, develop an electricity market based on a cost-plus tion of the capital employed. The liberalization of the end- model. By contrast, in Peru, intervention in the formulation user market is generally at a fairly advanced stage, though of spot prices has been in place since 2008, when the ex- not yet complete. Eligibility thresholds are set at 30 kW in istence of restrictions in the gas and electricity transport Argentina (20% of volumes in 2010), 3 MW in Brazil (30% of systems caused the authorities to adopt an emergency volumes), 0.3 MW in Chile (40% of volumes), 0.1 MW in Co- measure for defining an “ideal” marginal cost, assuming lombia (35% of volumes in 2010) and 0.2 MW in Peru (44% of the absence of such restrictions on transport networks. volumes). Free-market customers can sign bilateral contracts Long-term auction mechanisms are widely used for whole- with generation companies for electricity. The regulatory au- sale energy and/or capacity sales. These systems guarantee thorities set the rates for regulated market customers. continuity of supply and offer greater stability to genera- tion companies, with the expectation that this encour- ages new investments. Long-term sales contracts (up to 30 years) are used in Chile, Brazil, Peru and Colombia. In Limits on concentration and vertical integration Brazil, the price at which electricity is sold is based on the In principle, existing legislation permits companies to take average long-term auction prices for new and existing en- part in a variety of activities in the electricity sector (gen- ergy. In Colombia, the price is set by auction between the eration, distribution, sales). Usually, greater restrictions are operators, which usually enter into medium-term contracts imposed on participation in transmission activities so as to (up to 4 years). Finally, a regulatory framework recently in- ensure that all operators have adequate access to the net- troduced in Chile and Peru allows distribution companies work. There are special restrictions on generation and distri- to sign long-term contracts to sell electricity on regulated bution companies holding stakes in transmission companies end-user markets. Auctions are gradually replacing the in Argentina, Chile and Colombia. Furthermore, in Colombia practice of regulators setting a nodal price for supplying companies formed after 1994 may not adopt or maintain a electricity to regulated customers. vertically-integrated structure. Chile, Peru and Brazil have also approved legislation to en- As to concentration within the industry, Argentina, Brazil courage the use of unconventional renewable resources, and Chile have not set any specific restrictions on vertical or which sets out the objectives for the contribution of re- horizontal integration, while in Peru business combinations newable resources to the energy mix and governs their require prior authorization above certain thresholds. In Co- generation. Distribution and sale lombia, no company may control more than 25% of the gen- eration and sales markets, while in Brazil, as previously men- tioned, there are no explicit restrictions on integration in the electricity sector, although administrative authorization is re- Distribution is performed mainly under concession arrange- quired for business combinations that would result in market ments, using long-term contracts (ranging from 30 to 95 share of over 40%, or that involve a company whose annual years or in some cases with unspecified terms), with regu- turnover exceeds BRL 400 million (about €177 million). 89 Chile Law 20.701 - Electricity Concessions Act On October 14, 2013, Law 20.701 was published in the Diario Oficial. The law simplifies the process of granting electricity concessions for the expansion of the transmission grid. Argentina government to control final rates and use administrative res- olutions to introduce exceptions to the laws governing the electricity sector and concession contracts. New rate component On November 23, 2012, the regulatory authority (ENRE) ap- proved Resolution 347 increasing final rates through the intro- duction of a new rate component to finance investment in the Resolution 95 - New remuneration for generation On March 22, 2013, the Secretaría de Energía approved Reso- distribution grid. On January 3, 2014 the Ministerio de Planificación Federal, In- versión Pública y Servicios approved Resolution 3/2014 requir- lution 95, which establishes a new methodology for remuner- ing the authorization of the Subsecretaría de Coordinación y ating generation companies. The new model should allow op- Control de Gestión for investments from the Focede fund. erators to recover fixed costs and variable costs and ensure a return on investment. The new regulations are applicable start- ing from February 2013. The new regulatory framework also es- tablishes that CAMMESA will manage the procurement of fuels Resolution 1/2014 - Extraordinary fines for supply suspension On January 3, 2014, ENRE approved Resolution 1/2014 estab- and the forward market once the existing contracts expire. lishing the methodology for determining the amounts of the On December 27, 2013, the Secretaría de Energía approved extraordinary fines that Edesur will have to pay users affected Note 8376, which allows Endesa Costanera to postpone until by the suspension of supply in Buenos Aires in the final weeks 2014 the repayment of the excess revenues received in 2013 of December and the early days of January. owing to the overlap of Resolution 95/2013 with the revenues from the availability contracts of the Costanera plant. In addition, on December 30, 2013, CAMMESA announced the amounts concerning the availability contracts of the Costanera combined-cycle plants, making it possible to account for them for tax purposes in 2013. Resolution 250/2013 - Approval of MMC revenues and offsetting against debts from the PUREE mechanism On May 7, 2013 the Secretaría de Energía approved Resolu- International Russia Wholesale market The process of reorganizing and privatizing the assets of RAO UES (the former state-controlled, vertically-integrated monopolist) was successfully completed, ending with the tion 250/2013, which determines the residual value of the dissolution of RAO UES in July 2008. The generation assets, MMC receivable (rate update scheduled for 2006 and only divided among around 20 generation companies, were partially implemented) and allows it to be offset (until Feb- acquired by domestic and foreign investors (in addition to ruary 2013) against the corresponding debt in respect of Enel, the German company E.ON and the Finnish compa- the PUREE program (a mechanism of bonuses and penal- ny Fortum also participated). RusHydro (the hydroelectric ties to encourage energy efficiency created with Resolution genco), Rosenergoatom (the company that manages nucle- 745/2005) and other debts of Edesur in respect of the system. ar power plants), InterRAO (the company engaged in trad- The resulting balance will be allocated to a specific fund cre- ing and generating electricity in Russia and abroad) and the ated in November 2012 to finance investment in the distri- grid companies remained under state control. bution network. In addition, the Secretaría de Energía issued Wholesale electricity and capacity sales were fully regulated Note 6852 of November 6, 2013, extending the netting from until 2007. Electricity is mainly sold through a day-ahead March 2013 to September 2013. market. In 2011, the temporary capacity market was replaced Extension of emergency law On October 11, 2013, the Parliament approved a two-year with the long-term capacity market (on an annual basis for 2011 and 2012 and on a multi-year basis starting from 2013) with the goal of ensuring sufficient long-term capacity avail- extension of the emergency law, Law 26.898, allowing the ability and stable revenues for generation companies. 90 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsHowever, the government, in order to ensure stable ca- vulnerable consumers, who will be defined in future de- pacity, has compiled a list of new plants (so-called DPMs) crees. that are not included in the capacity market and that re- ceive guaranteed remuneration (capacity payments) for ten years. In 2011, Enel OGK-5 placed two new gas combined- cycle plants in Nevinnomysskaya and Sredneuralskaya (410 Decree 449 - New approach for the promo- tion of renewable energy resources On May 28, 2013, government Decree 449 “on the pro- MW each) into service that will take part in the DPM capac- motion of generation from renewable energy resources ity payment system. in the wholesale market” was published. The regulatory In 2011, the government appointed a working groups com- framework establishes remuneration similar to the capac- posed of industry experts and market players (including ity payment system for thermal plants (DPM) with limits on Enel OGK-5) to prepare a proposal for reforming the mar- electricity volumes broken down by technology. The remu- ket. At the start of 2013, a proposed amendment to the neration is granted through an auction system, the first of plan for the electricity market was put forth envisioning a which carried out in September, on the basis of the mini- transition from a centralized capacity and energy market mum cost of capital declared, which is subject to a cap es- to a system based on bilateral contracts without separate tablished by the government. remuneration for capacity, while maintaining existing DPM contracts (list of new plants identified by the government as excluded from the capacity market). The first version Approval of amendments to the tax code Approval was given for changes to the MET rates (the tax on of this reform was discussed by the government in March extraction) for oil and gas. The new formula for gas will be 2013. The presentation of a second version, envisaged for implemented as from July 1, 2014, and will bring greater clar- some time between the 3rd and 4th Quarters of 2013, was ity to the tax rules governing the sector. postponed until the 2nd Half of 2014. The 1st Half of 2014 will be devoted to a revision of the heat market. Retail market Financial guarantees in the wholesale market An order of February 21, 2013, approved by the Market The market has been liberalized in several stages, with a grad- ual increase in the volumes of electricity and capacity available Council, introduced the use of financial guarantees in the for sale on the free market. Since January 1, 2011, all volumes wholesale market (day-ahead market and balancing mar- for non-residential customers are sold on the free market. In ket) conditional on monitoring conducted by a central the retail market, the supply of power to residential custom- authority (ZFR) to ensure the governance and timing of ers is ensured by guarantee suppliers operating on a monopoly payments. basis, while non-residential customers are free to choose their own suppliers. However, despite the approval of a number of Decree 511 - Grid expansion strategy ap- proved On April 9, 2013 Decree 511 “on the grid expansion strategy” measures designed to promote competition in the non-res- idential market, switching is still limited since the process in- volved is still too complex. On June 4, 2012, Decree 442 was was published. Among its provisions, it envisages the follow- published. The decree amends the pricing rules for the sales ing measures: market and simplifies the procedures for switching suppliers by > the components remunerating transmission and distri- end users. More specifically: bution grids may not exceed 40% of the final rate; > the procedures for calculating pricing and volumes for > elimination of cross subsidies by 2022; sourcing capacity on the wholesale and retail markets > introduction of possibility of diversifying the transmis- were aligned; sion rate applicable to major industrial customers on a > end users will pay the actual grid costs incurred by sup- regional basis; pliers; > the privatization of a number of companies operating > the remuneration of regulated suppliers (guarantee sup- distribution grids, which will be assigned by auction. pliers) may differ by the level of capacity available to indi- Control of one of the distribution companies, MRSK, will vidual customers; be divested in 2014; > new principles for the competitive award of guarantee > beginning in 2014, social bonus will be introduced for supplier licenses were introduced; 91 > regulator control of the financial condition of guarantee reserved for generators connected to the DSO grid; suppliers was enhanced; > suppliers of auxiliary services and suppliers of electric- > finally, as regards the opening of the market to competi- ity to the TSO grids, as well as hydro plants with an in- tion, a number of measures hindering switching were stalled capacity of less than 5 MW, were exempted from eliminated. Slovakia General information the mechanism; > as regards the must-run obligation of the ENO plant, the variable costs directly associated with the purchase of lig- nite, the purchase of CO2 allowances and other costs (water, naphtha, other additives) will be considered as eligible costs and will be reimbursed. Fixed costs will be adjusted on the The wholesale market has been liberalized completely and basis of the utilization factor of the plant. has become increasingly liquid thanks to transparent, well- operated regional trading platforms. The Slovakia - Czech Republic - Hungary market coupling project seeks to im- prove the conditions necessary to increase liquidity and Resolution on 2014 tariff for the ENO plant short-term balancing. URSO Decision 0014/2014/E was published on November 21, More than half of the electricity generated in Slovakia is pro- 2013. The decision sets a rate of €63/MWh for electricity gener- duced by nuclear power plants, followed by conventional ated using local lignite at the ENO plant in 2014. Rate revenues thermal and hydroelectric power. Lignite is the only domestic for 2014 will amount to about €93 million. fossil fuel used in electricity generation. This is the reason its use is considered to be in the “general economic interest” and is regulated under special rules, which govern the operation Romania of the Nováky power plant (ENO). The remuneration system On July 1, 2007, Romania introduced European unbundling will be in effect until 2020 and the local regulatory authority principles for electricity companies. As a result, separate com- (URSO) recognizes the costs incurred by the plant in an an- panies were created for the management of the distribution nual decree. grid and the sale of electricity, with separate administrative, The regulation of renewables generation underwent a accounting and management arrangements. All customers sweeping reform with the enactment of Law 309/2009. are also free to choose their own suppliers on the free market, The support mechanism uses a feed-in tariff guaranteed again starting from that date. Customers that do not elect to for 15 years. A further amendment of Law 309/2009 is ex- choose their own suppliers are guaranteed service continuity pected for 2014, possibly accompanied by the introduction by an implicit supplier. In addition, in June 2012 the Roma- of a single buyer. nian government: All customers can choose their own supplier and the market > transposed the Third Energy Package. In doing so it select- has been entirely liberalized since 2007. Final prices for resi- ed the independent system operator (ISO) model for the dential customers and small and medium-sized companies national transmission grid operator, decided to gradually are still regulated by URSO. eliminate regulated prices for end users of gas and elec- Decree on the regulation of the electricity industry tricity and introduced new measures to protect consumers and ensure the security of supplies; > approved a law reforming the rules governing the inde- pendence and powers of the energy regulator (ANRE). The URSO Decree 221/2013 on the regulation of the electricity measures increase the independence and oversight pow- industry received final approval in July 2013. The main issues ers of the regulator in energy markets. addressed can be summarized as follows: > with regard to fees for access to the transmission and dis- tribution grids (G-component), an access fee was levied on Distribution generators connected to the transmission or distribution Electricity distribution rates are based on multi-year regu- grids. The fee was set at a maximum of €0.5/MWh for gen- latory periods – the first period of three years (2005-2007), erators connected to the TSO grid and 30% of the capacity and subsequent periods of 5 years – to which a revenue cap 92 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsmechanism is applied. Regulated distribution revenues are for ARENH to the forecasts for the volume and profile of calculated based on: their portfolios and the share of nuclear energy used to > remuneration of the regulatory asset base (RAB) through cover consumption; the WACC; > responsibility for allocating ARENH volumes to alterna- > recognition of operating and maintenance costs; tive suppliers is assigned to regulator CRE; > recognition of grid losses; > regulated asset depreciation. > the French transmission network operator (RTE) is respon- sible for overseeing ARENH energy trades and an indepen- For the second regulatory period (2008-2012), the authority dent body (Caisse des Dépôts et Consignation) is responsible applies an efficiency factor of not less than 1% to controllable for managing cash flows; operating costs. The rate for the regulated WACC is a real pre- > the ARENH price will be set with a ministerial decree, using tax rate of 10% and the target grid loss rate is 9.5% for 2012. the level of the TaRTAM (Tarif Réglementé Transitoire d’Aju- Also during the second regulatory period, a total ceiling of stement du Marché – a rate set by the Ministry of Energy for 12% on annual distribution rate increases was imposed (ceil- those customers that had initially decided to switch to the ing determined in real terms, net of inflation). free market. The ARENH mechanism replaced the TaRTAM) The year 2013 will be treated as a stand-along year and the at December 31, 2010 as a benchmark; as from 2013 the rate was increased by 5% from its 2012 level. In October ARENH price will be determined directly by CRE. The ARENH 2013 a new rate methodology for the third regulatory period price was set at €40/MWh for 2010 and €42/MWh for 2012 (2014-2018) was approved and published. The regulated re- and 2013; turn was set at 8.52% with an additional premium of 0.5% > the Ministry was required to establish, by the end of the for investments in smart meters, subject to reductions in loss- 1st Half of 2012, the regulatory framework for develop- es on the low-voltage grid. Sales to regulated-market customers ing the capacity market, a mechanism that must ensure plant availability during peak periods. It is not yet certain whether interconnection capacity will be included, al- though it is possible that ways of incorporating it will be The method for determining the price for regulated-market explored over the medium-term. customers is based on the principle of completely covering the electricity purchase cost component in rates plus a mar- gin of 2.5% on the cost of electricity. The Romanian regulator The debate on the energy transition ANRE sets the energy portfolio for each supplier in terms of The debate on the energy transition announced by the French prices and volumes in order to arrive at a single, final tariff for President in September 2012 was formally launched on No- the entire country. vember 20 by the Minister for Ecology, Sustainable Develop- The liberalization of the retail electricity market was com- ment and Energy. In order to develop recommendations to be pleted in December 2013 for business consumers and will be incorporated in the energy policy act, originally scheduled for completed by December 2017 for residential customers. completion by the end of the 1st Half of 2013, a special expert France group was established, whose composition was suggested by the Minister. A commission was then appointed to decide the content of the law on the energy transition to be presented to Enel sells electricity in France. The regulatory framework for the Parliament by the end of 2014. the French market was considerably modified by the NOME Independently of the debate, the President also announced a Act (Nouvelle Organisation du Marché de l’électricité), the reduction of the share of nuclear power in the national gen- main components of which are: eration mix from 75% to 50% by 2025 and the closure of the > access to nuclear-generated base electricity for alternative Fessenheim nuclear plant in 2016. suppliers at regulated prices (known as ARENH or “Accès Régulé à l’électricité Nucléaire Historique”) for a 15-year transitional period, with volumes calculated annually on the basis of the volume of nuclear generation as a percentage Capacity market: Decree 2012-1405 of total consumption, with an annual ceiling of 100 TWh; On December 18, 2012, Decree 2012-1405 was published > every six months alternative suppliers can adapt requests in the Official Journal. As provided for under the NOME Act, 93 the decree introduces a capacity market. The mechanism re- is promoted in France with a feed-in tariff mechanism dif- quires sellers to provide a percentage margin over their ex- ferentiated by resource, using long-term contracts with a pected supply peak. That obligation can be fulfilled by pur- term of 15 years (geothermal, on-shore wind and biomass) chasing capacity certificates on the market. The certificates or 20 years (off-shore wind, photovoltaic and hydroelectric) would be certified by the system operator (RTE). The system that are inflation adjusted. Unlike other sources, photovol- is a hybrid centralized-decentralized scheme, as although it taic power has a more complex incentive mechanism, as charges the system operator with defining adequacy obliga- rates are adjusted on a quarterly basis using a coefficient tions, the latter will also depend on sellers’ estimated shares that measures the level of demand for new concessions in of sales. The first year for delivery is scheduled to be 2016, the previous quarter. In order to ensure achievement of the to cover the winter of 2016-2017. Additional implementing planned targets by energy source (Programmation Plurian- rules were discussed in 2013. nuelle des Investissements - PPI), the French government has Renewable Energy Bulgaria promoted the use of auction mechanisms for the develop- ment of ground-based photovoltaic plants with a capacity of more than 100 kW and off-shore wind plants. The French system also provides for the deployment of other forms of support on an annual basis depending on the resources available in the budget, with mechanisms such as acceler- ated depreciation and tax deductions of up to 33% for in- The Bulgarian incentive system primarily uses resource- vestments in the overseas departments. based feed-in tariffs. On-shore wind plants, photovoltaic plants, hydroelectric plants of less than 10 MW and biomass plants of less than 5 MW are eligible for these incentives. Greece The government made the following amendments to the The Greek incentive system uses a feed-in tariff differenti- law on renewable resources: ated by renewable energy resource. Rates for all sources > the incentive period was reduced from 15 to 12 years for are adjusted annually by the change in the Greek consum- all resources, except for photovoltaic, for which the pe- er price index (CPI) increased by 25%. The incentives are riod was cut from 25 to 20 years; awarded through a 20-year contract for all resources, with > the rates are calculated annually (June) and are held the exception of roof-mounted photovoltaic systems with constant during the entire incentive period (without a capacity of less than 10 kW, which benefit from a 25-year indexing); contract. Resources that do not use local or European invest- > eligibility for incentives takes effect as from the date the ment support systems receive a rate premium of 15-20%, work is completed. with the exception of solar power. In March 2013, acting on an appeal filed by numerous In May 2013, Law 4153/2013 modified the tax on the reve- private operators, the Supreme Administrative Court of nues of existing renewable energy plants, orginally equal to Bulgaria revoked the measure of September 2012 that 30% for photovoltaic plants and 25-30% for other renewa- introduced a new grid access fee applicable to all renew- bles. With the change, the levy on photovoltaic plants has able energy generation plants. In addition, in approving increased from 30% to 37-42% and from 27% to 34-40%, the 2014 Budget Act, two further measures charged to re- depending on the commercial operation date of the plant. newables generators were introduced, which take effect as The tax, introduced in November 2012, is temporary (July from January 2014: 2012 - July 2014) but will very likely be extended for an ad- > a tax of 20% on profits from the sale of electricity; ditional year. > a cap on the amount of electricity that can be sold to the The same law also: national market operator (NEK) at the preferential price. > modified conditions for receiving permits for new renew- France ables plants; > modified the calculation methods for determining the tax for financing renewable energy subsidies; Generation from hydroelectric, on-shore and off-shore > changed the feed-in tariffs for new photovoltaic plants wind, biomass, biogas, photovoltaic and geothermal plants entering service as from June 1, 2013; 94 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions > suspended the issue of permits for connecting photovol- taic plants and PPAs until the end of 2013 (this was ex- Spain tended until December 2014 with Law 4223/2013). The Spanish incentive system for renewables, which was Romania updated with Royal Decree 661/2007, was mainly based on feed-in tariff and feed-in premium mechanisms. All plants in operation prior to January 1, 2008 could elect one of the The main form of incentive in Romania for all renewable two incentive schemes by January 1, 2009. Following that energy resources is the green certificates system. The only exception regards hydroelectric plants with a capacity of more than 10 MW, which are not eligible for any incentive mechanism. Sellers are required to purchase a specified share of renewable energy each year through the purchase of green certificates on the basis of annual targets set by law for the share of gross generation from renewables (8.3% in 2010, rising to 20% in 2020). Owing to a short- age of supply of green certificates on the market, each year the Romanian regulator publishes the mandatory share, re- vised downward to balance supply and demand. The value of the green certificates varies on the basis of coefficients date the election was frozen for the entire incentive pe- riod. As regards the feed-in premium system, Royal Decree 661/2007 also provides for a minimum and maximum range (cap & floor) for the value of the incentive differentiated by resource. As from September 28, 2008, with Royal Decree 1578/2008, photovoltaic systems are only eligible for the feed-in tariff mechanism, with tariff rates being updated during four annual windows (convocatoria) on the basis of the capacity registered in the previous reference period. Both tariff systems are all-inclusive and premiums are ad- justed annually for inflation. In 2009 the authorities established the criteria for the crea- tion of a pre-register for access to the incentive mechanism that differ by generation technology. More specifically, for projects under the special regime. these are 2 green certificates per MWh of generation from With Royal Decree 1/2012, the Spanish government sus- biomass, geothermal and wind until 2017 (after 2017, 1 pended the pre-register procedures and eliminated in- green certificate), 6 green certificates per MWh of genera- centive mechanisms for new renewable energy projects tion from photovoltaic, and 3 green certificates per MWh not already entered in the register at the date the decree of generation from hydroelectric for new plants. The price entered force. is expressed in euros/green certificate and is determined by Law 15/2012 introduced a tax of 7% on electricity gener- law within a specified range (cap & floor). Sellers are sub- ated with any technology and a royalty of 22% for the use of ject to penalties in the event of non-compliance. water for electricity generation (reduced by 90% for plants In June 2013, the Romanian government approved meas- with a capacity of less than 50 MW). ure EGO 57/2013 temporarily modifying the green certifi- cate system. The measures (which received final approval on December 17, 2013) include the temporary suspension (from July 1, 2013 to March 31, 2017) of trade in part of the green certificates due to renewables generators (1 green certificate per MWh for wind and mini-hydro and 2 green certificates per MWh for photovoltaic). Trading in the de- ferred green certificates could gradually resume after April 1, 2017 for photovoltaic and mini-hydro and after January 1, 2018 for wind, continuing until December 2020. On December 16, 2013, Resolution 994/2013 was pub- lished. It reduced the number of green certificates for new plants as from January 1, 2014. More specifically, the new Royal Decree 2/2013 eliminated the option of remuneration based on the market price plus a feed-in premium, leaving only the feed-in tariff option (price of energy included) or the market price, with no premium, and modified the ba- sis of the indexing used for the feed-in tariff for renewables and cogeneration. Royal Decree 9/2013 was approved in July 2013 as part of the reform of the electricity industry. For renewables and cogeneration, the legislation eliminated the feed-in tariff in favor of the market price, although if the market price is not sufficient to ensure “reasonable profitability” an additional amount per MW would be paid annually. The additional re- muneration will be determined on the basis of standard op- erating expenses and investment levels of an efficient, well- values are 1.5 certificates per MWh of wind generation un- managed enterprise and for clusters of plants. In February til 2017 (after 2017, 0.75 green certificates), 3 certificates 2014 draft secondary legislation was announced, contain- per MWh of photovoltaic output and 2.3 certificates per ing the reference parameters and the new remuneration MWh of hydroelectric generation. rates. Following the period for comments from stakeholders 95 and after publication of the report of the Comisión Nacional as the date for the next auction of A-5 energy, with supply de los Mercados y la Competencia, the legislation is sched- starting as from January 2018, while on August 15 the Ministry uled to be approved by the end of March 2014. of Energy set November 18, 2013 as the date for the next auc- Latin America tion of A-3 energy, with supply starting as from January 2016. The winning bidders are granted long-term contracts whose term varies from 20 to 30 years depending on the technology. The development of renewable energy resources in Latin Solar projects will be eligible to participate for the first time. America is less diversified than in Europe. In particular, the Finally, on October 30, 2013, the state of Pernambuco set De- territory has long had a large number of major hydroelectric cember 20, 2013 as the date for the first auction reserved for plants. The main incentive approach involves long-term pow- solar power only. The winning bidders will be awarded long- er purchase agreements (PPA), tax incentives and facilitated term sales contracts with a term of 20 years, with supply start- transport rates. ing as from May 1, 2015. Brazil Chile The incentive system for renewable energy in Brazil was cre- Chile has a system mandating achievement of specified renew- ated in 2002 with the implementation of a feed-in mecha- able energy targets for those who withdraw power for sale nism (PROINFA), and was then harmonized with the sales sys- through distributors or sales companies. The law sets a level of tem for conventional power using competitive auctions. The 5% of all power under contract after August 31, 2007. Between auctions are divided between new plants and existing plants 2010 and 2014, the proportion of electricity from renewables and comprise: will remain at 5%, before rising by 0.5 points a year to reach a > Leilão Fontes Alternativas, in which all technologies compete; share of 10% by 2024. The current mechanism establishes pen- > Leilão Energia de Reserva, in which a single technology com- alties for failure to achieve the mandatory share. The Chilean petes. These auctions are normally organized to increase re- government is currently discussing the possibility of increasing serve capacity and/or promote the development of certain the mandatory share from 10% in 2024 to 20% in 2020. The technologies (such as renewables). Consejo Asesor para el Desarrollo Energético (CADE), which was At present, the auctions are divided into A-1 (normally for ex- charged with analyzing the Chilean energy market, produced isting plants), A-3 and A-5 auctions on the basis of the genera- a report recommending a renewables target of 15% by 2024. tor’s obligation to supply the energy awarded after one, three The proposal to set the target at 20% by 2020 was recently or five years. An auction typically has two phases: the descend- approved by the Senate and is currently being examined by ing-clock phase in which the auction organizer establishes the the Energy Committee of the Chamber of Deputies. All renew- opening price for the auction and the generators submit de- able energy resources are eligible for the purposes of meeting creasing bids; and the pay-as-bid phase in which the remaining the requirement. For hydroelectric plants with a capacity of up generators further reduce the price until the supply of power to 40 MW, the system provides for a corrective factor which covers all the demand up for auction. The winning bidders are counts all of the first 20 MW and a declining proportion of the granted long-term contracts whose term varies by resource: 15 capacity between 20 and 40 MW. years for thermal biomass plants, 20 years for wind plants and As part of the process of revising the long-term targets in support 30 years for hydroelectric plants. of renewable energy resources, on October 22, 2013, Law 20698 The Brazilian auction mechanism is used for all renewable re- was published. It establishes that a certain percentage of total sources, with the exception of hydroelectric plants with a ca- contractual electricity supplied to the electrical system shall be pacity of more than 30 MW. generated from renewable resources. More specifically, for con- On March 6, 2013, the National Council for Energy Policy pub- tracts signed between 2007 and 2013, the target is 10% by 2024, lished Decision 3/2013 with amendments of the algorithm while for contracts signed after 2013 the target is 20% by 2025. used for calculating the exchange price (PLD). Pending the im- On March 8, 2013, Decreto Supremo 114 of the Energy Ministry plementation of the new model, as from August 1, 2013, the was published in Chile’s official journal. The decree governs a resolution introduces a transitional model providing for two number of aspects of Law 19657 concerning geothermal pow- separate prices in the wholesale market (PLD1 and PLD2). er. The decree establishes a number of departures from the On July 10, 2013, the Ministry of Energy set December 13, 2013 provisions of the previous Decree 32, with improvements in a 96 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsnumber of aspects, including the granting of “exclusive rights” gible for the incentive system. The auctions start with in obtaining a production concession once exploration activi- a maximum price and close depending on the bid price ties have been completed, creating greater legal certainty and (a pay-as-bid mechanism). The price can be adjusted on protection for investors. the basis of the US consumer price index if the increase Mexico The renewables promotion law (LAERFTE) was published in 2008 to govern the regulatory framework for the transition of the country towards clean energy technologies. On June 3, 2013, the Mexican government recently took steps to is more than 5%. Central America Siepac - Regional Electricity Market further develop a regulatory framework in support of rene- On June 1, 2013, the regional regulator (CRIE) announced wables, publishing the National Climate Change Strategy, the official launch of the Regional Electricity Market, with the which sets a target of reducing greenhouse gas emissions termination of the transitional system in place since March from their 2000 level by 30% by 2020 and by 50% by 2050, 2013. The implementation of regional regulations marks the incorporating renewable resources into the energy matrix, first step towards the consolidation of the rules governing implementing energy efficiency measures and transitio- cross-border trade in electricity among 6 countries in Central ning to smart cities. America (Guatemala, El Salvador, Honduras, Nicaragua, Costa Private investors participate as either independent power Rica and Panama). producers who sell all their output to the Comisión Fed- eral de Energía using auction mechanisms, self-suppliers or small-scale producers (with an installed capacity of less than Panama On June 12, 2013, in line with an energy policy directed at 30 MW) who sell their output at rates governed by the Co- diversifying the energy mix, the Panamanian government misión Federal de Energía. ratified Law 605, which establishes tax incentives to support On June 7, 2013, the Mexican government published an the development of solar power. The new incentives provide amendment to the renewable energy law (LAERFTE) that re- for an exemption from import tax, tax credits (5% of capital defines the standards used for hydroelectric plants to qualify expenditure) and the option of acceleration depreciation. as renewable resource plants. Large hydro plants (>30 MW) may now qualify as such if the ratio of generation capacity to the area of the reservoir containment wall is greater than Costa Rica On September 10, 2013, President Chinchilla approved De- 10W/m2, thereby gaining access to renewable energy incen- cree 62-2012 formalizing the creation of a voluntary car- tives, such as lower transport costs and tax relief. bon trading system. The market, which uses a cap and trade Finally on December 20, 2013 the anticipated energy reform mechanism linked to reforestation and energy efficiency pro- measures were published, with provisions intended to reor- jects, should begin operations in 2014. ganize the energy and oil industries. The reform, which en- On December 17, 2013, the local regulator published Resolu- visages the participation of private-sector operators in sec- tion 105 updating the remuneration of existing plants, pro- tors that had previously been restricted to the state, such as viding for an increase of 2% on the previous values. electricity distribution, will be completed during 2014 with the publication of the implementing decrees, including one governing the new regulatory framework for facilitating the El Salvador development of geothermal power. On August 22, 2013, Congress approved Decree 460 setting Peru The renewable energy incentive system is based on auc- out the rules governing the award of concessions for small- scale projects. From the entry into force of the decree, the leg- islature, and no longer the regulator, will have the authority tions differentiated by renewable resource. It was in- to approve concessions for mini-hydro and geothermal pro- troduced in 2010. The auctions are defined in terms of jects with an installed capacity of up to 5 MW. electricity generated for wind, solar and biomass plants, and by capacity for hydroelectric facilities. Hydroelectric plants with a capacity of more than 20 MW are not eli- 97 United States The United States has a two-level renewables incentive sys- tem. The federal level envisages various types of support, including tax incentives for production and investment (the Production Tax Credit and the Investment Tax Credit), accel- erated depreciation and federal subsidies. At the state level, the main incentive is a Renewable Portfolio Standard (RPS) mechanism, i.e. a system of mandatory percentages of gener- ation from renewables for utilities, with targets differing from state to state. Most states have adopted systems of tradable certificates but there is no corresponding platform active at the federal level. The American Taxpayer Relief Act, signed on January 2, 2013, extended the life of the Production Tax Credit for wind plants by one year and changed the termina- tion dates for the Production Tax Credit for all other technolo- gies: plants no longer must enter service by the termination date in order to qualify but rather must begin construction by December 31, 2013. Between May and September 2013, the Internal Revenue Service published guidelines with more detailed operational specifications of the requirements for the definition of “begin construction” for the purposes of qualifying for the Produc- tion Tax Credit. The termination date of the Tax Credit Invest- ment for solar power was left unchanged, with plants having to enter service by December 31, 2016. 98 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsMain risks and uncertainties Due to the nature of its business, the Group is exposed to responsibilities. More specifically, the governance model for a variety of risks, notably market risks, credit risk, liquidity financial, commodity and credit risks was consolidated. In risk, industrial and environmental risks and regulatory risk. addition to setting out specific policies, the model assigns In order to limit its exposure to these risks, the Group ana- strategic policy-making responsibilities for risk management lyzes, monitors, manages and controls them as described activities and supervision of risk management and control ac- in this section. tivities to special risk committees, both at the Group level and From an organizational standpoint, over the last year spe- at the division/company level, and establishes the structure cific risk management policies were developed for each cat- of an operational limits system for the Group and, if neces- egory of risk, identifying management and control roles and sary, for the individual divisions/companies. Risks connected with market liberalization and regulatory developments The energy markets in which the Group operates are cur- eration mix, improving the competitiveness of plants through rently undergoing gradual liberalization, which is being im- cost leadership, seeking out new high-potential markets and plemented using different approaches and timetables from developing renewable energy resources with appropriate in- country to country. vestment plans in a variety of countries. As a result of these processes, the Group is exposed to increas- The Group often operates in regulated markets or regulated ing competition from new entrants and the development of regimes, and changes in the rules governing operations in organized markets. such markets and regimes, and the associated instructions The business risks generated by the natural participation of and requirements with which the Group must comply, can the Group in such markets have been addressed by integrat- impact our operations and performance. ing them along the value chain, with a greater drive for tech- In order to mitigate the risks that such factors can engender, nological innovation, diversification and geographical expan- Enel has forged closer relationships with local government sion. More specifically, the initiatives taken have increased and regulatory bodies, adopting a transparent, collaborative the customer base in the free market, with the aim of inte- and proactive approach in tackling and eliminating sources of grating downstream into final markets, optimizing the gen- instability in regulatory arrangements. Risks connected with CO2 emissions In addition to being one of the factors with the largest po- tential impact on Group operations, emissions of carbon di- mitigate the risk factors associated with CO2 regulations, the Group monitors the development and implementation of EU oxide (CO2) are also one of the greatest challenges facing the Group in safeguarding the environment. and Italian legislation, diversifies its generation mix towards the use of low-carbon technologies and resources, with a fo- EU legislation governing the emissions trading scheme im- cus on renewables and nuclear power, develops strategies poses costs for the electricity industry, costs that could rise to acquire allowances at competitive prices and, above all, substantially in the future. In this context, the instability of enhances the environmental performance of its generation the emissions allowance market accentuates the difficul- plants, increasing their energy efficiency. ties of managing and monitoring the situation. In order to 99 Market risks As part of its operations, Enel is exposed to a variety of mar- To maintain this risk within the limits set out each year in the ket risks, notably the risk of changes in interest rates, ex- Group’s risk management policies, Enel uses derivatives ob- change rates and commodity prices. tained in the market. Risks connected with commodity prices and supply continuity Given the nature of its business, Enel is exposed to changes specification of a ceiling for maximum acceptable risk and the in the prices of fuel and electricity, which can have a signifi- implementation of a hedging strategy using derivatives. cant impact on its results. For a more detailed examination of commodity risk manage- To mitigate this exposure, the Group has developed a strat- ment and the outstanding derivatives portfolio, please see egy of stabilizing margins by contracting for supplies of fuel note 6 of the consolidated financial statements. and the delivery of electricity to end users or wholesalers in In order to limit the risk of interruptions in fuel supplies, the advance. Group has diversified fuel sources, using suppliers from dif- The Group has also implemented a formal procedure that pro- ferent geographical areas and encouraging the construction vides for the measurement of the residual commodity risk, the of transportation and storage infrastructure. Exchange rate risk The Group is exposed to the risk that changes in the ex- > financial assets/liabilities measured at fair value. change rates between the euro and the main other curren- The consolidated financial statements are also exposed to cies could give rise to adverse changes in the euro value of the exchange rate risk associated with the consolidation val- performance and financial aggregates denominated in for- ues of equity investments denominated in currencies other eign currencies. The exposure to exchange rate risk, which is than the euro (translation risk). mainly denominated in US dollars, is attributable to: Exchange rate risk is managed within the Group policies for > cash flows in respect of the purchase or sale of fuel or managing financial risks, which provide for the stabilization electricity on international markets; of the effects of changes in exchange rates with the exclu- > cash flows in respect of investments in foreign currency, sion of translation risk. To this end, the Group has developed dividends from unconsolidated foreign subsidiaries or the operational processes that ensure the systematic coverage purchase or sale of equity investments; of exposures through appropriate hedging strategies, which > financial liabilities assumed by the Parent Company or the typically involve the use of financial derivatives. individual subsidiaries denominated in currencies other For more details, please see note 6 of the consolidated finan- than the currency of account or functional currency of the cial statements. company holding the liability; Interest rate risk The nature of the financial risks to which the Group is ex- refinance debt falling due on changing market terms and posed is such that changes in interest rates could give rise to conditions. increases in net financial expense or adverse changes in the Our interest rate risk management policy seeks to maintain value of assets/liabilities measured at fair value. the risk profile established within the framework of the for- The main source of exposure to interest rate risk for the Enel mal risk governance procedures of the Group, curbing bor- Group comes from the fluctuation in the interest rates as- rowing costs over time and limiting the volatility of results. sociated with its floating-rate debt and from the need to This goal is pursued through the strategic diversification of 100 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsthe nature of our financial assets and liabilities and the use non-recourse assignment of invoiced receivables and receiva- of derivatives on over-the-counter markets. bles to be invoiced in respect of customers in the enhanced For more details, please see note 6 of the consolidated finan- protection market in Italy. cial statements. Credit risk In subsequent years, partly in view of the macroeconomic en- vironment, the use of assignments was extended both geo- graphically and to invoiced receivables and receivables to be invoiced of companies operating in other segments of the The Group’s commercial, commodity and financial operations electricity industry than retail sales (such as, for example, re- expose it to credit risk, i.e. the possibility that an unexpected ceivables from generation activities, sales of electricity as part change in the creditworthiness of a counterparty could im- of energy management operations, the sale of green certifi- pact the creditor position, in terms of insolvency (default risk) cates or electricity transport services). or changes in its market value (spread risk). All of the above transactions are considered as non-recourse Recent economic conditions, with the instability and uncer- transactions for accounting purposes and therefore involved tainty of the financial markets and the global economic crisis, the full derecognition of the corresponding assigned assets have given rise to an increase in average payment times by from the balance sheet, as the risks and rewards associated counterparties. with them have been transferred. In order to continue to minimize credit risk, the Group’s gen- eral policy calls for an assessment of the creditworthiness of the counterparties – on the basis of internal rating models Liquidity risk developed on a statistical basis and information supplied by Liquidity risk is the risk that the Group, while solvent, would external providers – and the structured monitoring of risk ex- not be able to discharge its obligations in a timely manner posures to promptly identify any deterioration in credit qual- or would only be able to do so on unfavorable terms owing ity, including with respect to specified limits. These methods to factors connected to the perception of its riskiness by the have been implemented in all the main divisions/countries, market or to systemic crises (credit crunches, sovereign debt with the application of uniform risk measurement metrics crises, etc.). that enable the consolidation and monitoring of credit risk As part of the Group’s formal risk governance procedures, exposure at the Group level. risk management policies are designed to maintain a level As regards credit risk in respect of the solvency of counter- of liquidity sufficient to meet its obligations over a speci- parties in commodity transactions, the Group’s Credit Risk fied time horizon without having recourse to additional Committee has approved, in addition to a new centralized sources of financing, as well as to maintain a prudential li- assessment system that enhances risk monitoring and man- quidity buffer sufficient to meet unexpected obligations. In agement, the use of portfolio limits both for the divisions/ addition, in order to ensure that the Group can discharge its countries involved and at the Group level. medium and long-term commitments, Enel pursues a bor- As to credit risk in respect of open positions in financial trans- rowing strategy that provides for a diversified structure of actions, including those involving derivatives, and in the light financing sources to which it can turn and a balanced matu- of the recent downgrades made by international rating agen- rity profile. Liquidity requirements are primarily met through cies, risk is minimized by selecting counterparties with high cash flows generated by normal operations, ensuring the ap- credit ratings from among leading Italian and international propriate management of any excess liquidity. financial institutions, portfolio diversification, entering into In order to optimize liquidity management within the margin agreements for the exchange of cash collateral, or the Group, Enel SpA (directly and through its subsidiary Enel use of netting arrangements. The credit risk is measured at Finance International NV) meets the cash needs of the both the individual counterparty level and the portfolio level Group companies through centralized access to the mon- using an internal valuation system in this case as well. ey and capital markets and provides management and co- To manage credit risk even more effectively, for a number of ordination services for Group companies that can access years the Group has carried out non-recourse assignments of market financing directly. receivables, mainly specific segments of the commercial port- Underscoring the Enel Group’s continued capacity to ac- folio. More specifically, in 2011 a five-year framework agree- cess the credit market despite the recent crisis in the finan- ment was reached with two leading banks for the ongoing cial markets, in 2013 the Group carried out bond issues with 101 institutional investors totaling €2.6 billion and bond issues In Europe, austerity policies will continue to slow economic within the framework of the Global Medium-Term Notes growth in 2014 as well, especially in Italy and Spain. The expan- program totaling €0.5 billion. sionary stance of monetary policy in the United States, which For more details, please see note 6 of the consolidated finan- gave rise to the ongoing recovery, will probably be tapered in cial statements. Rating risk the coming months, given the need to reconcile growth objec- tives with the sustainability of the debt, while in Japan those policies are expected to be kept in place for a longer period. In the Middle East and North Africa the political situation Credit ratings, which are assigned by rating agencies, impact is marked by a degree of permanent conflict, mainly do- the possibility of a company to access the various sources of mestic, balanced by a certain easing of relations with the financing and the associated cost of that financing. Any re- western world. duction in the rating could limit access to the capital market In emerging Asia, the leading economies (China and India) and increase finance costs, with a negative impact on the continue to be affected by the slowdown in foreign demand performance and financial situation of the company. from the developed economies (compared with the peaks In 2013, Standard & Poor’s revised the Enel Group’s long- achieved prior to the crisis), which has not yet been entirely term rating following the agency’s downgrade of the rating offset by growth in domestic demand. of the Italian Republic, in reflection of the deterioration of Finally, it is reasonable to expect that the Latin American macroeconomic conditions in the country. The stable out- economies, despite the changes wrought with the most re- look reflects the agency’s expectations that Enel will achieve cent elections in Chile and Argentina, will continue to make a and maintain performance and financial targets commensu- substantial contribution to the growth of the world economy. rate with its current rating as a result of its continued delev- eraging efforts, the large contribution of regulated activities and its good geographical and technological diversification outside Europe. At the end of the year Enel’s rating was: (i) “BBB” for Stand- Industrial and environmental risks ard & Poor’s with a stable outlook; (ii) “BBB+”, with a nega- Breakdowns or accidents that temporarily interrupt opera- tive credit watch for Fitch; and (iii) “Baa2”, with a negative tions at Enel’s plants represent an additional risk associated outlook for Moody’s. with the Group’s business. Country risk Industrial and environmental risks are therefore managed by all business lines (Generation, Distribution, Sales and Up- stream Gas) and all process phases (Business Development, By now, more than 50% of the revenues of the Enel Group Engineering Procurement and Construction, Operation are generated outside Italy. The major international ex- and Maintenance, Decommissioning). The Group is gradu- pansion of the Group – located, among other countries, in ally extending its risk management models to all divisions Latin America and Russia – therefore requires the Group to and countries in order to be able to use statistical methods assess its exposure to country risk, namely the macroeco- to assess risks in probabilistic and monetary terms. This will nomic, financial, regulatory, market, geopolitical and social make it possible to characterize each plant/network/pro- risks whose manifestation could have a negative impact on ject using specific risk factors. In addition, new models have income or jeopardize corporate assets. In order to mitigate been developed to measure the risk of natural disasters, this form of risk, the Group has adopted a country risk calcu- such as earthquakes, hurricanes, flooding, landslides and lation model (using a shadow rating approach) that specifi- major climatic events, with the objective of identifying the cally monitors the level of country risk in the areas in which most critical areas and preparing appropriate instruments the Group operates. to safeguard the industrial value of plants. From a macroeconomic point of view, in 2013 we wit- The attention that Enel devotes to environmental issues nessed the gradual stabilization of international markets, also prompted the development of models that enable the with the easing of restrictive fiscal policies in Europe and Group to measure, in probabilistic terms, the exposure of the continuation of expansionary monetary policies in the each plant to risks involving all possible segments of the United States and Japan. environment, such as the air, water, land and underground. 102 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsIn order to mitigate such risks, the Group adopts leading eration has made it necessary to take a new approach to prevention and protection strategies, including preventive managing risks through the analysis of grid losses and the and predictive maintenance techniques and technology management of active distribution systems in order to en- surveys to identify and control risks, and recourse to inter- sure the stability and security of electrical system, integrat- national best practices. ing management of ordinary risks with the optimization Any residual risk is managed using specific insurance poli- of service quality and managing exceptional risks deriving cies to protect corporate assets and provide liability cov- above all from major exogenous events. erage in the event of harm caused to third parties by ac- With regard to nuclear power generation, Enel operates in cidents, including pollution, that may occur during the Slovakia through Slovenské elektrárne and in Spain through production and distribution of electricity and gas. Endesa. In relation to its nuclear activities, the Group is ex- As part of its strategy of maintaining and developing its posed to operational risk and may face additional costs cost leadership in the markets in which it has generation because of, inter alia, accidents, safety violations, acts of operations, the Group is involved in numerous projects for terrorism, natural disasters, equipment malfunctions, mal- the development, improvement and reconversion of its functions in the storage, movement, transport and treat- plants. These projects are exposed to the risks commonly ment of nuclear substances and materials. In the countries associated with construction activities, which the Group where Enel has nuclear operations, specific laws based on mitigates by requiring its suppliers to provide specific guar- international conventions require operators to obtain in- antees and, where possible, obtaining insurance coverage surance coverage for liability for risks associated with the against all phases of construction risk. use and transport of nuclear fuel, with coverage ceilings With regard to distribution operations, the evolution of the and other terms and conditions set by law. Other mitigating electrical system from a passive network to an active net- measures have been taken in accordance with international work as a result of the sharp increase in distributed gen- best practices. 103 Outlook The Group’s strategic priorities in the period covered by the smart grids field, Enel intends to strengthen its leadership 2014-2018 Business Plan respond to the expected structural position, leveraging the key driver, technological innovation, evolution in the world’s macroeconomic conditions and in and a geographically and technologically well-diversified as- the energy industry. More specifically, the former will contin- set portfolio which forms the foundation of the Group’s fu- ue to move ahead at two speeds: on the one hand the Euro- ture development. pean countries, which are emerging slowly from the crisis; on Reducing debt and generating cash flow will also remain a the other the emerging economies, especially those in Latin top priority for the Group. And maximization of cash flow is America, where electricity demand is still expanding rapidly. precisely the goal of the plan for optimizing operating costs In this environment, Enel expects the following main trends launched in 2013, which has already led to the identification to drive the evolution of these scenarios: (i) the emerging of major opportunities for efficiency gains, with results that markets will continue to fuel global growth; (ii) technologi- have easily exceeded expectations. These opportunities will cal innovation will be one of the key factors driving trends continue to be pursued in the coming years, with a special in the energy sector; (iii) end users will be increasingly well- focus on businesses in the mature markets. informed about technology and environmental matters; and In the 2014-2018 period, the Group expects to generate about (iv) regulatory systems will sharpen their focus on environ- €50 billion in operating cash flow (net of financial expense mental issues and system costs. and taxes), to be used to pursue the gross investment plan of In the business plan, the Group confirms the increasingly im- €28.6 billion and to pay dividends of €11.6 billion. The remain- portant role of the emerging markets, with an investment ing free cash flow, equal to about €10 billion, together with policy targeted at consolidating its position and simplifying the proceeds of the disposal plan in the expected amount of its corporate structure. Renewables will expand substantially, more than €4 billion, will be devoted to reducing the debt and with careful selection of high-return investment opportuni- minority buyouts, with a view to simplifying the Group’s struc- ties. Another area of action will be the retail market, energy ture and gradually enhancing the dividend policy. All of this efficiency and, more generally, value-added services, a seg- is expressed in the financial targets set out in the 2014-2018 ment with robust growth potential. In this area, as in the Business Plan: Billions of euro Gross operating margin Group net income Net financial debt 2014 about 15.5 about 3 about 37 2016 about 16.5 about 3.7 about 39 2018 about 18 about 4.5 about 36 104 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsSustainability Our mission At Enel our mission is to create and deliver value in the international electricity market, benefiting our customers and our shareholders, fostering competition in the countries in which we operate, and meeting the expectations of all those who work with us. Enel works to serve the community, while respecting the environment and human safety, with a commitment to leaving future generations a better world. 106 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsSustainability in Enel At Enel, sustainability is a strategic part of running and de- lines established in our Strategic Sustainability Plan; veloping our business in line with our business plan. The in- > established the country/division CSR committees and tegration of governance, the environment, and managing appointed the CSR managers in the various countries in relationships with interest groups and communities with order to implement local sustainability policies and strat- economic and financial factors enables us to create value egies and the various CSR projects and other activities both for the business and for the social contexts in which called for in the Plan. the Group operates, from the perspective of stable growth In particular in 2013, Enel Green Power began efforts to and social inclusion over the medium and long term. bring the culture of sustainability to its own processes so as In 2013, in line with our in-house CSR policy, we: to orient its business model to the creation of shared value > continued developing the organization and structure of and the rational use of resources. The company also estab- the CSR processes of planning, monitoring and reporting; lished short, medium and long-term action plans in order to > structured coordination by the Parent Company of the ensure that sustainability becomes an integrated part of its various CSR policies and activities, as well as of the guide- day-to-day operations. The Enel Group’s materiality matrix In line with the latest international innovations, Enel has con- both the Company and our stakeholders (i.e. the “material is- tinued working on the materiality analysis process, efforts sues”) and to verify the degree of alignment or misalignment which began in 2012 in order to map out and study the issues between outside expectations and internal relevance. of interest and the expectations of our stakeholders, as well as Based on this assessment, we have established the objec- to bring the Company’s processes and procedures in line with tives of the Strategic Sustainability Plan and determined the these expectations. The unification of these two perspectives content and information to be included in the Sustainability will enable us to identify the issues of most importance to Report. The 2013-2017 Sustainability Plan The sustainability plan focuses on the most relevant issues as > Environmental issues: lowering emissions, making effi- determined by the analysis of materiality, while also speci- cient use of water, biodiversity, and global environmental fying the goals and specific targets that Enel has set for the management. Group for the coming years. > Social issues: access to electricity, responsible relation- > Business and governance issues: creation of financial ships with the community, the respect of individual rights, value, governance, fairness and transparency, develop- quality for the customer, the development of people, di- ment of renewable energy, energy efficiency, and ESG versity and equal opportunity, health and safety in the risk management. workplace, and a responsible supply chain. The CSR data collection system In order to monitor our sustainability performance and to lect and monitor financial and other data and related com- ensure the thorough traceability of data owners, we have munications in an integrated, consistent manner throughout launched a data collection system in collaboration with the the Group and in line with international standards. External Relations and Administration, Finance & Control de- The system is also in line with the guiding principles of the partments. Beginning in 2014, after establishing a dedicated One Company project and will ensure that data will be gath- information system that is to be integrated into the current ered at the individual company level by way of an accurate system used to collect financial data, it will be possible to col- process of identifying the various data owners. 107 Sustainability reporting Since 2002, Enel has, with its Sustainability Report, main- Enel has also begun revising the structure of our Sustain- tained a constant commitment to measuring and reporting ability Report and the process of materiality analysis based on corporate responsibility, ensuring maximum transparency on the new GRI (GRI-G4) guidelines published in May 2013, for all its stakeholders and continuous implementation of its while also beginning the process of integrated the new G4 sustainability strategy. The reporting process involves collect- indicators into our CSR data collection system. ing and analyzing specific key financial, environmental and The thoroughness and reliability of the Sustainability Report social performance indicators. are assessed by an external auditing firm, by the Control & Enel’s Sustainability Report is prepared in accordance with Risk Committee and also, since 2012, by the Nomination & the Global Reporting Initiative (GRI) international standard Corporate Governance Committee. The document is then and the related Electric Utility Sector Supplement (EUSS), as approved by the Enel SpA Board of Directors before being well as with the United Nations Global Compact and princi- presented to the shareholders. ples of accountability. The Enel Group in international sustainability networks Since 2004, Enel has been an active member of the United integration of sustainability in business strategy. Enel is one Nations Global Compact, and since 2011 we have been a of the first corporations to have confirmed its participation member of the steering committee of the Global Compact in the pilot stage of this program. LEAD program, which is made up of the organizations most committed to promoting new global initiatives in Other international sustainability initiatives that Enel has sustainability. undertaken include: The Global Compact is an action program being promoted > supporting the Global Reporting Initiative (GRI) in defin- by the UN Secretary General with the goal of involving the ing the new GRI-G4 guidelines, which were presented in private sector in a new form of public-private partnership May 2013 in Amsterdam during the Global Conference through adherence to the ten universal principles that con- on Sustainability Reporting; cern human rights, employment, environmental protection > our active contribution, as a member of the IIRC pilot and the fight against corruption. program, in developing the new international formats In 2013 in particular, Enel’s efforts focused on our involve- that will be used to certify and standardize integrated ment in the global consultation to set the targets of sustain- reporting; able development that are to replace the Millennium Devel- > our involvement – as the first utility in the world to do opment Goals that will expire in 2015. so – in the assessment of Ceres, the non-profit organiza- The post-2015 agenda was the focus of the 2013 Leaders tion that is mobilizing businesses and investors to take on Summit held in New York in September 2013, which brought the challenges of sustainability as concerns its efforts to together over 3,000 representatives from businesses, insti- manage water-related risks. Named “Aqua Gauge”, the tutions and civil society from around the world in order to initiative was presented to the European Parliament in establish the next global architecture for corporate sustain- September 2013; ability. In conjunction with the Leaders Summit, the United > our commitment to support the domestic and interna- Nations selected Enel to present the Lead Board Program, tional activities of Transparency International, serving as which seeks to provide company boards with in-depth in- members of the Business Advisory Board of this impor- formation prepared by leading international experts in the tant organization. 108 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsEnel and socially responsible investors Eleven years ago, Enel started down the road to achieving diversified geographical presence, covering continental Eu- the highest sustainability standards and has been rewarded rope, the United Kingdom and North America. with the interest of socially-responsible investment funds, which continue to expand despite the challenging interna- In 2013, for the tenth straight year, Enel was included in tional economic climate: at December 31, 2013, Enel shares the Dow Jones Sustainability Index, a market benchmark were held by 117 (108 in 2012) socially-responsible investors which includes the world’s leading companies that meet (SRIs), representing about 15.6% of our identified institu- strict economic, social and environmental criteria. During tional shareholders (14.6% in 2012). the year, Enel was again included in the FTSE4Good Index, This figure refers to SRIs that include Environmental, Social, which measures environmentally sustainable corporate Governance (ESG) standards among the criteria used in mak- practices, relations with stakeholders, respect for human ing investment decisions. At December 31, 2013, these in- rights, the quality of working conditions, and the tools that vestors held around 5.5% of Enel’s total shares outstanding companies employ to fight corruption, and we are one of (5.0% in 2012), equal to about 8% of the float (7.3% in 2012). the utility companies involved in the Carbon Disclosure Pro- These funds represent a stable shareholder base with a well- ject (CDP). The four pillars of corporate ethics For over ten years, Enel has had a solid system of ethics that practices, a body of “common law” governing participation in underlies our sustainability efforts. This system has become a the company, the rules of citizenship that everyone who works dynamic set of rules constantly incorporating international best for and with Enel must respect and apply in their daily activities. Code of Ethics Our awareness of the social and environmental repercus- The document applies to the entire Group, with consid- sions of the Group’s activities and the importance of a trans- eration given to the cultural, social and economic diversity parent and fair approach with stakeholders prompted Enel, found in the various countries in which Enel does business. in 2002, to adopt a Code of Ethics. The Code is binding on the conduct of all of Enel’s employ- As such, this Code of Ethics lays the groundwork for all of our ees. All of the companies in which Enel has an equity interest activities and expresses our commitment and ethical respon- and the Group’s major suppliers and partners are also re- sibility in doing business, while also guiding and standard- quired to adhere to the general principles contained therein. izing corporate conduct based on the utmost transparency, Any stakeholder can report a violation or suspected violation respect and fairness towards all stakeholders. of the Code of Ethics through dedicated channels. Compliance Model (Legislative Decree 231/2001) In 2002, the Board of Directors of Enel SpA approved a Com- ency and responsibility in relations within the Company and pliance Model that meets the requirements of Legislative with the outside world. Decree 231 of June 8, 2001, which introduced into Italian law In 2010, Enel SpA also approved specific Guidelines aimed at a system of administrative (though actually criminal) liability extending the principles set out in the Compliance Model to for companies for certain types of offences committed by the Group’s foreign subsidiaries, in order to make them more its directors, executives or employees on behalf of or to the aware of the importance of ensuring the same conditions of benefit of the company. fairness and transparency in the conduct of their business Having been approved and implemented by the Group com- and corporate activities and to prevent situations that could panies in Italy, the model serves as a point of reference for all result in administrative liability pursuant to Legislative De- who act in the name and on behalf of Enel such that they can cree 231/2001 for the Parent Company, Enel SpA, and the conduct themselves in line with the standards of transpar- other Italian companies of the Group. 109 Zero-Tolerance-of-Corruption Plan In 2006, the Board of Directors approved the adoption of the The ZTC Plan does not replace or overlap the Code of Ethics Zero-Tolerance-of-Corruption (ZTC) Plan as a concrete move or the Compliance Model, but is rather a more detailed plan marking Enel’s participation in the Global Compact (a 2000 for addressing the issue of corruption by following a series of UN program of action) and the Partnering Against Corruption recommendations for implementing principles developed by Initiative (PACI) promoted by the World Economic Forum in Transparency International. Davos in 2005. Policy on Business and Human Rights In order to give effect to the guidelines of the UN Forum on rights, in 2013 we also launched the risk-assessment process Business and Human Rights, on February 5, 2013, the Board aimed at identifying the main risks in the area of human rights of Directors of Enel SpA approved a Human Rights Policy, that the Company may encounter in the course of operations which was subsequently extended to all of the Group’s sub- in various countries and through relations with third parties sidiaries. In line with the Code of Ethics, the policy sets out the in general. The first phase of this risk assessment called for the commitments and responsibilities in respect of human rights inclusion of an ESG country-risk indicator within the Group’s on the part of the employees of Enel SpA and its subsidiar- risk-management process in order to quantify the risks that ies, whether they be directors or employees in any manner could have a negative impact on the Company, such as the of those companies. Similarly, with this formal commitment, violation of human rights and the potential involvement in Enel explicitly becomes a promoter of the observance of such the illegal conduct of others, which could expose the Compa- rights on the part of contractors, suppliers and business part- ny to systemic risks connected with certain institutional and ners as part of its business relationships. environmental conditions. Within the scope of the due diligence in respect of human Selected sustainability indicators Net efficient capacity by primary energy source MW Net efficient thermal capacity - Coal - CCGT - Fuel oil/gas Total Net efficient nuclear capacity Net efficient renewable capacity - Hydro - Wind - Geothermal - Biomass and co-generation - Other Total 2013 2012 Change 17,501 16,584 22,592 56,677 5,370 17,589 15,684 23,286 56,559 5,351 30,463 30,436 5,200 4,394 795 134 277 769 160 170 36,869 35,929 (88) 900 (694) 118 19 27 806 26 (26) 107 940 Total net efficient capacity 98,916 97,839 1,077 110 -0.5% 5.7% -3.0% 0.2% 0.4% 0.1% 18.3% 3.4% -16.3% 62.9% 2.6% 1.1% EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsNet efficient capacity by geographical area MW Italy Iberian peninsula Latin America Russia Slovakia North America Romania Belgium Greece France Morocco Bulgaria 2013 2012 Change 39,923 39,940 24,068 17,155 9,107 5,399 1,683 534 406 290 186 123 42 23,931 16,794 9,052 5,400 1,239 498 406 248 166 123 42 (17) 137 361 55 (1) 444 36 - 42 20 - - - 0.6% 2.1% 0.6% - 35.8% 7.2% - 16.9% 12.0% - - Total net efficient capacity 98,916 97,839 1,077 1.1% Net electricity generation by primary energy source GWh Net thermal electricity generation - Coal - CCGT - Fuel oil/gas Total Net nuclear electricity generation Net renewable generation - Hydro - Wind - Geothermal - Biomass and co-generation - Other Total Total net electricity generation 2013 2012 Change 82,388 40,766 29,312 91,729 42,908 35,211 (9,341) (2,142) (5,899) 152,466 169,848 (17,382) 40,591 41,378 (787) 74,344 12,314 5,581 546 304 68,139 9,138 5,492 644 194 6,205 3,176 89 (98) 110 93,089 83,607 9,482 286,146 294,833 (8,687) -10.2% -5.0% -16.8% -10.2% -1.9% 9.1% 34.8% 1.6% -15.2% 56.7% 11.3% -2.9% 111 Net electricity generation by geographical area GWh Italy Iberian peninsula Latin America Russia Slovakia North America Romania Belgium Greece France Morocco Bulgaria Ireland 2013 2012 Change 72,897 74,436 (1,539) 74,614 65,712 41,901 21,343 5,360 1,080 1,373 566 362 852 86 - 81,727 65,916 44,511 20,720 3,899 588 1,183 476 364 906 83 24 (7,113) (204) (2,610) 623 1,461 492 190 90 (2) (54) 3 -2.1% -8.7% -0.3% -5.9% 3.0% 37.5% 83.7% 16.1% 18.9% -0.5% -6.0% 3.1% (24) -100.0% Total net electricity generation 286,146 294,833 (8,687) -2.9% Other generation ratios Generation from renewable resources (% of total) Zero-emission generation (% of total) (1) ISO 14001-certified net efficient capacity (% of total) Average efficiency of thermal plants (%) Specific emissions of CO2 from net generation (gCO2/kWheq) (2) Specific water withdrawal (l/kWheq) 2013 2012 Change 32.5 46.7 94.0 39.8 391 0.64 28.4 42.4 92.6 39.9 418 0.62 4.1 4.3 1.4 (0.1) (27) 0.02 14.4% 10.1% 1.5% -0.3% -6.5% 3.2% (1) The 2012 figures have been restated in order to align them with the new method for recognizing energy generated in Latin America (which is measured at the point of delivery). (2) Specific emissions have been calculated by taking account of the total emissions from simple thermal generation, combined electrical and thermal, as a ratio to the total generated by renewable sources, nuclear, simple thermal, and combined electrical and thermal generation (including the thermal contribution in MWh equivalent). Customers by geographic area Average no. Electricity - Italy - Latin America - Iberian peninsula - Romania - Other countries Total electricity customers Natural gas - Italy - Spain Total natural gas customers 112 2013 2012 Change 27,819,881 28,032,500 (212,619) 14,383,084 13,905,892 477,192 11,376,287 11,431,437 (55,150) 2,663,728 2,652,594 74,754 83,397 11,134 (8,643) 56,317,734 56,105,820 211,914 3,245,996 3,158,532 87,464 1,214,038 1,265,941 (51,903) 4,460,034 4,424,473 35,561 -0.8% 3.4% -0.5% 0.4% -10.4% 0.4% 2.8% -4.1% 0.8% EnEl AnnuAl REpoRt 2013REpoRt on opERAtions Safety rates No. Injury frequency rate Injury severity rate Serious and fatal injuries at Enel Serious injuries (1) Fatal injuries Total Serious and fatal injuries at contractors Serious injuries (1) Fatal injuries Total 2013 2012 Change 1.42 0.07 1.98 0.10 (0.56) (0.03) 7 6 13 17 10 27 15 - 15 23 11 34 (8) 6 (2) (6) (1) (7) -28.3% -30.0% -53.3% - -13.3% -26.1% -9.1% -20.6% (1) Injuries with an initial prognosis, as reported on the medical certificate issued, of greater than 30 days, or with a confidential prognosis until the actual prognosis is released, or with an unknown prognosis that, based on an initial assessment by the company/division concerned, is expected to exceed 30 days. Once the official prognosis is released, the related injury is considered serious only if said prognosis exceeds 30 days. Should a confidential prognosis never be released or an unknown prognosis remain unknown, within 30 days of the event, the injury is to be deemed serious. Other rates No. Average hours of training per employee Verified violations of the Code of Ethics (1) 2013 2012 Change 39.8 27 44.8 41 (5.0) (14) -11.2% -34.1% (1) In 2013, an analysis was performed of violations reported in 2012. As a result, there was a change in the number of verified violations reported for 2012 from 34 to 41 Creating value for stakeholders Enel’s stakeholders are individuals, groups or institutions whose contribution is needed to achieve its mission or who have a stake in its pursuit. The economic value created and shared by Enel gives a good indication of how the Group has created wealth for the following stakeholders: shareholders, lenders, employees and government. Millions of euro Revenues Net income/(charges) from commodity risk management External costs Gross global value added from continuing operations Gross value added of discontinued operations Gross global value added distributed to: Shareholders Lenders Employees Government Enterprises 2013 80,535 (378) 56,691 23,466 - 23,466 1,410 2,884 4,596 4,211 10,365 2012 restated (1) 84,949 38 61,451 23,536 - 23,536 1,505 2,971 5,789 3,910 9,361 (1) The 2012 consolidated income statement has been restated in order to better reflect the effects recognized in the previous year concerning the introduction of the IAS 19 Revised and the change in the method of recognizing environmental certificates. 113 People Human resources and organization Organization Functions and divisions Staffing levels In 2013, the Group’s model of operations was consolidated with the goal of achieving the following benefits: At December 31, 2013, the total workforce of the Enel Group > more effective, streamlined decision-making processes; numbered 71,394 employees, of whom 52% were employed > economies of scale through a more integrated, efficient by Group companies abroad. management of services; During the year, the number of employees fell by 2,308, most- > more rigorous management and allocation of financial re- ly reflecting the net negative balance between new hires and sources among the various businesses and geographic ar- terminations. eas in order maximize the creation of value for the Group; Of the total new hires, 85% concerned companies abroad, > greater opportunities to develop the Group’s human re- while 44% of the terminations took place in Italy, mainly sources and talent. through application, beginning in September, of the legal mechanism established by Article 4 of Law 92/2012 concern- The Group is structured as follows: ing early retirement. > Parent Company functions, which are responsible for the guidance, coordination and strategic control of the activi- ties of the Enel Group; 114 EnEl AnnuAl REpoRt 2013REpoRt on opERAtions > global service functions, which are responsible for the These efforts made it possible to conduct a detailed analysis integrated management of services for the entire Group of the optimal size of the various organizational structures (i.e. Global ICT, Global Procurement and Global Business of the Group. Services); It has also been possible to further increase the integration > operating divisions/functions, which are responsible for of the business units involved in the handling of: managing operations within the scope of their respec- > power plant engineering, construction and maintenance; tive areas. During the year: > distribution; > marketing, sales and customer operations; > with regard to the Iberia and Latin America Division: thereby promoting both the creation of global models of - the organizational structure for the two distinct sub-ar- coordination and the sharing of best practices between the eas, i.e. Spain & Portugal and Latin America, was imple- various geographic areas. mented, thereby establishing the roles and responsibili- Finally, in support of this integration, work was complet- ties of the business and staff functions for each country ed in 2013 on the mapping of the management and tech- and for overall coordination of the Division; nical positions that are seen as being of key importance - the organizational structure for Brazil was rationalized, to the Group. shifting towards a single line of business of distribution and sales, although with various legal entities; > within the Generation, Energy Management and Sales Italy Division: - the Energy Management areas of Product Optimization Hiring, training and development and Back Office were reorganized in order to take ad- vantage of better operational synergies and to rational- Hiring ize the workforce; The channels most used for recruiting are the organization’s - two organizational structures dedicated to defining and database (containing all applications submitted, divided developing energy efficiency services for corporate and by country), external databases, and the lists of graduates retail customers were created in line with the positioning provided by schools and universities. In 2013, with a view goals of Enel in Italy in this new area of business. These towards enhancing the recruiting channels and achiev- two structures received the resources of Enel.si, which ing global synergies in our employer branding efforts, we was previously a part of the Renewable Energy Division; signed an agreement with a global provider for the use of > within the Renewable Energy Division, work continued an online platform that will enable those responsible for hir- on aligning the organization of the various structures of ing in all of the various countries to publish job offers and business development, operations and related support search for interesting candidates. services within the scope of the plan for growth in Latin Based on the guidelines of the Group, the employee hiring America and in the emerging markets; process calls for an initial search within the company and, > within the International Division: should no suitable candidates be found within the compa- - in Russia, the Operations unit was created within OGK-5, ny, then beginning an external search. This external search which was given the activities of engineering, produc- can be conducted in multiple stages and in various ways de- tion, and employee health and safety; pending on the target profile and local practice in the coun- - in Slovakia, the Generation and Energy Management try concerned, such as: units were integrated based on a model found in other > an assessment center for junior positions, which includes areas of the Group. group testing and interviews; Integration efforts In 2013, work was completed on process redesign and the > behavioral interviews, particularly for senior positions, which focus on past experience, skills and motivation; > technical/professional interviews. definition of new operating models for the Group related The hiring programs vary according to the type of recruit. In to the primary functions of guidance, coordination and particular, projects for the integration of university gradu- control, in line with the goals of the One Company project. ates include on-the-job training and structured training 115 courses that, in addition to providing the tools necessary ones, which are defined by each person to be reviewed, are for them to perform their work, contribute to their personal to be assessed and validated by each reviewer. and professional development. In-house mobility programs This year, the entire management population, the key layers include both progressive specialization within one’s as- and another significant portion of the employee popula- signed area and efforts to develop cross-functional skills. tion with variable remuneration will be involved in the next The job-posting system enables people to apply for avail- assignment phase. able positions, both domestically or internationally. At the same time as the assessment of supervisors, there The internationalization of the organization is promoted will also be a phase of self-assessment by their staffs. both by way of cross-country mobility, which facilitates the The reviewers will discuss and validate the evaluations of sharing of experience and best practice, and through inter- their teams during the Calibration phase in order to im- national working groups for projects of global scope. prove review quality by comparing and discussing the cri- Development teria used. Finally, there is a feedback interview in order to discuss the results of the review and establish a targeted development plan for the coming year. The overall performance review process which has been re- The Talent Management system seeks to identify people vised as part of the One Company project is now, and for with excellent performance, high potential, interdiscipli- the first time, managed globally by way of a single model nary and international experience, who are necessary for a and single system for all of the countries in which the Group Group such as Enel that depends on the high quality of its operates. staff and needs managers capable of navigating their way Conduct assessment within the organization is done in one through a global environment. To that end, three “pools” of two ways, depending on the target concerned: the 360° have been defined: Evaluation (for executive vice presidents, senior vice presi- > Pool 1, consisting of managers with high responsibil- dents, vice presidents, and other key positions) and the Be- ity and complex posts whose work demands that they havior Performance Review. engage with internal and external interlocutors and Results-oriented tools, on the other hand, include: who will therefore have the opportunity to prepare > the Objectives Performance Review (OPR); themselves for one of the top 100 posts in the Group > Task Management. (at the level of senior vice president or executive vice- Compared with the previous year, the most important president); change is the fact that all employees involved in the behav- > Pool 2, consisting of people who have a solid profession- ior assessment process who do not receive any variable re- al background, currently hold pre-managerial coordinat- muneration are to be assigned measurable tasks on which ing roles, and are focused on attaining managerial posts they will be evaluated. of increasing complexity in the medium term; Within the scope of the Objective Performance Review, the > Pool 3, consisting of young employees with high growth assignment of objectives is based on input coming directly potential who aspire to enhance their careers through from the business plan and involves the definition and pre- interdisciplinary and/or international experience. assignment of closed-ended targets. This is followed by the In March 2013, the first edition of Pool 3 was launched with definition of open-ended objectives, which calls for a pre- the goal of creating a “Potentials Observatory” whereby, paratory meeting between the reviewer and each person over a period of two years, the Company will invest in and to be reviewed in order to discuss strategies and priorities involve these young people in an integrated program of for the current year. training and development in order to enhance their skills. In turn, the purpose of the review process is to measure the The starting point is an interview in which an individual de- actual contribution made during one’s day-to-day activities velopment plan is established. Over the course of the two by assessing the targets and objectives assigned the previ- years, this plan will be supported and monitored by the var- ous year. The entire assessment process will involve a total ious people responsible for the employee’s development. of some 8,000 people throughout the Enel Group. During In any event, responsibility for implementing the develop- this phase, both closed and open-ended objectives will ment plan has been assigned directly to the members of be assessed. While the closed-ended objectives are to be Pool 3; therefore, the commitment that each member ap- reviewed by the Planning & Control unit, the open-ended plies to his or her development will play a crucial role. 116 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsThe training program has been designed so as to instill tries in which Enel operates and has also made it possible an ongoing rapport among the members of Pool 3 and to involve their direct supervisors and middle management to promote networking. In 2013, for example, training – the targets of the Pool 2 program – in their development was provided in Rome on topics such as change manage- while also working on their skills in coaching and mentoring. ment or innovation, and a virtual platform was created In 2013, the Global One ALigned (GOAL) managerial train- which members can use to discuss the various topics un- ing campaign came to a close. This campaign involved all til the next in-person training session, which is to be held management within the Group with the goal of making in 2014. At the same time, these young talents have been them more aware of company strategies and objectives invited to participate in a variety of projects and other and of the conduct expected within the new One Company activities of international/global scope, and, in the same organization. way, they have been made candidates for various job post- Safety-related training also continued in 2013 in the form ings in order to give them opportunities to develop their of the Leadership for Safety campaign, which seeks to careers within the Group. strengthen the culture of prevention, wellness and the In addition to the questions typically included in the survey, sharing of best practices and which has involved about the 2012 Climate and Safety Survey had the dual objective 1,000 people around the world over a period of three years. of assessing the level of engagement, motivation and invest- Efforts of a more technical/specialist nature also continued ment in their jobs and determining what their perception with the goal of promoting greater awareness of proce- was with regard to the culture of safety, the various health dures, tools, laws and regulations related to prevention and and safety processes, and the impact of the action taken. safety in the workplace. An analysis of the results and the information provided by A number of training courses for the technical and functional the employees led to the creation of plans for improve- schools (i.e. purchasing, AFC, legal affairs, engineering, and ment at various levels of the organization and of local energy management) were also started in 2013. action plans. The actions implement in 2013 include: the redesign of the leadership model with the goal of translat- ing the Group’s values into actual behaviors; the new cas- cade model in order to establish both a more fluid process of communication and greater alignment and consensus; Compensation and incentive systems a project focusing on the topic of innovation; the identi- When defining the remuneration policy for 2013, we took fication of internal and external best practices, and other account of the challenges being posed by the current state initiatives aimed at attracting, motivating and developing of the economy. To that end, we have implemented a num- young talent. ber of measures in order to control the cost of labor in a man- A specific project has been set up for each of these priori- ner that best serves us all. Given the lack of economic growth ties, with each project being sponsored by both divisional and the limited competitiveness of the job market, the main and country managers along with international teams, so measures adopted concern the suspension of the discretion- that the initiatives will be more effective for all of the vari- ary compensation policy for all employees and a reduction ous cultures found within the Enel Group in the short-term variable portion of compensation tied to Training 2013 objectives for management. Nonetheless, as we do every year, we have assessed the re- lated market benchmarks in order to determine the proper In 2013, Enel University consolidated its efforts to interna- positioning of salaries in order to ensure that our compensa- tionalize training. tion package as a whole remains competitive. Within the scope of the Leadership Curriculum, the Group’s In terms of short-term incentives, we are continuing MBO system for developing cross-functional skills from new hires as the primary means of guiding the performance of man- on up to the highest levels of management, training related agement. This program involves practically all upper man- to performance reviews involved more than 6,000 people agement and about 60% of middle management. The com- around the world in a broad, diversified training program. mercial staff also has specific short-term incentives aimed at The Pool 3 project has led to the involvement of over 170 promoting the achievement of sales and customer-manage- young people showing great potential in the various coun- ment targets. 117 Workplace health and safety 2014 and involve over 5,000 people in all of the Group’s countries and divisions. Workplace accident statistics The downward trend in accident rates continued in 2013. The Conduct In 2013, work was completed on the implementation, frequency rate fell by approximately 60% from 2009 to 2013, throughout the Group, of the project aimed at promoting reaching 1.42, while the severity rate fell by 50%, to stand at safe conduct by way of a systematic process of observing be- 0.07. This downward trend was also confirmed by the opera- havior, providing immediate feedback, and establishing steps tional accident frequency rate, which focuses on certain types for improvement. The project has been implemented in 927 of especially serious accidents that are the most related to Enel locations, and some 260,000 observations have been the Company’s core business (e.g. electrocutions, falling from made throughout the world. It has also been implemented heights, blows-crushing-cuts, exposure to hazardous agents, in 30 shared civil sites in a manner specific to office spaces. and explosions) and which has fallen by 41% since 2009. Beginning in 2014, the project will become a systematic pro- Serious and fatal accidents fell by 68% from 2009 for those cess of behavior observation. To that end, four workshops involving Enel personnel and by 81% for those involving the have been conducted in Italy, Spain, Slovakia and Colombia employees of contractors. In 2013, there were six fatal acci- aimed at defining steps for improvement to be implemented dents involving Enel personnel, and there were 10 fatal ac- based on past experience. cidents involving employees of contractors. This year, the efforts of the working group set up to investi- gate the causes of certain injury case studies continued. The The “5+1” program working group also circulates the lessons learned and identi- In 2013, the efforts of the six permanent working groups of fies global improvements that can be made, with particular the “5+1” program continued and focused on the following regard to electrical accidents. Three best practices have been key areas for improvement in health and safety processes: defined with regard to lifting loads by mechanical means, > development of a culture of safety and training; grounding during electrical works, and preventive measures > safety in tender processes; to take to avoid falls when working on power lines. > communicating about safety; In 2013, Enel and Endesa were also deemed to be best in class > structural safety and technological innovation; in occupational health and safety within electrical utilities > major works; segment of the Dow Jones Sustainability Index. > health. The One Safety project Chaired by executive sponsors, each area developed a pro- gram of activities during the year aimed at strengthening the culture of health and safety within the Enel Group and at pro- In 2013, work continued on implementation of the One moting the sharing of best practices and starting bottom-up Safety project, a global initiative focused on the behavior of initiatives by adopting an approach that is both global and all Enel employees as well as contractors, the aim of which is adapted to the various contexts within the Group. to promote a coordinated and synergistic effort by the entire Group to achieving the goal of zero injuries. The project pursues two main lines of action: the strengthen- ing of safety leadership (Leadership) and the promotion of Development of a culture of safety and training The 2012 Climate and Security Survey, which included a sec- safe and responsible conduct (Conduct). tion specifically dedicated to safety for the first time, has demonstrated that safety is seen as a key value for the Com- Leadership In 2013, on the back of the GOAL managerial training pro- pany, while also underscoring the widespread commitment of both Enel employees and of our various contractors. Based gram, a cascade-training program focused on an analysis of on the results of the survey, a global improvement plan has the Enel film “Safety: the Heart of the Matter“ was launched. been established that focuses on safety leadership, employee In addition, 10 editions were initiated to train 200 internal conduct, wellbeing and the prevention of stress, and safety trainers, as were 130 cascade editions involving some 2,000 in the office. people. This training program is scheduled to continue in Within this context, work has also begun on a revision of the 118 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsleadership model in order to enhance the allocation of safety- related responsibilities at all levels of the organization, and the process for conducting safety walks by management has Structural safety and technological innovation A health and safety catalog has been published. This work is also been enhanced by integrating it with the periodic organ- a collection of the technologies and structural solutions that ization of health and safety meetings. A process of assessing have been implemented by the various divisions in order to health and safety attitudes has also been added to the hiring increase safety standards and is to be sent to the lines of process, and the Six Months of Safety project is currently be- business in order to promote the sharing of experience and ing extended to the various staff functions. best practice. A number of safety-innovation projects have also been de- Safety in tender processes In 2013, the One Safety - Contractors project began. This veloped, such as: the Zero Accidents Project (ZAP), which seeks to improve safety management at large-scale work project seeks to promote the adoption of conduct self-mon- sites; the Active Safety at Work project, the goal of which is itoring by our contractors in order to limit unsafe conduct to promote the use and control of personal protection de- by their employees. In order to promote the involvement of vices when conducting distribution activities; and the BOA contractors in this project, we have established a system of project, aimed at supporting the management of interfer- rewards, such as reductions in security deposits, increases in ence during power-plant maintenance. safety scores for the vendor-rating system, and the ability to use the Enel logo designed for the project. In 2013, work also continued on consolidating the vendor- Major works A peer-review plan has been implemented in four of the rating and contractor-qualification system, which establishes Group’s leading work sites on the Iberian peninsula and in specific, stringent health and safety requirements. These ef- Colombia, Slovakia and Italy in order to enhance work-site forts focused in particular on the foreign countries in which safety management by setting common standards and iden- the Group operates. tifying best practices to be shared. As part of the process of aligning the general contract condi- tions for the Enel Group, we have revised the clauses related to health and safety, which are broken down into general Health Work has begun on implementing the Global Health Plan, obligations applicable throughout Enel and local require- which includes initiatives of both prevention and increasing ments, which vary in accordance with the laws and regula- awareness in the three areas of health defined by the World tions for the given country. Health Organization (WHO), i.e. physical, mental and social Throughout the Group, we have also enhanced the safety wellbeing. Group policies have been defined concerning controls for contractors, and around 300 meetings have prevention and other health-related issues, and we have de- been held as part of Contractors Safety Day in order to ana- veloped a plan for the installation and use of defibrillators. lyze the injuries that have occurred together with the con- In Italy, we have launched a pilot campaign for voluntary tractors, as well as to promote their involvement in the on- cardiovascular screening and courses to help quit smoking. going health and safety projects and to share experiences The Enel Group has participated in the project Safe Work and best practice. Without Alcohol and Drugs, promoted by the International Labour Organization (ILO) in order to promote the preven- Communicating about safety We have also launched the Safety in the Office campaign tion of alcohol consumption and drug use, and we have launched informational campaigns on other health-related aimed at increasing awareness of the importance of safety topics. even in areas that are traditionally seen as presenting little or Particular attention was given to the prevention of stress no risk, and we have created a newsletter about the various and the promotion of health and organizational wellbeing, health and safety initiatives and other related topics. for which a specific action plan has been prepared. This plan The sixth edition of International Health & Safety Week was calls for the definition of a global stress-prevention policy held in November, with all areas of the Enel Group being in- and the launch of a training program that focuses on three volved in order to promote proactive commitment to safety. targets: upper management, personnel managers, and em- Nearly 2,000 initiatives involving over 97,000 participants in ployees. We have also activated a psychological-support 18 countries were organized during the week. service for employees. 119 Plan of controls tive bargaining agreement in Italy, which was renewed for In 2013, a plan of health and safety controls was created in 2013-2015 on February 18, 2013, and the signing of the 4th order to verify compliance with procedures and other com- Convenio Marco (framework agreement) of Endesa in Spain pany guidelines within the Group’s various businesses. This in December for the period 2013-2017. plan focused on the Group sites with the most critical issues A number of company contracts were also finalized in Latin based on accidents recorded over the last three years. Spe- America (particularly in Chile, Peru and Brazil), Russia and cifically, 13 areas were analyzed in Latin America, Europe and Slovakia in 2013. Italy, and action plans were defined for each site visited. Im- Activities of note in Italy, due in part to their innovative plementation of these action plans is to be monitored and nature, were the two trade-union agreements of May 9, subject to a follow-up process. A distribution peer-review 2013, i.e. the framework agreement under Article 4 of Law plan has also begun in order to promote the sharing of expe- 92/2012 and the agreement for geographic, functional and rience and to identify any best practices that can be shared intragroup mobility. throughout the Group. This process is scheduled to continue The former is the first of its kind in Italy for the handling in 2014 with a particular focus on Latin America. of “redundancies” without the need for social safety nets Labor relations and calls for the voluntary early retirement of up to 3,500 employees over the period 2013-2014, thereby allowing for a generational change through a plan to hire up to 1,500 In June 2013, in line with the principles of the One Company young people on apprentice contracts. project, Enel and the Italian and international trade unions On September 6, 2013, in application of this agreement and signed a global framework agreement (GFA), which consol- following completion of the established procedures, the idates the three levels of the Group’s industrial relations, i.e. main Italian companies of the Group signed an agreement national/divisional, European and global. This agreement is with the trade unions FILCTEM, FLAEI and UILTEC in imple- based on the principles of individual and workers’ rights mentation of the framework agreement of May 9, 2013. The and on the most modern systems of transnational indus- implementing company agreements establish the number trial relations and those of leading international organiza- of employees for each company to be included in forecasted tions such as the International Labour Organization (ILO). retirements, subject to the successful outcome of further It establishes the guidelines for industrial relations, such as verifications aimed at confirming these candidates meet the the approach to handling matters of interest to the Compa- established requirements. As at December 31, 2013, this plan ny and its employees, and includes the creation of an infor- has resulted in 1,911 employees leaving the Company. mational body, the Global Works Council, to represent the employees of the Enel Group and three multilateral com- The agreement for geographic, functional and intragroup mittees dedicated to significant transnational issues in the mobility is closely correlated with the agreement above as areas of Health and Safety, Training, and Equal Opportuni- a mechanism that supplements and harmonizes its effects. ties/Diversity, respectively. This agreement establishes the possibility for groups of In 2013, the multilateral committees were established and workers to be transferred, in the event of redundancies, to worked to define a joint document of group-level recom- one or more other production units, while also seeking to mendations for each of the three areas of interest. Each promote better alignment in supply and demand on the in- document was then approved by the Global Works Council house job market by making use of people outside of their at its first meeting held in October before being formally specific company/division of origin. presented to the Company’s management. In terms of the talks concerning changes in the organiza- Many of the Group’s national collective bargaining agree- tion, the structure of the global functions and the operat- ments were also renewed during the year. ing divisions has been consolidated in all countries in which Of particular note were the renewal of the industry’s collec- the Group operates. 120 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsCustomers In 2013, with a view towards ongoing improvement, in- off on the rules for conciliation with these associations. cluding better integration between the companies in the These rules were then updated and approved again on No- various countries that are now a part of the Enel Group, the vember 26, 2012. Commercial Best Practice Sharing project was completed. As a complementary alternative to this online joint-concilia- The goal of this project was to share and integrate, at the tion process, on April 1, 2013, Enel also voluntarily adhered global level, the methods used to calculate the key perfor- to the Energy Customer Conciliation Service established by mance indicators related to customer satisfaction and over- the Authority for Electricity and Gas on June 21, 2012 (Reso- all service quality. lution 260/2012/E/com). This service also facilitates the out- of-court settlement of disputes between customers and In 2013, Enel was confronted with a fully liberalized mar- operators (sellers or distributors) in the gas and electricity ket in Italy, characterized by a high level of competition. industries by way of a screen-based meeting over a virtual In this environment, and in line with 2012, the Company platform and with the help of a mediator, who helps the par- confirmed its choice to maximize the creation of customer ties to find a mutually agreeable solution. value, focusing on achieving excellence in the quality of the service we offer. Since 2003, in Spain and Portugal, Endesa has adopted a This was also a year of transformation for Enel Energia, with Plan de Excelencia en la Atención Comercial (the Excellence the company broadening its offering of products and solu- in Customer Service Plan), which seeks to improve customer tions for the home and for electric mobility, which have been satisfaction indicators year after year. designed for customers keen to reduce environmental im- In 2013, this plan focused on the quality of customer service pact in the use of electricity and gas. (i.e. via phone, online and in person and including the han- Again this year, the attention devoted to service quality is- dling of complaints) and on the development of new invoic- sues confirmed the rising trend in customer satisfaction seen ing systems and models. in recent years. The areas of intervention have been many, Use of the web site www.ENDESAonline.com increased by ranging from the development of new contact methods and 21% compared with 2012 to reach a total of 967,000 regis- channels to improving back-office processes, and monitoring tered users. Customer use of the online invoicing service also complaints and requests for information in order to reduce increased by 99.7% in 2013 to reach 995,000 e-factura con- processing times and ensure their effective management tracts in effect. and analysis, with the objective of understanding customer In 2013, Endesa continued efforts to enhance its portfolio of perceptions and any problems that may arise and immedi- value-added products and services, including a shift towards ately implementing appropriate corrective action without new business models and new sales channels, which will en- compromising the overall satisfaction of the customer. able the company to provide the market and their customers The 100% Compliance project also continued in 2013. This (households and small, medium and large-scale enterprises) project involves a team of specialists in the field of service with a series of products and services that unite sustainabili- quality and seeks to monitor and improve the quality of the ty with other economic benefits, such as ensuring both lower responses sent to customers who write to our sales compa- emissions and greater operational and/or energy efficiency. nies with complaints, requests for billing adjustments, or The Twenergy website has also become the world’s largest simply to request information, all for the purpose of safe- online community created around the issue of sustainability guarding our customers and keeping them satisfied in all and energy efficiency. situations, including in respect of their right to receive fast, Endesa is the only company in Spain’s electricity industry thorough assistance. to have established an ombudsman, independent from the One part of this effort is the adoption by the Enel Group of company’s organization, that provides customers with an- an online joint-conciliation process with the signing, in May other channel for dialog concerning the services the com- 2009, of a protocol with the consumer associations of the pany provides. The ombudsman interacts with both internal Italian National Council of Consumers and Users (CNCU, a and external contacts and recommends new ways for identi- body established within the Ministry for Economic Develop- fying the customers’ needs and expectations, as well as ways ment), in implementation of which the Sales Division signed for improving the company’s customer services. 121 In Argentina, continued the project El Viaje de la Energia ing how far they have to travel from home. Finally, 2013 (The Voyage of Energy), which targets schools in Buenos included efforts to promote the “Client Handbook”, a Aires and the areas of the province within the Edesur con- practical guide to the contract process, 100,000 copies of cession area. The primary goal of this project is to guide which were distributed to the various Enel Points, and the the community towards a rational, safe and efficient use Energia Verde offering, the only offering of renewable en- of energy with view towards sustainable development by ergy, was launched. educating people on the “voyage of energy”, from power generation to how energy is used. In order to improve customer service, invoices are also now Society being issued in Braille for the vision impaired, and a mes- The companies of the Enel Group around the world play saging system has been set up for the hearing impaired. an important role in the communities in which they oper- ate. Enel can make a concrete contribution to social and In 2013, work continued in Colombia on the process of economic development in these communities through increase awareness among young people concerning the various types of initiatives, such as the expansion of infra- safe, efficient use of electricity as part of the programs Vi- structures, education and training programs, projects of gias de la Energia, which targets children, and Siembra En- social inclusion, and support for local cultural activities. ergía for the general public, which also seeks to promote In particular, Enel is developing projects and other initia- the use of energy-efficient light bulbs. tives in the area of corporate social responsibility, which Preferential channels for the elderly, pregnant women are selected based on materiality analyses, detailed peer and people with disabilities have also been established. benchmarking, and an assessment of general trends in sustainability. In Chile, work continued on development of the program The areas of development that have been given the high- Vínculo Emocional con el Cliente (VEC), which seeks to est priority concern: access to energy and eliminating the strengthen the customer relationship through various loy- barriers to entry for low-income consumers; implement- alty programs. ing the program to support high-quality education and employability training, particularly in emerging nations; In Peru, as part of efforts to calculate the customer satis- and projects of social inclusion and in support of eco- faction index (ISCAL), regional surveys began in June 2012 nomic development in the areas in which the Enel Group in order to gather consumer opinions on energy provision, operates. billing, communication, and customer services. Edelnor is keenly committed to providing customers, with a particular emphasis on new users, with clear, transparent Enabling Electricity information concerning rates and the services provided, as The fight against energy poverty is the focus of one of the well as to providing preferential channels for the disabled. United Nations Millennium Development Goals, as reaf- firmed by the UN General Assembly, which unanimously For the fifth consecutive year, Coelce was ranked as the declared the period 2014-2024 as the Decade of Sustain- best electricity distributor in Brazil. Improvement efforts able Energy for All. included the services for the disabled, which allow for Within this context, as a member of the United Nations better communication, including via Facebook. In addi- Global Compact LEAD, at the end of 2011 Enel launched tion, Coelce and Ampla continue work to promote the the Enabling Electricity program with the goal of creating energy-efficiency program aimed at educating customers a new business model based on the access to energy, one to make more responsible consumer decisions and reduce which targets both people living in isolated rural areas non-payment by the poorest segments of the population. and those who live in the outskirts of major metropoli- tan areas. To date, with projects under way in 12 nations, In Romania in 2013, Enel developed a new self-service the program has provided access to electricity to over 2.3 channel known as “Kiosk Enel” in order to provide cus- million people around the world, bringing forward to this tomers without access to the online services with an easy, year achievement of the target for 2014 of doubling the convenient means of contacting the Company by minimiz- number of people reached by the program. 122 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsSpecifically, the project is based on three areas of action: energy, helping them understand the sources of energy, > projects aimed at facilitating access to electricity through generation plants and the path electricity takes to get to new distributed power generation technologies and grid their home, with a view to increasing their awareness and infrastructures; critical skills, thereby nudging them towards sustainable > projects to eliminate the economic barriers to electricity decisions and behavior. in territories such as Latin America; More specifically, we are developing programs in Latin > projects with the local communities in order to develop America to provide communities with the tools and capa- and share capacity-building capabilities, which provide bilities they need for their members to be better able to disadvantaged populations with the experience of the enter the job market (especially in energy-related fields), Enel Group. including through partnerships with schools. Energy, science, technology, environment: these are the key works of the PlayEnergy initiative, a free project com- bining entertainment and education that Enel has been organizing for the last 11 years in schools in 10 different countries, all with the goal of disseminating a responsible energy culture among young people, starting with knowl- edge to enable responsible decision-making. This commit- ment is renewed each year, involving thousands of stu- dents of all ages with the use of on- and off-line materials and local initiatives. Enel also publishes Oxygen, the quarterly magazine de- voted to promoting scientific thought and debate, with a focus on the environment, energy, innovation and, more generally, geopolitical events. Finally, Enel supports many initiatives aimed at providing access to information and opportunities for dialog. The relationship with local communities Strengthening the Group’s leadership necessarily involves forging a responsible partnership with the local communi- ties and areas which host our power plants and other ac- tivities, credibility in relations with the governments and authorities in the countries in which Enel operates and a stable, ongoing and integrated relationship with all stake- holders, based on trust and respect for shared values. This constant interaction with the local communities is at the heart of Enel’s relationship with them. In order to maintain constructive exchange and involvement in managing Enel’s impact on the local communities, it is necessary, first of all, for those communities to be more aware of the Group’s activities. This is the reasoning behind all of our initiatives aimed at bringing the general public closer to the world of energy, such as publications about our projects, tours of our plants, speaking opportunities at cultural and scientific events, informational videos, the publication of information about our work sites, the Natura e Territorio (Nature and the Territory) programs to promote sports and recreation, cul- tural itineraries and nature walks around our plants, and all of the other initiatives to promote our industrial heritage. In 2013, Enel also launched the Stakeholder Management project by which Enel ask them to share with us their expec- tations concerning our business. Education, science, information Enel has long promoted a culture of environmental sustain- ability and the informed use of resources, both through dedicated initiatives and by investing in research and in the dissemination of scientific knowledge. For example, Enel introduces young people to the world of 123 Climate strategy and the environment Environmental management and climate strategy Enel recognizes the central importance of the fight against and innovation, and the reduction of emissions through the climate change within the scope of the responsibilities of a implementation of projects in developing nations and in global player in the energy industry and has, for years now, transition economies. been taking steps to reduce greenhouse gas emissions in all For a number of years, Enel has also been active on the vol- of the countries in which we operate, both by observing the untary emissions reduction market, which is intended for obligations of the ETS Directive and by implementing our parties (i.e. companies, institutions, end users, etc.) who in- own long-term strategy. In that regard, the CEO of the Com- tend to monitor or neutralize the carbon footprint of their pany has promoted the Eurelectric initiative under which 60 various (internal and external) activities (e.g. publications, firms have committed to transforming the European electric- products and services, events, etc.). All of these initiatives are ity sector into a CO2 “emissions-neutral” industry by 2050. In 2013, over 46.7% of the power Enel generates comes from associated with the “CO2 NEUTRAL” trademark that Enel reg- istered in 2011. zero-emission sources, an increase of 10.1% on 2012. More Alongside these mitigation polities, the Enel Group is also specifically, about 940 MW of new capacity from renewable working on adapting to the process of climate change. Ex- sources was installed in 2013, thereby confirming our com- treme weather can have a significant impact on the level mitment to the development of carbon-free power genera- and quality of power generation, distribution and provision tion, a commitment which will continue over the years to over both the short term and the long term. For this reason, come. In addition, in 2013 the zero-emissions installed ca- Enel has begun studying ways to adapt to climate change pacity of the Enel Group was equal to 42.7% of the total, or through a pilot project related to the Iberian peninsula and 42,239 MW. Latin America. In 2014, this study will be extended to the Since 1990 (the benchmark year for the Kyoto Protocol), Group’s operations around the world. specific CO2 emissions for the Enel Group have declined by 37%. In 2013, Enel reduced emissions by 16% compared The Group’s commitment to the safe management of nu- with 2007, which is in line with the target reduction set for clear power generation is clearly laid out in our Nuclear 2020 compared with 2007, the year immediately preced- Policy, which was approved in 2010 and more information ing the first commitment period defined by the Kyoto Pro- for which may be found online at http://www.enel.com/ tocol. In light of this encouraging performance, Enel will be en_GB/sustainability/our_responsibility/enel_nuclear. evaluating whether to set a mid-range target, given that our This policy is intended to guarantee that all nuclear power 2013 performance was affected both by ongoing structural investment projects in which the Group participates are growth in power generation from renewable sources and by conducted with overriding priority given to nuclear safety contingent factors, such as high levels of water availability and the protection of workers, the general public and the and other market dynamics. environment, while encouraging excellence and going be- Enel has set the following targets for 2020, which concern yond mere compliance with the law. a number of environmental factors that are of greatest rel- evance to the activities of the Group: -10% in total specific The safety stress tests of nuclear power plants seek to de- emissions of sulfur dioxide (SO2); -10% in total specific emis- sions of nitrogen oxides (NOx); -50% in total specific emis- sions of particulates; and -10% in total specific water con- fine the margins of safety of active power plants when faced with extreme stressors (whether external, e.g. earthquakes or floods, or accidental) and to study how the reactors re- sumption (all figures relative to 2010 totals). spond under such extreme conditions. The long-term strategy of the Enel Group is based on the The Group’s nuclear power plants have been studied in development of zero-emissions energy sources, the commit- depth, and the steps for improvement identified are under ment to improve existing technologies, the promotion of en- way. Enel Engineering & Research has participated in the ergy efficiency and the development of smart grids, research testing stage and actively supported the Group’s nuclear 124 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionspower companies in Spain and Slovakia in implementing any and other suppliers, as are training and awareness initia- improvements. tives and more effective coordination mechanisms. During operation of the plant, by way of the existing Envi- Plant upgrading efforts included that of Santa Maria de ronment Management System, we define specific plans for Garoña, a shareholding of the Enel Group through Endesa, improvement at the Group’s various sites, so as to identify which was kept offline for all of 2013 and the operating per- any action to be taken in order to manage and mitigate mit of which expired on July 6. The fiscal regime on spent any significant impact. These efforts include reducing and nuclear fuel, which had forced the plant to shut down in De- controlling emissions, managing waste, protecting water cember 2012 based on the expected financial impact, was resources, and managing environmental emergency situa- favorably amended in September 2013. The plant operator tions. is assessing the possibility of starting up the plant again and requesting a renewal of the operating permit within the deadline of one year from expiration of the previous one. Water scarcity Renewables Water resource management is an issue of increasing im- portance, and Enel constantly monitors all of our produc- tion sites in areas at risk in terms of water scarcity, so as to In line with its health, safety and environmental policy, the manage these resources in the most efficient manner pos- Renewable Energy Division has the goal of protecting the sible. environment in all phases of the development, construc- Beginning in 2013, consumption due to evaporation of a tion and management of renewable energy systems. The number of plants with special cooling processes has been environmental impact of such activities varies based on the calculated. This change in calculation methods overesti- type of plant, the technology used, and the stage of devel- mates consumption for 2013. Nonetheless, comparing the opment the plant is currently in. 2013 figures with the same calculation method used for Some types of impact are handled a priori through specific the prior year, we see a decline in specific consumption of strategic decisions. Examples of this include the introduc- around 6%, which is in line with Enel’s commitment to re- tion of specific green-procurement requirements or the duce consumption by 10% by 2020 compared with 2010. “short chain” in biomass power generation by procuring More specifically, site monitoring is done at the following biomass directly from local farms, thereby creating both a levels of analysis: source of inputs for the plant and stable, alternative sourc- > mapping of the production sites located in areas of po- es of income for the farms. tential water scarcity, where the average value of renew- When developing new infrastructure projects, environ- able water resources per capita is less than the target set mental impact assessments are conducted when request- by the FAO and also identified by using special software ing related authorizations in line with the laws and regula- developed by the World Business Council for Sustainable tions of the country concerned. Based on the outcome of Development; these assessments, we either establish any technical ad- > identification of “critical” production sites, i.e. those with justments needed in order to reduce environmental impact fresh water supplies; right from the planning stage or evaluate, together with > more efficient management by making changes to plants the local authorities, any compensatory measures that can or processes to maximize use of waste water and sea wa- be taken (e.g. biodiversity development projects that en- ter; hance the particular features of the local environment). > monitoring of climate and vegetation data for each site. During plant construction, which is the activity with the Globally, Enel returns about 99% of the water used, and greatest impact on the environment, we adopt a plan of only about 7% of the Group’s total production uses and/or environmental impact prevention and mitigation, which is consumes fresh water in water-stressed areas. defined, in part, in collaboration with the contractors that In 2013, Enel was also the first utility to participate in the will be working at the site. The goal of this plan is to estab- Aqua Gauge questionnaire being promoted by the US in- lish the environmental performance monitoring and con- vestor network Ceres, the goal of which is to assess Com- trol mechanisms for the work site, through which plans for pany awareness of the environmental risks related to water improvement are developed together with the contractors resources. 125 Biodiversity be based on in-depth knowledge of the various conditions of equilibrium found in the areas in which we operate. As Preserving biodiversity is one of the strategic objectives of such, for each installation, the proximity of protected areas Enel’s environmental policy. has been monitored, identifying for each the reasons for The Group promotes a number of projects throughout the protection, the valuable ecosystems, biotopes and the en- world with the aim of supporting the preservation of eco- dangered animal or plant species to be protected, and the systems and the natural habitats of the various territories in related impact has been assessed. Knowing what species which we operate, while playing an active role in the local are present in a given area makes it possible to find those on communities. the “Red List” of the International Union for Conservation of In 2013, we completed the mapping of the biodiversity Nature and Natural Resources (IUCN) and, in relation to the protection efforts of the Group, which has enabled Enel to level of risk involved, to take any necessary protective meas- adopt a Group Biodiversity Plan. This plan is comprised of ures. The results of these efforts show that our activities are 133 projects, 34 of which were completed in 2011 and 2012 being conducted in an environmentally balanced manner and 98 of which are still under way. The total financial outlay that protects biodiversity. since 2011 has been about €21 million. The projects are in areas concerning production plants and other installations As regards plant operations, in many areas, in agreement and involve projects of various types, including: monitoring, with local authorities, independent experts perform bio- safeguarding, research and development, corrective or com- monitoring studies of the land, rivers and sea in order to pensatory measures, and social and environmental studies. assess the impact of operations on biodiversity and the adequacy of any compensatory or improvement meas- At Enel, we feel that any action involving ecosystems must ures taken. Research and development Model of technological leadership Traditional power generation The Enel Group aspires to be a technology leader in the industry by developing innovative projects that generate value and promote the creation of sustainable competitive advantage. Efficiency and reducing emissions at coal-fueled plants The primary means by which Enel defines strategy and de- In 2013, the efforts of the Enel Group focused on the fol- velops the Group’s Innovation Plan is the Technology Map, lowing issues: which has the goal of identifying the key technologies to fo- > developing tools to monitor and control gas and coal- cus on in the future, thereby anticipating the evolution and fueled thermal plants in order to optimize operations to other changes in energy policy and energy scenarios. The make them more versatile, while reducing downtime, map also seeks to establish the investment priorities based consumption and emissions; on these expectations and other market opportunities. > studying processes able to increase plant efficiency by In 2013, the Enel Group invested €76 million in research and recovering energy from waste heat and optimizing other innovation across the various areas of business, i.e. tradi- processes; tional power generation, renewable energy, networks, en- > studying new technologies that can increase plant reli- ergy storage, and end uses. ability under more flexible operations. 126 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsEnvironmental research seeks to anticipate scientific de- ence Discovery), in which Enel is the project’s coordinator, velopments in order to play a more proactive role in iden- and other leading European distribution system operators tifying any areas for improvement. The capabilities that (DSOs) are also involved. The project uses the results and Enel has developed in this field do, in fact, enable us to data of other demonstration projects currently under way, assess environmental impact related to the air, water and such as Enel Info+ in Isernia, together with other Active soil, thereby moving beyond the simple monitoring re- Demand projects around Europe. quired by law. Enel is also responsible for technical directions for Euro- Being active in the characterization and analysis of air pean project Grid4EU, which encompasses six different quality, the Enel Group has also carried out an initial cam- projects in various nations and has the goal of conduct- paign to validate the integrated method for establish- ing wide-scale testing under real operating conditions ing the environmental impact caused by operating coal- of advanced smart grids aimed at promoting the use and fueled thermal power plants. More specifically, in 2013: management of distributed power generation, support- ing energy efficiency, and enabling and integrating active > we worked to characterize the emission of macro- and demand and new uses of electricity. micro-pollutants on high-efficiency exhaust-treatment September 2013 saw the start of the project EvolvDSO, the systems with the goal of assessing the room for im- goal of which is to define, develop and validate tools and provement and performance over time; methodologies that can allow for DSOs to play new roles. > we launched a new line of water management activities Various smart-grid projects are also under way in Spain at the thermal power plants, which focuses on identify- and Latin America, including the ICONO project for the ing integrated solutions and/or new processes that can development of functions for monitoring distributed reduce the use of water; power generation, automating the network, and improv- > research continues regarding the development of ad- ing operating efficiency, reliability and safety. vanced applications of sensors, diagnostics and auto- mation in order to increase the reliability, safety and ef- ficiency of the Enel Group’s power plants and to reduce Smart cities accidents during the construction, maintenance and The innovative technologies and skills developed by the normal operations of such plants. Enel Group have enabled us to promote the concept of Smart grids, distributed generation, and demand- side management Smart grids “smart cities” in various parts of the world, uniting envi- ronmental protection, energy efficiency and economic sustainability within a single urban model. In Italy, the first pilot projects are under way in Genoa, Bari, Cosenza and L’Aquila, where Enel is helping the cities to make the move towards becoming smart cities through measures aimed at developing smart grids as an enabling platform for new innovations and services. Enel is also active in smart-city projects being funded at Enel is a leading player, both within Italy and internation- the European level. We are, for example, partnering with ally, in numerous initiatives working towards innovations the city of Genoa in the project FP7 TRANSFORM, which in energy distribution systems in order to continue in- features the involvement of other European cities (i.e. Am- creasing grid efficiency. sterdam, Hamburg, Copenhagen, Grand Lyon, and Vien- The most significant project currently under way concerns na) and other high-profile industrial partners. “smart grids”, which add innovative digital solutions to Also in 2013, work continued on the innovative smart-city traditional technologies in order to make power grid man- projects in Spain (Malaga and Barcelona) and Brazil (Búzi- agement more flexible by increasing the efficacy of how os), and another was started in Chile (Santiago). As a part information is shared. of these projects, new smart-grid technologies and solu- With the goal of developing an action plan for implement- tions will be implemented in order to manage the cities ing Active Demand in Europe, work continues on project more efficiently and in a more sustainable manner, while ADVANCED (Active Demand Value ANd Consumer Experi- also saving more energy. 127 Distributed power generation the goal of which is to develop technologies to help op- timize the energy efficiency of office buildings by focus- In 2013, initial testing of the triangle-based omni-purpose ing on the optimal control of the subsystems within the building (TOP) was completed. This system is made up of buildings, while also providing adequate means for inter- photovoltaic panels and storage systems and is able to acting effectively with the outside world (i.e. with other provide renewable energy to populations in remote areas buildings, local power generators, energy retailers and that are not connected to the power grid. distributors). In Spain, work is ongoing on project “Novare Energrid”, In Spain and South America, various energy-efficiency an open, modular energy management platform based on projects are under way, including the European project a distributed infrastructure for managing the flow of en- EnergyTIC, the goal of which is to develop various innova- ergy on the grid. The system makes it possible to manage tive solutions that will enable customers to save water and power generation and consumption by way of a system energy. of nodes (in residential and business areas), thereby creat- ing a decentralized system of dialog between consumers, producers and users. Renewable energy The Enel Group is also greatly committed to a number of Renewable energy is one of Enel’s key strategies for re- projects in various countries, such as Italy, Spain and Bra- zil, to create an innovative network of advanced smart ducing CO2 emissions and, at the same time, for making our production portfolio more competitive. There is great infrastructures to recharge electric vehicles, so as to pro- growth potential in terms of installed capacity, and in- mote the use of these vehicles and favor more sustainable tensive efforts are under way to develop increasingly ef- mobility. Energy efficiency ficient, effective technologies that can be used in a variety of contexts around the world. For this reason, Enel is ac- tive in all of the leading renewable generation technolo- gies, and we are identifying technologies that can help to The Enel Group is developing innovative technologies and take advantage of resources that are currently not being new electrical services for our customers in order to opti- used, such as the energy of the sea. mize and rationalize the consumption of energy. In 2013, the following activities were undertaken. During the year, particular emphasis was placed on post- metering services, the regulation of consumption, and end-use energy efficiency, while also studying the related technical aspects and defining and developing new busi- ness models. In particular: Concentrated Solar Power (CSP, or thermodynamic solar) Construction and start-up have been completed at the 5 > work continued on the project Enel Info+, which calls MWe “Archimede” concentrated solar power (CSP) plant, for the testing of Enel smart info, a device that provides and the procedures of plant management and steam gen- customers with tracked generation/consumption data, eration have been defined, as have the main guidelines of thereby promoting greater awareness of their own en- operation and maintenance. Studies are also being con- ergy-use habits and fostering more efficient ones; ducted concerning a new fluid mix with a lower melting > the project Energy@Home was carried out in collabo- point and the use of innovative plant components that ration with Electrolux, Indesit Company and Telecom will help to increase performance. Italia. This project led to the development of a commu- nication platform for smart devices in the home; > work continued on the project Come Consumo (How I Photovoltaics Consume), a system that enables end users to view their Efforts continue to find innovative technologies and plant consumption in real time on either a local device or on- components with a view towards their commercial and line, while also providing access to historical consump- pre-commercial development, and we have assessed the tion data. possibility of integrating semi-transparent photovoltaic Enel is also involved in the European project ENCOURAGE, modules into architecture. 128 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsWind Efforts continue to refine the short- and medium-term (up to 72 hours) output forecasting models of wind farms. Information and Communication Technologies (ICT) Geothermal power The increasing focus on innovative digital technologies can be seen, in part, in the 2013 creation of a unit dedi- In Stillwater, Nevada (USA), work has been completed on the cated to the guidance, coordination, creation and promo- detailed plans for the first CSP thermal solar plant to be in- tion of innovative solutions based on such technologies. tegrated with a binary geothermal plant, which will provide By way of a network with the world’s most prominent ICT additional thermal power of 17 MW. firms, research labs, and a number of universities, we have Biomass been able to identify several innovative solutions for pre- dictive maintenance applied to wind turbines and for de- tecting energy fraud (i.e. non-technical losses). In terms of Enel has focused on characterizing small-scale (100 kWe to 1 customer relations, we have been testing new technolo- MWe) technologies able to provide high levels of efficiency gies of sentiment analysis using the social networks and and flexibility. for the advanced analysis of the efficacy of the various online tools. Hydroelectric Solutions have been developed that could optimize the power generation of hydroelectric plants by using the water released to meet minimum environmental flow obligations. Marine energy The R115 marine system has begun operating. This system was developed in collaboration with 40South Energy and is able to generate 100 kWe. Commercial agreements have been signed with the partner firm for the provision of ad- ditional systems. Energy storage The ability to store the energy generated from renewable sources is proving to be one of the most interesting, sig- nificant challenges in the management of renewable en- ergy, as well as in the evolution of smart grids and in the manner in which energy is managed at both the residen- tial and industrial level. As storage systems become more efficient, it will be possible to store the electricity gener- ated when costs are lower and there is an abundance of renewable energy and then use that energy at a later time when it is needed. In Italy and Spain, numerous pilot projects are under way in which various storage technologies installed at various points of the grid are being tested and compared. 129 Related parties As an operator in the field of generation, distribution, tran- The table below summarizes the main types of transactions sport and sale of electricity and the sale of natural gas, Enel carried out with such counterparties. carries out transactions with a number of companies directly or indirectly controlled by the Italian State, the Group’s con- trolling shareholder. Related party Single Buyer Relationship Nature of main transactions Fully controlled (indirectly) by the Ministry for the Economy and Finance Purchase of electricity for the enhanced protection market EMO - Energy Markets Operator Fully controlled (indirectly) by the Ministry for the Economy and Finance ESO - Energy Services Operator Fully controlled (directly) by the Ministry for the Economy and Finance Sale of electricity on the Power Exchange Purchase of electricity on the Power Exchange for pumping and plant planning Sale of electricity for own use Sale of subsidized electricity Payment of A3 component for renewable resource incentives Sale of electricity for own use Sale of electricity on the Ancillary Services Market Purchase of transport, dispatching and metering services Sale of electricity for own use Sale of electricity transport services Purchase of fuels for generation plants, storage services and natural gas distribution Sale of electricity for own use Indirectly controlled by the Ministry for the Economy and Finance Directly controlled by the Ministry for the Economy and Finance Directly controlled by the Ministry for the Economy and Finance Purchase of IT services and supply of goods Sale of electricity for own use Fully controlled (directly) by the Ministry for the Economy and Finance Purchase of postal services Sale of electricity for own use Terna Eni Group Finmeccanica Group Poste Italiane Group Finally, Enel also maintains relationships with the pension For more details on transactions with related parties, ple- funds FOPEN and Fondenel, Fondazione Enel and Enel ase see the discussion in note 37 to these consolidated fi- Cuore, an Enel non-profit company devoted to providing nancial statements. social and healthcare assistance. All transactions with related parties were carried out on normal market terms and conditions, which in some cases are determined by the Authority for Electricity and Gas. 130 EnEl AnnuAl REpoRt 2013REpoRt on opERAtionsReconciliation of shareholders’ equity and net income of Enel SpA and the corresponding consolidated figures Pursuant to CONSOB Notice DEM/6064293 of July 28, 2006, for the year and shareholders’ equity with the corresponding the following table provides a reconciliation of Group results figures for the Parent Company. Millions of euro Income statement Shareholders’ equity Income statement Shareholders’ equity at Dec. 31, 2013 at Dec. 31, 2012 restated Financial statements - Enel SpA 1,372 25,867 3,428 25,817 Carrying amount and impairment adjustments of consolidated equity investments and equity investments accounted for using the equity method Shareholders’ equity and net income (calculated using harmonized accounting policies) of the consolidated companies and groups and those accounted for using the equity method, net of non-controlling interests Consolidation differences at the Group consolidation level Intercompany dividends Elimination of unrealized intercompany comprehensive income, net of tax effects and other minor adjustments TOTAL SHAREHOLDERS OF THE PARENT COMPANY NON-CONTROLLING INTERESTS CONSOLIDATED FINANCIAL STATEMENTS 7 (77,828) 14 (77,683) 6,149 (745) (3,540) (8) 3,235 1,545 4,780 74,861 12,235 - 806 35,941 16,898 52,839 3,943 (2,504) (4,583) (60) 238 1,204 1,442 73,842 12,855 - 944 35,775 16,312 52,087 131 Consolidated financial statements Consolidated Income Statement Millions of euro Notes 2013 2012 restated (1) of which with related parties of which with related parties Revenues Revenues from sales and services Other revenues and income Costs Raw materials and consumables Services Personnel Depreciation, amortization and impairment losses Other operating expenses Capitalized costs Net income/(charges) from commodity risk management Operating income Financial income Financial expense Share of income/(expense) from equity investments accounted for using the equity method Income before taxes Income taxes Net income from continuing operations Net income from discontinued operations Net income for the year (shareholders of the Parent Company and non-controlling interests) Pertaining to shareholders of the Parent Company Pertaining to non-controlling interests Earnings per share (euro) pertaining to the ordinary shareholders of the Parent Company Diluted earnings per share (euro) pertaining to the ordinary shareholders of the Parent Company Earnings from continuing operations per share (euro) pertaining to the ordinary shareholders of the Parent Company Diluted earnings from continuing operations per share (euro) pertaining to the ordinary shareholders of the Parent Company 9.a 9.b [Subtotal] 10.a 10.b 10.c 10.d 10.e 10.f [Subtotal] 11 12 12 13 14 15 15 15 15 7,217 46 9,971 2,298 39 82 13 8,753 401 10,266 2,510 30 78 35 4 77,258 3,277 80,535 41,612 15,551 4,596 7,067 2,837 (1,450) 70,213 (378) 9,944 2,453 5,266 86 7,217 2,437 4,780 - 4,780 3,235 1,545 0.34 0.34 0.34 0.34 82,431 2,518 84,949 46,582 15,780 5,789 9,003 2,774 (1,747) 78,181 38 6,806 2,185 5,197 88 3,882 2,440 1,442 - 1,442 238 1,204 0.03 0.03 0.03 0.03 (1) The consolidated income statement for 2012 has been restated to provide a better presentation of the impact recognized in the previous year of the introduc- tion of IAS 19 Revised and the change in the accounting treatment of environmental certificates. For more information, please see note 4 below. 134 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Statement of Consolidated Comprehensive Income Millions of euro Notes Net income for the year Other comprehensive income recyclable to profit or loss Effective portion of change in the fair value of cash flow hedges Share of income recognized in equity by companies accounted for using the equity method Change in the fair value of financial investments available for sale Change in translation reserve Other comprehensive income not recyclable to profit or loss Change in net liabilities (assets) in respect of defined-benefit plans Income/(Loss) recognized directly in equity Comprehensive income for the period Pertaining to: - shareholders of the Parent Company - non-controlling interests 29 2013 4,780 (174) (29) (105) (3,197) (188) (3,693) 1,087 1,514 (427) 2012 restated (1) 1,442 (760) (7) (416) 73 (248) (1,358) 84 (1,232) 1,316 (1) The statement of consolidated comprehensive income for 2012 has been restated to provide a better presentation of the impact recognized in the previous year of the introduction of IAS 19 Revised and the change in the accounting treatment of environmental certificates. For more information, please see note 4 below. 135 at Dec. 31, 2013 at Dec. 31, 2012 restated (1) at Jan. 1, 2012 restated of which with related parties of which with related parties of which with related parties Consolidated Balance Sheet Millions of euro Notes ASSETS Non-current assets Property, plant and equipment Investment property Intangible assets Deferred tax assets Equity investments accounted for using the equity method Non-current financial assets Other non-current assets 16 17 18 19 20 21 81,050 181 33,229 6,239 647 6,401 837 [Total] 128,584 Current assets Inventories Trade receivables Tax receivables Current financial assets Other current assets Cash and cash equivalents Assets held for sale TOTAL ASSETS 22 23 24 25 26 27 [Total current assets] 28 3,586 11,533 1,735 7,877 2,562 8,030 35,323 241 164,148 83,115 197 35,997 6,816 1,115 5,518 800 133,558 3,338 11,719 1,631 9,381 2,262 9,891 38,222 317 172,097 4 15 1,268 4 152 80,592 245 39,049 6,206 1,085 6,325 415 133,917 3,148 11,570 1,251 10,466 2,136 7,015 35,586 381 169,884 74 55 893 39 46 1,473 1 71 (1) The consolidated balance sheet at December 31, 2012 has been restated to provide a better presentation of the impact recognized in the previous year of the introduction of IAS 19 Revised and the completion of the purchase price allocation process for a number of business combinations carried out the previous year. For more information, please see note 4 below. 136 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Millions of euro Notes LIABILITIES AND SHAREHOLDERS’ EQUITY at Dec. 31, 2013 at Dec. 31, 2012 restated (1) at Jan. 1, 2012 restated of which with related parties of which with related parties of which with related parties Equity pertaining to the shareholders of the Parent Company Share capital Other reserves Retained earnings (Loss carried forward) Non-controlling interests Total shareholders’ equity Non-current liabilities Long-term loans Post-employment and other employee benefits Provisions for risks and charges Deferred tax liabilities Non-current financial liabilities Other non-current liabilities Current liabilities Short-term loans Current portion of long-term loans Trade payables Income tax payable Current financial liabilities Other current liabilities Liabilities held for sale Total liabilities TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY [Total] 29 27 30 31 18 32 33 [Total] 27 27 34 35 36 [Total] 28 9,403 7,084 19,454 35,941 16,898 52,839 51,113 3,696 8,047 10,905 2,257 1,266 77,284 2,529 4,690 9,403 8,747 17,625 35,775 16,312 52,087 55,959 4,542 8,648 11,786 2,553 1,151 84,639 3,970 4,057 2 9,403 10,217 18,892 38,512 15,589 54,101 48,703 3,192 8,057 11,505 2,307 1,313 75,077 4,799 9,672 2 13,004 3,647 13,903 3,496 12,931 3,304 308 3,640 9,834 34,005 20 111,309 164,148 4 24 364 3,138 9,931 35,363 8 120,010 172,097 1 39 671 3,668 8,907 40,648 58 115,783 169,884 2 15 (1) The consolidated balance sheet for 2012 has been restated to provide a better presentation of the impact recognized in the previous year of the introduction of IAS 19 Revised and the completion of the purchase price allocation process for a number of business combinations carried out the previous year. For more information, please see note 4 below. 137 Statement of Changes in Consolidated Shareholders’ Equity Share capital and reserves pertaining to the shareholders of the Parent Company at January 1, 2012 Effect of application of IAS 19/R at January 1, 2012 restated Dividends and interim dividends Change in scope of consolidation Comprehensive income for the year of which: - Income/(Loss) recognized directly in equity - Net income/(loss) for the year Share capital Share premium reserve Legal reserve 9,403 - 9,403 5,292 - 5,292 1,881 - 1,881 Other reserves 2,262 - 2,262 - - - - - - - - - - - - - - - - - - - - at December 31, 2012 restated (1) 9,403 5,292 1,881 2,262 Dividends and interim dividends Change in scope of consolidation Disposal of equity interests without loss of control Comprehensive income for the year of which: - Income/(Loss) recognized directly in equity - Net income/(loss) for the year - - - - - - - - - - - - - - - - - - - - - - - - Reserve from translation of financial statements in currencies other than euro Reserve from measurement of financial instruments Reserve from Reserve from disposal of equity transactions in accounted for Reserve for Reserve from equity investments Equity pertaining to the shareholders interests without non-controlling using the equity employee Other retained of the Parent Non-controlling shareholders’ loss of control interests method benefits earnings Company interests 120 - 120 - - (28) (28) - 92 - 98 - (49) - (49) - - (1,204) (1,204) - (1,253) - - - (1,290) (237) 749 749 - - - - - - - - - 749 (28) 721 78 78 - - - - - - - 78 22 6 - - - 62 15 15 - - - (7) - 8 - - - (24) (24) - (16) (231) 238 (1,232) (7) (231) (131) (131) - - - - - - - (362) 4 (170) (170) (528) 18,899 (7) 18,892 (1,505) - 238 17,625 (1,410) 3,235 - 4 - 3,235 19,454 38,650 (138) 38,512 (1,505) (1,470) 238 35,775 (1,410) 76 (14) 1,514 (1,721) 3,235 35,941 15,650 (61) 15,589 (628) 35 1,316 112 1,204 16,312 (829) 102 1,740 (427) (1,972) 1,545 16,898 Total equity 54,300 (199) 54,101 (2,133) 35 84 (1,358) 1,442 52,087 (2,239) 178 1,726 1,087 (3,693) 4,780 52,839 (237) - (1,490) (1,290) - at December 31, 2013 9,403 5,292 1,881 2,262 (1,100) (1) The statement of changes in consolidated shareholders’ equity at December 31, 2012 has been restated to provide a better presentation of the impact recog- nized in the previous year of the introduction of IAS 19 Revised and the completion of the purchase price allocation process for a number of business combina- tions carried out the previous year. For more information, please see note 4 below. 138 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Statement of Changes in Consolidated Shareholders’ Equity Share capital and reserves pertaining to the shareholders of the Parent Company at January 1, 2012 9,403 5,292 1,881 2,262 Share premium Other currencies other measurement of Share capital reserve Legal reserve reserves than euro financial instruments at January 1, 2012 restated 9,403 5,292 1,881 2,262 Effect of application of IAS 19/R Dividends and interim dividends Change in scope of consolidation Comprehensive income for the year of which: in equity - Income/(Loss) recognized directly - Net income/(loss) for the year Dividends and interim dividends Change in scope of consolidation Disposal of equity interests without loss of control Comprehensive income for the year of which: in equity - Income/(Loss) recognized directly - Net income/(loss) for the year - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - at December 31, 2012 restated (1) 9,403 5,292 1,881 2,262 - - - - - - - - - - - - 120 120 (28) (28) 92 98 - - - - - - - (49) (49) (1,204) (1,204) (1,253) - - - - - - - - (1,290) (237) (1,290) (237) at December 31, 2013 9,403 5,292 1,881 2,262 (1,100) (1,490) (1) The statement of changes in consolidated shareholders’ equity at December 31, 2012 has been restated to provide a better presentation of the impact recog- nized in the previous year of the introduction of IAS 19 Revised and the completion of the purchase price allocation process for a number of business combina- tions carried out the previous year. For more information, please see note 4 below. Reserve from translation of financial statements in Reserve from Reserve from disposal of equity interests without loss of control Reserve from transactions in non-controlling interests Reserve from equity investments accounted for using the equity method Reserve for employee benefits Other retained earnings Equity pertaining to the shareholders of the Parent Company Non-controlling interests Total shareholders’ equity 749 749 - - - - 749 - - (28) - - - 721 78 - 78 - - - - - 78 - 22 6 - - - 62 15 - 15 - - (7) (7) - 8 - - - - (131) (131) - - 18,899 (7) 18,892 (1,505) 38,650 (138) 38,512 (1,505) (231) 238 (1,232) (231) - (362) - - 4 - 238 17,625 (1,410) - 4 (24) (170) 3,235 (24) - (16) (170) - (528) - 3,235 19,454 (1,470) 238 35,775 (1,410) 76 (14) 1,514 (1,721) 3,235 35,941 15,650 (61) 15,589 (628) 35 1,316 112 1,204 16,312 (829) 102 1,740 (427) (1,972) 1,545 16,898 54,300 (199) 54,101 (2,133) 35 84 (1,358) 1,442 52,087 (2,239) 178 1,726 1,087 (3,693) 4,780 52,839 139 Consolidated Statement of Cash Flows Millions of euro Notes 2013 2012 restated (1) of which with related parties of which with related parties Income before taxes for the year Adjustments for: Amortization and impairment losses of intangible assets Depreciation and impairment losses of property, plant and equipment Exchange rate adjustments of foreign currency assets and liabilities (including cash and cash equivalents) Accruals to provisions Financial (income)/expense (Gains)/Losses from disposals and other non-monetary items Cash flows from operating activities before changes in net current assets Increase/(Decrease) in provisions (Increase)/Decrease in inventories (Increase)/Decrease in trade receivables (Increase)/Decrease in financial and non-financial assets/liabilities Increase/(Decrease) in trade payables Interest income and other financial income collected Interest expense and other financial expense paid Income taxes paid Cash flows from operating activities (a) Investments in property, plant and equipment Investments in intangible assets Investments in entities (or business units) less cash and cash equivalents acquired Disposals of entities (or business units) less cash and cash equivalents sold (Increase)/Decrease in other investing activities Cash flows from investing/disinvesting activities (b) Financial debt (new long-term borrowing) 27 Financial debt (repayments and other net changes) Collection of proceeds from disposal of equity interests without loss of control Incidental expenses in disposal of equity interests without loss of control Dividends and interim dividends paid Cash flows from financing activities (c) Impact of exchange rate fluctuations on cash and cash equivalents (d) Increase/(Decrease) in cash and cash equivalents (a+b+c+d) Cash and cash equivalents at the start of the year (2) Cash and cash equivalents at the end of the year (3) 7,217 1,622 4,790 (264) 1,023 2,319 48 16,755 (1,884) (249) (596) (681) (893) 1,110 (3,715) (2,606) 7,241 (5,350) (610) (210) 1,409 614 (4,147) 5,336 (9,565) 1,814 (85) (2,044) (4,544) (426) (1,876) 9,933 8,057 (375) 27 151 35 4 3,882 3,516 4,899 (66) 2,469 2,413 514 17,627 (1,517) (190) (825) 1 978 1,168 (3,898) (2,929) 10,415 (6,522) (627) (182) 388 355 (6,588) 13,739 (12,505) - - (2,229) (995) 29 2,861 7,072 9,933 580 (117) 192 13 (1) The consolidated statement of cash flows for 2012 has been restated to reflect the application of the new IAS 19 Revised. For more information, please see note 4 below. (2) Of which cash and cash equivalents equal to €9,891 million at January 1, 2013 (€7,015 million at January 1, 2012), short-term securities equal to €42 million at January 1, 2013 (€52 million at January 1, 2012) and cash equivalents pertaining to “assets held for sale” equal to zero at January 1, 2013 (€5 million at January 1, 2012). (3) Of which cash and cash equivalents equal to €8,030 million at December 31, 2013 (€9,891 million at December 31, 2012), short-term securities equal to €17 million at December 31, 2013 (€42 million at December 31, 2012) and cash and cash equivalents pertaining to “assets held for sale” in the amount of €10 million at December 31, 2013 (none at December 31, 2012). 140 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Notes to the financial statements 1 Form and content of the financial statements Basis of presentation The consolidated financial statements consist of the con- solidated income statement, the statement of consolidated comprehensive income, the consolidated balance sheet, the statement of changes in consolidated shareholders’ equity and the consolidated statement of cash flows and the re- lated notes. Enel SpA, which operates in the energy utility sector, has its The assets and liabilities reported in the consolidated bal- registered office in Viale Regina Margherita 137, Rome, Italy. ance sheet are classified on a “current/non-current basis”, The consolidated financial statements for the period ended with separate reporting of assets held for sale and liabilities December 31, 2013 comprise the financial statements of the associated with assets held for sale. Current assets, which in- Company, its subsidiaries and joint ventures (“the Group”) clude cash and cash equivalents, are assets that are intended and the Group’s holdings in associated companies. A list of to be realized, sold or consumed during the normal operat- the subsidiaries, associated companies and joint ventures in- ing cycle of the Company or in the twelve months following cluded in the scope of consolidation is reported in the annex. the balance-sheet date; current liabilities are liabilities that These consolidated financial statements were approved for are expected to be settled during the normal operating cycle publication by the Board on March 11, 2014. of the Company or within the twelve months following the These financial statements have been audited by Reconta close of the financial year. Ernst & Young SpA. Compliance with IFRS/IAS The consolidated income statement is classified on the basis of the nature of costs, while the indirect method is used for the consolidated statement of cash flows. The consolidated financial statements are presented in euro, The consolidated financial statements for the year ended De- the functional currency of the Parent Company Enel SpA. All cember 31, 2013 have been prepared in accordance with in- figures are shown in millions of euro unless stated otherwise. ternational accounting standards (International Accounting The financial statements are prepared on a going-concern Standards - IAS and International Financial Reporting Stand- basis using the cost method, with the exception of items that ards - IFRS) issued by the International Accounting Standards are measured at fair value under IFRS-EU, as specified in the Board (IASB), the interpretations of the International Financial measurement policies for the individual items. Reporting Interpretations Committee (IFRIC) and the Standing The consolidated income statement, the consolidated bal- Interpretations Committee (SIC), recognized in the European ance sheet and the consolidated statement of cash flows re- Union pursuant to Regulation 1606/2002/EC and in effect as port transactions with related parties, the definition of which of the close of the year. All of these standards and interpreta- is given in the next section. tions are hereinafter referred to as the “IFRS-EU”. The financial statements have also been prepared in conform- ity with measures issued in implementation of Article 9, para- graph 3, of Legislative Decree 38 of February 28, 2005. 141 2 Accounting policies and measurement criteria Use of estimates and management judgment uted during the period but not yet invoiced, which is equal to the difference between the amount of electricity and gas delivered to the distribution network and that invoiced in the period, taking account of any network losses. Revenues be- tween the date of the last meter reading and the end of the year are based on estimates of the daily consumption of in- dividual customers calculated on the basis of their consump- tion record, adjusted to take account of weather conditions and other factors that may affect estimated consumption. Preparing the consolidated financial statements under Pensions and other post-employment benefits IFRS-EU requires management to take decisions and make Some of the Group’s employees participate in pension estimates and assumptions that may impact the value of plans offering benefits based on their wage history and revenues, costs, assets and liabilities and the related dis- years of service. closures concerning the items involved as well as contin- Certain employees are also eligible for other post-employ- gent assets and liabilities at the balance-sheet date. The ment benefit schemes. estimates and management’s judgments are based on pre- The expenses and liabilities of such plans are calculated vious experience and other factors considered reasonable on the basis of estimates carried out by consulting actuar- in the circumstances. They are formulated when the carry- ies, who use a combination of statistical and actuarial el- ing amount of assets and liabilities is not easily determined ements in their calculations, including statistical data on from other sources. The actual results may therefore dif- past years and forecasts of future costs. Other components fer from these estimates. The estimates and assumptions of the estimation that are considered include mortality and are periodically revised and the effects of any changes are withdrawal rates as well as assumptions concerning future reflected through profit or loss if they only involve that pe- developments in discount rates, the rate of wage increases, riod. If the revision involves both the current and future pe- the inflation rate and trends in the cost of medical care. riods, the change is recognized in the period in which the These estimates can differ significantly from actual devel- revision is made and in the related future periods. opments owing to changes in economic and market condi- In order to enhance understanding of the financial state- tions, increases or decreases in withdrawal rates and the ments, the following sections examine the main items af- lifespan of participants, as well as changes in the effective fected by the use of estimates and the cases that reflect cost of medical care. management judgments to a significant degree, under- Such differences can have a substantial impact on the scoring the main assumptions used by managers in meas- quantification of pension costs and other related expenses. uring these items in compliance with the IFRS-EU. The criti- cal element of such valuations is the use of assumptions Recoverability of non-current assets and professional judgments concerning issues that are by The carrying amount of non-current assets is reviewed pe- their very nature uncertain. riodically and wherever circumstances or events suggest Changes in the conditions underlying the assumptions and that a more frequent review is necessary. Goodwill is re- judgments could have a substantial impact on future results. viewed at least annually. Such assessments of the recover- Use of estimates able amount of assets are carried out in accordance with the provisions of IAS 36, as described in greater detail in note 17 below. Revenue recognition Where the value of a group of non-current assets is consid- Revenues from sales to customers are recognized on an ac- ered to be impaired, it is written down to its recoverable cruals basis. Revenues from sales of electricity and gas to re- value, as estimated on the basis of the use of the assets tail customers are recognized at the time the electricity or gas and their possible future disposal, in accordance with the is supplied and include, in addition to amounts invoiced on Company’s most recent plans. the basis of periodic (and pertaining to the year) meter read- The estimates of such recoverable values are considered ings, an estimate of the value of electricity and gas distrib- reasonable. Nevertheless, possible changes in the estima- 142 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntstion factors on which the calculation of such values is per- that can be recovered at the end of existing concessions formed could generate different recoverable values. The (residual value). analysis of each group of non-current assets is unique and The main uncertainties are the following: requires management to use estimates and assumptions > the price for the transfer of the business unit must be nego- considered prudent and reasonable in the specific circum- tiated with the grantor agency five years prior to the expira- stances. tion of the concession, on the basis of currently unavailable technical and financial parameters that will be announced Depreciable value of certain elements of Italian hydroelec- in a decree of the Ministry for Economic Development ac- tric plants following enactment of Law 134/2012 ting on an opinion of the Authority for Electricity and Gas; Law 134 of August 7, 2012 containing “urgent measures > it is reasonable to expect that the process of quantifying for growth”, published in the Gazzetta Ufficiale on August that value will require assessments involving significant un- 11, 2012, introduced a sweeping overhaul of the rules gov- certainties, especially as regards the determination of the erning hydroelectric concessions. Among its various provi- ordinary wear and tear of the assets under discussion and sions, the law establishes that five years before the expi- the positions that the parties involved could take; ration of a major hydroelectric water diversion concession > the law itself, which acknowledges the existence of objec- and in cases of lapse, relinquishment or revocation, where tive uncertainties associated with the determination of the there is no predominant public interest in using the waters price, establishes that in the event of disagreement betwe- for another purpose that is incompatible with continuing en the concession holder and the grantor, the issue shall be use for hydroelectric purpose, the competent public entity resolved through recourse to a panel of three independent shall organize a public call for tender for the award for con- and qualified third parties; sideration of the concession for a period ranging from 20 > at present no historic data are available as the rules have not to a maximum of 30 years. yet been applied. In order to ensure operational continuity, the law also es- In view of the above uncertainties, management has con- tablished procedures for the transfer from the departing cluded that it cannot formulate an estimate of residual value. concession holder to the new concession holder of owner- Given that the legislation still requires the new concession ship of the business unit necessary to operate the conces- holder to make a payment to the departing concession hold- sion, including all legal relationships associated with the er, management reviewed the depreciation period for assets concession, against payment of a price to be determined classified as to be relinquished free of charge prior to the en- in negotiations between the departing concession holder actment of Law 134/2012 (until year ended December 31, and the grantor agency, taking due account of the follow- 2011, in view of the fact that they were to be relinquished ing elements: free of charge, they were depreciated over the shorter of the > for intake and governing works, penstocks and outflow term of the concession and the useful life of each asset), no channels, which under the consolidated law governing longer basing it on the term of the concession but, if longer, waters and electrical plants are to be relinquished free on the economic and technical life of the individual asset. If of charge (Article 25 of Royal Decree 1775 of December further information should become available that would ena- 11, 1933), the payment shall be determined on the basis ble a reliable estimate of residual value, the carrying amounts of revalued cost less public capital grants (also revalued) of the assets involved will be modified on a prospective basis. received by the concession holder for the construction of such works, as reduced for ordinary wear and tear; Determining the fair value of financial instruments > for other property, plant and equipment, the payment shall The fair value of financial instruments is determined on be determined on the basis of market value, meaning repla- the basis of prices directly observable in the market, where cement value, as reduced for ordinary wear and tear. available, or, for unlisted financial instruments, using spe- While acknowledging that the new regulations introduce cific valuation techniques (mainly based on present value) major changes in the transfer of ownership of the business that maximize the use of observable market inputs. In rare unit for the operation of hydroelectric concessions, the dif- circumstances were this is not possible, the inputs are esti- ficulties associated with the practical application of these mated by management taking due account of the charac- principles are clear, given the uncertainties that do not teristics of the instruments being measured. permit the formulation of a reliable estimate of the value In accordance with the new international accounting 143 standard IFRS 13, the Group includes a measurement of of historical experience with receivables with similar credit credit risk, both of the counterparty (Credit Valuation Ad- risk profiles, current and historical arrears, eliminations and justment or CVA) and its own (Debit Valuation Adjustment collections, as well as the careful monitoring of the quality or DVA), in order to adjust the fair value of financial instru- of the receivables portfolio and current and forecast condi- ments for the corresponding amount of counterparty risk. tions in the economy and the relevant markets. More specifically, the Group measures CVA/DVA on the Although we believe that the amount of such provisions is basis of the net exposure to counterparty risk of the po- appropriate, the use of different assumptions or a change in sition and subsequently allocating the adjustment to the economic conditions could result in changes in the provision individual financial instruments that make up the overall for doubtful accounts and, therefore, impact net income. portfolio. In order to measure CVA/DVA, the Company uses The estimates and assumptions are reviewed periodically a Potential Future Exposure valuation technique, most of and the effects of any changes are taken to the income whose inputs are observable on the market. statement in the year they accrue. Changes in the assumptions made in estimating the input date could have an impact on the fair value recognized for Decommissioning and site restoration those instruments. In calculating liabilities in respect of decommissioning and site restoration costs, especially for the decommissioning of Recovery of deferred tax assets nuclear power plants and the storage of waste fuel and other At December 31, 2013, the financial statements report de- radioactive materials, the estimation of future costs is a criti- ferred tax assets in respect of tax losses to be reversed in cal process in view of the fact that such costs will be incurred subsequent years and income components whose deduct- over a very long period of time, estimated at up to 100 years. ibility is deferred in an amount whose recovery is consid- The obligation, based on financial and engineering assump- ered by management to be highly probable. tions, is calculated by discounting the expected future cash The recoverability of such assets is subject to the achieve- flows that the Company considers it will have to pay for the ment of future profits sufficient to absorb such tax losses decommissioning operation. and to use the benefits of the other deferred tax assets. The discount rate used to determine the present value of the The assessment of recoverability takes account of the es- liability is the pre-tax risk-free rate and is based on the eco- timate of future taxable incomes and is based on prudent nomic parameters of the country in which the plant is located. tax planning strategies. However, where the Company That liability is quantified by management on the basis of the should become aware that it is unable to recover all or part technology existing at the measurement date and is reviewed of recognized tax assets in future years, the consequent each year, taking account of developments in decommission- adjustment would be taken to the income statement in the ing and site restoration technology, as well as the ongoing year in which this circumstance arises. evolution of the legislative framework concerning the protec- Litigation Subsequently, the value of the obligation is adjusted to re- The Enel Group is involved in various legal disputes regard- flect the passage of time and any changes in estimates. tion of health and the environment. ing the generation, transport and distribution of electricity. In view of the nature of such litigation, it is not always ob- Other jectively possible to predict the outcome of such disputes, In addition to the items listed above, estimates were also which in some cases could be unfavorable. used with regard to the valuation of share-based payment Provisions have been recognized to cover all significant li- plans and the fair value measurement of assets acquired and abilities for cases in which legal counsel feels an adverse liabilities assumed in business combinations. For these items, outcome is likely and a reasonable estimate of the amount the estimates and assumptions are discussed in the notes on of the loss can be made. the accounting policies adopted. Provision for doubtful accounts Management judgments The provision for doubtful accounts reflects estimates of losses on the Group’s receivables portfolio. Provisions have Identification of cash generating units (CGUs) been made against expected losses calculated on the basis In application of “IAS 36 - Impairment of assets”, the goodwill 144 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsrecognized in the consolidated financial statements of the policies of an entity so as to obtain benefits from its activities. Group as a result of business combinations has been allocated The existence of control does not depend solely on owner- to individual or groups of CGUs that will benefit from the com- ship of a majority shareholding or the contractual form used bination. A CGU is the smallest group of assets that generates in the acquisition. Accordingly management must use its largely independent cash inflows. judgment in determining whether specific situations give In identifying such CGUs, management took account of the spe- the Group the power to govern the financial and operating cific nature of its assets and the business in which it is involved policies of the investee. (geographical area, business area, regulatory framework, etc.), For subsidiaries for which control does not derive from owner- verifying that the cash flows of a given group of assets were ship of a majority of voting rights, management has analyzed closely interdependent and largely independent of those asso- any agreements with other investors in order to determine ciated with other assets (or groups of assets). whether such agreements give the Group the power of gov- The assets of each CGU were also identified on the basis of the ernance indicated above, even though it holds a minority share manner in which management manages and monitors those as- of voting rights. In this assessment process, management also sets within the business model adopted. took account of potential voting rights (call options, warrants, In particular, the CGUs identified in the Iberia and Latin Amer- etc.) in order to determine whether they would be currently ex- ica Division are represented by groups of electricity/gas pro- ercisable as of the reporting date. Following such analysis, the duction, distribution and sales assets in the Iberian peninsula Group consolidated certain companies (Emgesa, Codensa and and certain countries in Latin America that are managed on a SE Hydropower) on a line-by-line basis even though it does not unified basis by the Group, including in financial matters. The hold more than half of the voting rights, as detailed in the at- CGUs identified in the Generation and Energy Management Di- tachment “Subsidiaries, associates and other significant equity vision and the Sales Division are represented by assets resulting investments of the Enel Group at December 31, 2013” to these from business combinations involving gas regasification opera- financial statements. tions in Italy and the domestic retail gas market or by uniform groups of assets operating in the sale or generation of elec- Application of “IFRIC 12 - Service concession arrangements” tricity. The CGUs identified in the Renewable Energy Division to concessions are represented (with a number of minor exceptions made in “IFRIC 12 - Service concession arrangements” establishes Italy and Spain to reflect the Group organizational model) by that, depending on the characteristics of the concession ar- the group of assets exclusively associated with the generation rangements, the infrastructure used to deliver public services of electricity from renewable energy resources located in geo- shall be recognized under intangible assets or under finan- graphical areas considered uniform on the basis of regulatory cial assets, depending, respectively, on whether the conces- and contractual aspects and characterized by a high degree of sion holder has the right to charge users of the services or it interdependence of business processes and substantial integra- has the right to receive a specified amount from the grantor tion in the same geographical area. The CGUs identified in the agency. International Division are represented by electricity generation More specifically, IFRIC 12 applies to public-to-private service and distribution/sales assets identified with business combina- concession arrangements if: tions and which constitute, by geographical area and business, > the grantor controls or regulates what services the operator individual units generating independent cash flows. The CGUs must provide with the infrastructure, to whom it must provi- identified by management to which the goodwill recognized de them, and at what price; and in these consolidated financial statements has been allocated > the grantor controls – through ownership or otherwise – are indicated in the section on intangible assets, to which the any significant residual interest in the infrastructure at the reader is invited to refer. end of the term of the arrangement. The number and scope of the CGUs are updated systemati- In assessing the applicability of these provisions for the cally to reflect the impact of new business combinations and Group, management carefully analyzed existing concessions. reorganizations carried out by the Group. On the basis of that analysis, the provisions of IFRIC 12 are Determination of the existence of control the distribution of electricity of a number of companies in “IAS 27 - Consolidated and separate financial statements” de- the Iberia and Latin America Division that operate in Brazil fines control as power to govern the financial and operating (Ampla and Coelce). applicable to the infrastructure used for the concessions for 145 Related parties Associated companies Related parties are mainly parties that have the same con- Associated companies comprise those entities in which the trolling entity as Enel SpA, companies that directly or indi- Group has a significant influence. Potential voting rights that are rectly through one or more intermediaries control, are con- effectively exercisable or convertible are also taken into consid- trolled or are subject to the joint control of Enel SpA and in eration in determining the existence of significant influence. which the latter has a holding that enables it to exercise a These investments are initially recognized at cost, allocating significant influence. Related parties also include the FOPEN any difference between the cost of the equity investment and Fondenel pension funds, and the members of the boards and the share in the net fair value of the assets, liabilities of auditors (and their close family members), and the key and identifiable contingent liabilities of the associated com- management personnel (and their close family members) of pany in an analogous manner to the treatment of business Enel SpA and the companies over which it exercises control. combinations, and are subsequently measured using the Key management personnel comprises management person- equity method. The Group’s share of profit or loss is recog- nel who have the power and direct or indirect responsibility nized in the consolidated financial statements from the date for the planning, management and control of the activities on which it acquires the significant influence over the entity of the company. They include company directors. until such influence ceases. Subsidiaries Should the Group’s share of the loss for the period exceed the carrying amount of the equity investment, the latter is impaired and any excess recognized in a provision if the Subsidiaries comprise those entities for which the Group has Group has a commitment to meet legal or constructive obli- the direct or indirect power to determine their financial and gations of the associate or in any case to cover its losses. operating policies for the purposes of obtaining the benefits Where an interest is divested and as a result the Group no of their activities. In assessing the existence of a situation of longer exercises a significant influence, any capital gain (or control, account is also taken of potential voting rights that loss) on the sale and the effects of the remeasurement to fair are effectively exercisable or convertible. The figures of the value of the residual interest as at the sale date is recognized subsidiaries are consolidated on a full line-by-line basis as through profit or loss. from the date control is acquired until such control ceases. The acquisition of an additional stake in subsidiaries and the sale of holdings that do not result in the loss of control are Joint ventures considered transactions between owners. As such, the ac- Interests in joint ventures – enterprises over whose eco- counting effects of these transactions are recognized directly nomic activities the Group exercises joint control with in consolidated equity. other entities – are consolidated using the proportionate Conversely, where a controlling interest is divested, any method. The Group recognizes its share of the assets, li- capital gain (or loss) on the sale and the effects of the re- abilities, revenues and expenses on a line-by-line basis in measurement to fair value of the residual interest as at the proportion to the Group’s share in the entity from the date sale date are recognized through profit or loss. on which joint control is acquired until such control ceases. The following table reports the contribution of the main joint ventures to the aggregates in the consolidated finan- cial statements: Hydro Dolomiti Enel RusEnergoSbyt Nuclenor Atacama Tejo 49.0% 282 47 81 38 147 86 49.5% 42 82 1 64 1,419 1,313 At Dec. 31, 2013 50.0% 50.0% 38.9% 28 44 36 25 4 3 204 122 31 44 134 100 164 53 122 36 78 63 Millions of euro Percentage of consolidation Non-current assets Current assets Non-current liabilities Current liabilities Revenues Costs 146 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsWhere an interest is divested and as a result the Group cy of the consolidated financial statements are translated no longer exercises joint control, any capital gain (or loss) into euro by applying the relevant period-end exchange on the sale and the effects of the remeasurement to fair rate to the assets and liabilities, including goodwill and value of the residual interest as at the sale date is recog- consolidation adjustments, and the average exchange nized through profit or loss. rate for the period, which approximates the exchange Consolidation procedures rates prevailing at the date of the respective transactions, to the income statement items. Any resulting exchange rate gains or losses are recog- The financial statements of subsidiaries used to prepare nized as a separate component of equity in a special re- the consolidated financial statements were prepared at serve. The gains and losses are recognized proportion- December 31, 2013 in accordance with the accounting ately in the income statement on the disposal (partial or policies adopted by the Parent Company. total) of the subsidiary. All intercompany balances and transactions, including any unrealized profits or losses on transactions within the Group, are eliminated, net of the theoretical tax ef- Business combinations fect. Unrealized profits and losses with associates and At first-time adoption of the IFRS-EU, the Group elected joint ventures are eliminated for the part pertaining to to not apply IFRS 3 (Business combinations) retrospec- the Group. tively to acquisitions carried out prior to January 1, 2004. In both cases, unrealized losses are eliminated except Accordingly, the goodwill in respect of acquisitions pre- when representative of impairment. ceding the IFRS-EU transition date is carried at the value Translation of foreign currency items reported in the last consolidated financial statements prepared on the basis of the previous accounting stand- ards (for the year ended December 31, 2003). Transactions in currencies other than the functional cur- Business combinations initiated before January 1, 2010 rency are recognized in these financial statements at the and completed within that financial year are recognized exchange rate prevailing on the date of the transaction. on the basis of IFRS 3 (2004). Monetary assets and liabilities denominated in a foreign Such business combinations were recognized using the currency other than the functional currency are later ad- acquisition method, where the purchase cost is equal to justed using the balance-sheet exchange rate. the fair value at the date of the exchange of the assets ac- Non-monetary assets and liabilities in foreign currency stat- quired and the liabilities incurred or assumed, plus costs ed at historic cost are translated using the exchange rate directly attributable to the acquisition. This cost was allo- prevailing on the date of initial recognition of the transac- cated by recognizing the assets, liabilities and identifiable tion. Non-monetary assets and liabilities in foreign currency contingent liabilities of the acquired company at their fair stated at fair value are translated using the exchange rate values. Any positive difference between the cost of the prevailing on the date that value was determined. acquisition and the fair value of the net assets acquired Any exchange rate differences are recognized through the pertaining to the shareholders of the Parent Company income statement. Translation of financial statements denominated in a foreign currency was recognized as goodwill. Any negative difference was recognized in profit or loss. If the fair values of the assets, liabilities and contingent liabilities could only be calculat- ed on a provisional basis, the business combination was recognized using such provisional values. The value of the For the purposes of the consolidated financial state- non-controlling interests was determined in proportion ments, all profits/losses, assets and liabilities are stated to the interest held by minority shareholders in the net in euro, which is the functional currency of the Parent assets. In the case of business combinations achieved in Company, Enel SpA. stages, at the date of acquisition of control the net assets In order to prepare the consolidated financial statements, acquired previously were remeasured to fair value and the financial statements of consolidated companies in any adjustments were recognized in equity. Any adjust- functional currencies other than the presentation curren- ments resulting from the completion of the measurement 147 process were recognized within twelve months of the ac- between market participants at the measurement date. quisition date. The fair value measurement assumes that the transac- tion to sell an asset or transfer a liability takes place in the Business combinations carried out as from January 1, 2010 principal market, i.e. the market with the largest volume are recognized on the basis of IFRS 3 (2008), which is re- and level of activity for the asset or liability. In the absence ferred to as IFRS 3 Revised hereafter. of a principal market, it is assumed that the transaction More specifically, business combinations are recognized takes place in the most advantageous market to which using the acquisition method, where the purchase cost the Group has access, i.e. the market that maximizes the (the consideration transferred) is equal to the fair value at amount that would be received to sell the asset or mini- the purchase date of the assets acquired and the liabilities mizes the amount that would be paid to transfer the li- incurred or assumed, as well as any equity instruments is- ability. sued by the purchaser. After having identified the market, the entity identifies Costs directly attributable to the acquisition are recog- market participants, i.e. independent, knowledgeable nized through profit or loss. sellers and buyers who are able to enter into a transaction This cost is allocated by recognizing the assets, liabilities for the asset or the liability and who are motivated but not and identifiable contingent liabilities of the acquired com- forced or otherwise compelled to do so. pany at their fair values as at the acquisition date. Any In determining which assumptions to consider in measur- positive difference between the price paid, measured at ing fair value, an entity should use the assumptions that fair value as at the acquisition date, plus the value of any market participants would use when pricing the asset or non-controlling interests, and the net value of the identifi- liability, assuming that market participants act in their able assets and liabilities of the acquiree measured at fair economic best interest. value is recognized as goodwill. Any negative difference is In accordance with IFRS 13, fair value measurement takes recognized in profit or loss. account of the characteristics of the specific assets or li- The value of the non-controlling interests is determined abilities being measured, namely: either in proportion to the interest held by minority share- > for a non-financial asset, an entity takes into account a holders in the net identifiable assets of the acquiree or at market participant’s ability to generate economic ben- their fair value as at the acquisition date. efits by using the asset in its highest and best use or by If the fair values of the assets, liabilities and contingent selling it to another market participant that would use liabilities can only be calculated on a provisional basis, the the asset in its highest and best use; business combination is recognized using such provisional > for liabilities and equity, the fair value reflects the ef- values. Any adjustments resulting from the completion of fect of non-performance risk, the risk that an entity will the measurement process are recognized within twelve not fulfil an obligation; months of the date of acquisition, restating comparative > in the case of groups of financial assets or liabilities figures. managed on the basis of an entity’s net exposure to In the case of business combinations achieved in stages, market risks or credit risk, it may measure fair value on at the date of acquisition of control the holdings acquired a net basis. previously are remeasured to fair value and any positive or In measuring the fair value of assets and liabilities, the Group negative difference is recognized in profit or loss. uses valuation techniques that are appropriate in the circum- Measurement of fair value The Group determines fair value in accordance with IFRS stances and for which sufficient data are available to meas- ure fair value, maximizing the use of relevant observable in- puts and minimizing the use of unobservable inputs. 13 whenever such measurement is required by the inter- All of the assets and liabilities measured at fair value or national accounting standards as a recognition or meas- whose fair value is reported in the notes to the financial urement criterion or as a supplemental disclosure regard- statements are classified in accordance with the three- ing specific assets or liabilities. level hierarchy described below, depending on the inputs Fair value is the price that would be received to sell an as- used in determining their fair value. set or paid to transfer a liability in an orderly transaction More specifically: 148 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts > Level 1, where the fair value is determined on the ba- ognized as an expense in the period in which it is incurred. sis of quoted prices (unadjusted) in active markets for The cost of replacing part or all of an asset is recognized as identical assets or liabilities that the entity can access at an increase in the value of the asset and is depreciated over the measurement date; its useful life; the net carrying amount of the replaced unit is > Level 2, where the fair value is determined on the basis eliminated through profit or loss. of inputs other than quoted prices included within Lev- Property, plant and equipment is reported net of accumu- el 1 that are observable for the asset or liability, either lated depreciation and any impairment losses determined as directly or indirectly; set out below. Depreciation is calculated on a straight-line > Level 3, where the fair value is determined on the basis basis over the item’s estimated useful life, which is reviewed of unobservable inputs. annually, and any changes are reflected on a prospective ba- For assets and liabilities measured at fair value on a recur- sis. Depreciation begins when the asset is ready for use. ring basis, the Group determines whether any transfers between these levels have occurred, identifying at the The estimated useful life of the main items of property, end of the reporting period the level in which the material plant and equipment is as follows: input with the lowest level has been classified. Civil buildings Buildings and civil works incorporated in plants Property, plant and equipment Property, plant and equipment is recognized at historic cost, including directly attributable ancillary costs necessary for the asset to be ready for use. It is increased by the present value of the estimate of the costs of decommissioning and restoring the asset where there is a legal or constructive obligation to do so. The cor- responding liability is recognized under provisions for risks and charges. The accounting treatment of changes in the es- timate of these costs, the passage of time and the discount rate is discussed under “provisions for risks and charges”. Hydroelectric power plants: - penstock - mechanical and electrical machinery - other fixed hydraulic works Thermal power plants: - boilers and auxiliary components - gas turbine components - mechanical and electrical machinery - other fixed hydraulic works Nuclear power plants Geothermal power plants: - cooling towers - turbines and generators Borrowing costs associated with financing directly attribut- - turbine parts in contact with fluid able to the purchase or construction of assets that require a - mechanical and electrical machinery substantial period of time to get ready for its intended use Wind power plants: or sale (qualifying assets) are capitalized as part of the cost - towers of the assets themselves. Borrowing costs associated with - turbines and generators the purchase/construction of assets that do not meet such - mechanical and electrical machinery requirement are expensed in the period in which they are Solar power plants: 20-67 years 20-67 years 22-65 years 20-40 years 20-100 years 18-46 years 10-26 years 17-45 years 21-66 years 40-60 years 20 years 30 years 10 years 20 years 20-25 years 20-25 years 15-25 years incurred. - mechanical and electrical machinery 15-40 years Certain assets that were revalued at the IFRS-EU transition date or in previous periods are recognized at their fair value, which is considered to be their deemed cost at the revalua- Public and artistic lighting: - public lighting installations - artistic lighting installations tion date. Where major components of individual items of property, plant and equipment have different useful lives, the compo- nents are recognized and depreciated separately. Subsequent expenditure is recognized as an increase in the Transport lines Transformer stations Distribution plants: - high-voltage lines - primary transformer stations - low- and medium-voltage lines carrying amount of the asset when it is probable that future Meters: economic benefits deriving from the cost incurred to replace - electromechanical meters a part of the asset will flow to the Group and the cost of the - electricity balance measurement equipment item can be reliably determined. All other expenditure is rec- - electronic meters 18-25 years 20-25 years 21-50 years 24-50 years 40-50 years 15-40 years 30-50 years 6-25 years 10-35 years 10-20 years 149 The useful life of leasehold improvements is determined on outflow channels and other assets on public lands were to the basis of the term of the lease or, if shorter, on the duration be relinquished free of charge to the State in good oper- of the benefits produced by the improvements themselves. ating condition. Accordingly, depreciation on assets to be Land, both unbuilt and on which civil and industrial build- relinquished was calculated over the shorter of the term of ings stand, is not depreciated as it has an undetermined the concession and the remaining useful life of the assets. useful life. In the wake of the legislative changes introduced with Law Assets recognized under property, plant and equipment 134 of August 7, 2012, the assets previously classified as are derecognized either at the time of their disposal or assets “to be relinquished free of charge” connected with when no future economic benefit is expected from their the hydroelectric water diversion concessions are now con- use or disposal. Any gain or loss, recognized through profit sidered in the same manner as other categories of “prop- or loss, is calculated as the difference between the net con- erty, plant and equipment” and are therefore depreciated sideration received in the disposal, where present, and the over the economic and technical life of the asset (where net book value of the derecognized assets. this exceeds the term of the concession), as discussed in Leased assets Property, plant and equipment acquired under finance ments of Italian hydroelectric plants following enactement of Law 134/2012”, which you are invited to consult for the section above on the “Depreciable value of certain ele- leases, whereby all risks and rewards incident to owner- more details. ship are substantially transferred to the entity, are initially recognized as assets at the lower of fair value and the pre- In accordance with Spanish Laws 29/1985 and 46/1999, hy- sent value of the minimum lease payments due, including droelectric power stations in Spanish territory operate under the payment required to exercise any purchase option. The administrative concessions at the end of which the plants will corresponding liability due to the lessor is recognized un- be returned to the government in good operating condition. der financial liabilities. The assets are depreciated on the The terms of the concessions extend up to 2067. basis of their useful lives. If it is not reasonably certain that A number of generation companies that operate in Argen- the Group will acquire the assets at the end of the lease, tina, Brazil and Mexico hold administrative concessions they are depreciated over the shorter of the lease term and with similar conditions to those applied under the Spanish the useful life of the assets. concession system. These concessions will expire in the pe- Leases where the lessor retains substantially all risks and riod between 2013 and 2088. rewards incident to ownership are classified as operating leases. Operating lease costs are taken to profit or loss on a As regards the distribution of electricity, the Group is a systematic basis over the term of the lease. concession holder in Italy for this service. The concession, Although not formally designated as lease agreements, granted by the Ministry for Economic Development, was is- certain types of contract can be considered as such if per- sued free of charge and terminates on December 31, 2030. formance of such contracts depends on the use of one or If the concession is not renewed upon expiry, the grantor is more specific assets and if in substance those contracts required to pay an indemnity. The amount of the indemnity grant the right to use such assets. will be determined by agreement of the parties using ap- Assets to be relinquished free of charge The Group’s plants include assets to be relinquished free of propriate valuation methods, based on both the balance- sheet value of the assets themselves and their profitability. In determining the indemnity, such profitability will be rep- charge at the end of the concessions. These mainly regard resented by the present value of future cash flows. The in- major water diversion works and the public lands used for frastructure serving the concessions is owned and available the operation of the thermal power plants. For plants in to the concession holder. It is recognized under “property, Italy, the concessions terminate in 2020 and 2040 (respec- plant and equipment” and is depreciated over the useful tively, for plants located in the Autonomous Province of lives of the assets. Trento and in the Autonomous Province of Bolzano) and Enel also operates under administrative concessions for the 2029 (for all others). Within the regulatory framework in distribution of electricity in other countries (including Spain force until 2011, if the concessions are not renewed, at and Romania). These concessions give the right to build and those dates all intake and governing works, penstocks, operate distribution networks for an indefinite period of time. 150 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsInvestment property Investment property consists of the Group’s real estate held to generate rental income or capital gains rather than for use in operations or the delivery of goods and services. Investment property is initially recognized at cost in the same manner as other property, plant and equipment. Subsequently, it is measured at cost net of depreciation and any impairment losses. Impairment losses are determined on the basis of the fol- lowing criteria. The fair value of investment property is determined assum- ing that the individual assets are sold in an orderly trans- action between market participants at the measurement date at current market conditions. The calculation of fair value takes account of the condition of the individual as- sets and any lease income and other assumptions that mar- ket participants would use in determining the price of the asset at current market conditions. The fair value of invest- Intangible assets with an indefinite useful life are not am- ortized systematically. Instead, they undergo impairment testing at least annually. Intangible assets are derecognized either at the time of their disposal or when no future economic benefit is ex- pected from their use or disposal. Any gain or loss, recog- nized through profit or loss, is calculated as the difference between the net consideration received in the disposal, where present, and the net book value of the derecog- nized assets. Goodwill deriving from the acquisition of subsidiaries, as- sociated companies or joint ventures is allocated to each of the cash generating units identified. After initial recog- nition, goodwill is not amortized but is tested for recover- ability at least annually using the criteria described in note 17 below. Goodwill relating to equity investments in asso- ciates is included in their carrying amount. ment property recognized at December 31, 2013, as deter- Impairment of non-financial assets mined on the basis of appraisals by independent experts, is equal to €216 million. Investment property is derecognized either at the time of its disposal or when no future economic benefit is ex- pected from its use or disposal. Any gain or loss, recog- nized through profit or loss, is calculated as the difference between the net consideration received in the disposal, where present, and the net book value of the derecog- nized assets. Intangible assets Intangible assets are identifiable assets without physical substance controlled by the entity and capable of gener- ating future economic benefits, as well as goodwill if ac- quired for consideration. They are measured at purchase or internal development cost, when it is probable that the use of such assets will generate future economic benefits and the related cost can be reliably determined. The cost includes any directly attributable incidental ex- penses necessary to make the assets ready for use. The assets, with a definite useful life, are reported net of accumulated amortization and any impairment losses, de- termined as set out below. Amortization is calculated on a straight-line basis over the item’s estimated useful life, which is checked at least annu- ally; any changes in amortization policies are reflected on a prospective basis. Amortization commences when the asset is ready for use. At each reporting date, non-financial assets are reviewed to determine whether there is evidence of impairment. If such evidence exists, the recoverable amount of any prop- erty, plant and equipment and intangible assets is estimat- ed. The recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. Value in use is represented by the present value of the estimated future cash flows generated by the asset in question. Value in use is determined by discounting estimated future cash flows – calculated on the basis of the most recent business plans – using a pre-tax discount rate that reflects the cur- rent market assessment of the time value of money and the specific risks of the asset. In determining the recoverable amount of property, plant and equipment, intangible as- sets and goodwill, the Group generally adopts the value in use criterion. The recoverable amount of assets that do not generate independent cash flows is determined based on the cash generating unit to which the asset belongs. If an asset’s carrying amount or that of the cash generating unit to which it is allocated is higher than its recoverable amount, an impairment loss is recognized in the income statement. Impairment losses of cash generating units are first charged against the carrying amount of any goodwill attributed to it and then against the value of other assets, in proportion to their carrying amount. If the reasons for a previously recognized impairment loss 151 no longer apply, the carrying amount of the asset is re- stored through profit or loss in an amount that shall not Construction contracts Construction contracts are measured on the basis of the exceed the net carrying amount the asset would have had contractual amounts accrued with reasonable certainty in if the impairment loss had not been recognized and depre- respect of the stage of completion of the works as deter- ciation or amortization had been performed. mined using the cost-to-cost method. Advances paid by The recoverable amount of goodwill and intangible assets customers are deducted from the value of the construction with an indefinite useful life as well as that of intangible contracts up to the extent of the accrued amounts; any assets not yet available for use is tested for recoverability excess is recognized under liabilities. Losses on individual annually or even more frequently if there is evidence sug- contracts are recognized in their entirety in the period in gesting that the assets may be impaired. The original value which they become probable, regardless of the stage of of goodwill is not restored even if in subsequent years the completion of the contract. reasons for the impairment no longer apply. If certain specific identified assets owned by the Group are impacted by adverse economic or operating conditions that undermine their capacity to contribute to the genera- tion of cash flows, they can be isolated from the rest of the assets of the CGU, undergo separate analysis of their recov- Financial instruments Financial assets measured at fair value through profit or loss This category includes debt securities and equity invest- erability and written down where necessary. ments in entities other than subsidiaries, associates and Inventories joint ventures held for trading and designated as at fair val- ue through profit or loss at the time of initial recognition. Such assets are initially recognized at fair value. Subse- Inventories are measured at the lower of cost and net estimat- quent to initial recognition, gains and losses from changes ed realizable value, except for inventories involved in trading in their fair value are recognized in the income statement. activities, which are measured at fair value with recognition through profit or loss. Average weighted cost is used, which Financial assets held to maturity includes related ancillary charges. Net estimated realizable This category comprises non-derivative financial instru- value is the estimated normal selling price net of estimated ments with fixed or determinable payments, that do not selling costs or, where applicable, replacement cost. represent equity investments, are quoted on an active For the portion of inventories held to discharge sales that market and for which an entity has the positive intention have already been made, the net realizable value is deter- and ability to hold them until maturity. They are initially mined on the basis of the amount established in the contract recognized at fair value as measured at the trade date, of sale. including any transaction costs; subsequently, they are Environmental certificates (green certificates, white certifi- measured at amortized cost using the effective interest cates and CO2 emissions allowances) not used for compli- ance purposes in the reference period are recognized under inventories. As regards CO2 emissions allowances, inventories are allocated between the trading portfolio and that used method, net of any impairment losses. Impairment losses are calculated as the difference be- tween the carrying amount of the asset and the present value of expected future cash flows, discounted using the for compliance with greenhouse gas emission requirements. original effective interest rate. Within the latter, the allowances are allocated in sub-portfo- In the case of renegotiated financial assets, impairment lios on the basis of the year of compliance to which they have losses are calculated using the original effective interest been assigned. rate in effect prior to the amendment of the related terms Materials and other consumables (including energy com- and conditions. modities) held for use in production are not written down if it is expected that the final product in which they will be incor- porated will be sold at a price sufficient to enable recovery of Loans and receivables This category includes non-derivative financial and trade the cost incurred. receivables, including debt securities, with fixed or deter- Inventories also include purchases of nuclear fuel, whose use minable payments that are not quoted on an active market is determined on the basis of the energy produced. and that the entity does not originally intend to sell. 152 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsSuch assets are initially recognized at fair value, adjusted Objective evidence of an impairment loss includes observ- for any transaction costs, and subsequently measured at able data about events such as, for example, significant amortized cost using the effective interest method, net of financial difficulty of the obligor; default or delinquency any impairment losses. Such impairment losses are calcu- in interest or principal payments; it becoming probable lated as the difference between the carrying amount of the that the borrower will enter bankruptcy or other form of asset and the present value of expected future cash flows, financial reorganization; or observable data indicating a discounted using the original effective interest rate. In the measurable decrease in estimated future cash flows. case of renegotiated financial assets, impairment losses are Where an impairment loss is found, the latter is calculated calculated using the original effective interest rate in effect as indicated above for each type of financial asset involved. prior to the amendment of the related terms and conditions. When there is no realistic chance of recovering the finan- Trade receivables falling due in line with generally accept- cial asset, the corresponding value of the asset is written ed trade terms are not discounted. off through profit or loss. Financial assets available for sale This category includes listed debt securities not classified as Cash and cash equivalents This category reports assets that are available on demand or held to maturity, equity investments in other entities (un- at very short term, have cleared and have no collection costs less classified as “designated as at fair value through profit as well as highly short-term liquid financial investments that or loss”) and financial assets that cannot be classified in are readily convertible into a known amount of cash and other categories. These instruments are measured at fair which are subject to insignificant risk of changes in value. value with changes recognized in shareholders’ equity. In addition, for the purpose of the consolidated statement At the time of sale, or when a financial asset available for of cash flows, cash and cash equivalents do not include sale becomes an investment in a subsidiary as a result of bank overdrafts at period-end. successive purchases, the cumulative gains and losses pre- viously recognized in equity are reversed to the income statement. Trade payables Trade payables are initially recognized at fair value and Where there is objective evidence that such assets have in- subsequently measured at amortized cost. Trade payables curred an impairment loss, the cumulative loss previously falling due in line with generally accepted trade terms are recognized in equity is eliminated through reversal to the not discounted. income statement. Such impairment losses, which cannot be reversed, are calculated as the difference between the carrying amount of the asset and its fair value, determined Financial liabilities Financial liabilities other than derivatives are recognized on the basis of the market price at the balance-sheet date when the Company becomes a party to the contractual for financial assets listed on regulated markets or on the clauses representing the instrument and are initially meas- basis of the present value of expected future cash flows, ured at fair value adjusted for directly attributable transac- discounted using the market interest rate for unlisted fi- tion costs. Financial liabilities are subsequently measured nancial assets. at amortized cost using the effective interest rate method. When the fair value cannot be determined reliably, these assets are recognized at cost adjusted for any impairment losses. Derivative financial instruments Derivatives are recognized at fair value and are designated as hedging instruments when the relationship between Impairment of financial assets At each balance-sheet date, financial assets are analyzed the derivative and the hedged item is formally document- ed and the effectiveness of the hedge (assessed periodi- to determine whether their value is impaired. cally) meets the thresholds envisaged under IAS 39. A financial asset is considered impaired when there is ob- When the derivatives are used to hedge the risk of changes jective evidence of such impairment loss as the result of in the fair value of hedged assets or liabilities, any chang- one or more events that occurred after the initial recogni- es in the fair value of the hedging instrument are taken tion of the asset that have had an impact on the reliably to profit or loss. The adjustments in the fair values of the estimated future cash flows of the asset. hedged assets or liabilities are also taken to profit or loss. 153 When derivatives are used to hedge the risk of changes in Financial liabilities are derecognized when they are extin- the cash flows generated by the hedged items (cash flow guished, i.e. when the contractual obligation has been dis- hedges), changes in fair value are initially recognized in charged, cancelled or lapsed. equity, in the amount qualifying as effective, and are rec- ognized in profit or loss only when the change in the cash flows from the hedged items to be offset actually occurs. The ineffective portion of the fair value of the hedging in- Post-employment and other employee benefits strument is taken to profit or loss. Liabilities related to employee benefits paid upon or after Changes in the fair value of trading derivatives and those ceasing employment in connection with defined-benefit that no longer qualify for hedge accounting under IAS 39 plans or other long-term benefits accrued during the em- are recognized in profit or loss. ployment period are determined separately for each plan, Derivative financial instruments are recognized at the using actuarial assumptions to estimate the amount of the trade date. future benefits that employees have accrued at the balance- Financial and non-financial contracts (that are not already sheet date (the projected unit credit method). The liability, measured at fair value) are analyzed to identify any em- which is carried net of any plan assets, is recognized on an bedded derivatives, which are separated and measured accruals basis over the vesting period of the related rights. at fair value. This analysis is conducted at the time the en- These appraisals are performed by independent actuaries. tity becomes party to the contract or when the contract As regards the net liabilities (assets) of defined-benefit is renegotiated in a manner that significantly changes the plans, the actuarial gains and losses from the actuarial original associated cash flows. measurement of the liabilities, the return on the plan as- The Group also analyzes all forward contracts for the pur- sets (net of the associated interest income) and the effect chase or sale of non-financial assets, with a specific focus of the asset ceiling (net of the associated interest) are rec- on forward purchases and sales of electricity and energy ognized in other comprehensive income when they occur. commodities, in order to determine if they must be classi- In the event of a change being made to an existing de- fied and treated in conformity with IAS 39 or if they have fined-benefit plan or the introduction of a new plan, any been entered into for physical delivery in line with the nor- past service cost is recognized immediately in profit or loss. mal purchase/sale/use needs of the Company (own use exemption). If such contracts have not been entered into in order to ob- Termination benefits tain or deliver electricity or energy commodities, they are Liabilities for benefits due to employees for the early ter- measured at fair value. mination of the employment relationship are recognized Derecognition of financial assets and liabilities Financial assets are derecognized whenever one of the fol- at the earlier of the following dates: > when the entity can no longer withdraw its offer of be- nefits; and > when the entity recognizes a cost for a restructuring that lowing conditions is met: is within the scope of IAS 37 and involves the payment > the contractual right to receive the cash flows associa- of termination benefits. ted with the asset expires; The liabilities are measured on the basis of the nature of > the Company has transferred substantially all the risks the employee benefit. More specifically, when the bene- and rewards associated with the asset, transferring its fits represent an enhancement of other post-employment rights to receive the cash flows of the asset or assuming benefits, the associated liability is measured in accordance a contractual obligation to pay such cash flows to one with the rules governing that type of benefits. Otherwise, or more beneficiaries under a contract that meets the if the termination benefits due to employees are expected requirements envisaged under IAS 39 (the “pass throu- to be settled wholly before 12 months after the end of the gh test”); annual reporting period, the entity measures the liability in > the Company has not transferred or retained substan- accordance with the requirements for short-term employ- tially all the risks and rewards associated with the asset ee benefits; if they are not expected to be settled wholly but has transferred control over the asset. before 12 months after the end of the annual reporting 154 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts period, the entity measures the liability in accordance with the time value of money and, if applicable, the risks spe- the requirements for other long-term employee benefits. cific to the liability. Share-based payments If the provision is discounted, the periodic adjustment of the present value for the time factor is recognized as a fi- nancial expense. Stock option plans The cost of services rendered by employees and remuner- Where the liability relates to decommissioning and/or site restoration in respect of property, plant and equipment, ated through stock option plans is determined based on the initial recognition of the provision is made against the the fair value of the options granted to employees at the related asset and the expense is then recognized in profit grant date. or loss through the depreciation of the asset involved. The calculation method to determine the fair value consid- Where the liability regards the treatment and storage of ers all characteristics of the option (option term, price and nuclear waste and other radioactive materials, the provi- exercise conditions, etc.), as well as the Enel share price sion is recognized against the related operating costs. at the grant date, the volatility of the stock and the yield Changes in estimates of accruals to the provision are recog- curve at the grant date consistent with the expected life nized in the income statement in the period in which the of the plan. The pricing model used is the Cox-Rubinstein. changes occur, with the exception of those in the costs of This cost is recognized in the income statement, with a dismantling and/or restoration resulting from changes in the specific contra-item in shareholders’ equity, over the vest- timetable and costs necessary to extinguish the obligation or ing period considering the best estimate possible of the from a change in the discount rate. These changes increase number of options that will become exercisable. or decrease the value of the related assets and are taken to the income statement through depreciation. Where they in- Restricted share units incentive plans The cost of services rendered by employees and remuner- crease the value of the assets, it is also determined whether the new carrying amount of the assets is fully recoverable. If ated through restricted share units (RSU) incentive plans is this is not the case, a loss equal to the unrecoverable amount determined based on the fair value of the RSU granted to is recognized in the income statement. employees, in relation to the vesting of the right to receive Decreases in estimates are recognized up to the carrying the benefit. amount of the assets. Any excess is recognized immedi- The calculation method to determine the fair value consid- ately in the income statement. ers all characteristics of the RSU (term, exercise conditions, For more information on the estimation criteria adopted etc.), as well as the price and volatility of Enel shares over in determining provisions for dismantling and/or restora- the vesting period. The pricing model used is the Monte tion of property, plant and equipment, especially those as- Carlo method. sociated with nuclear power plants, please see the section This cost is recognized in the income statement, with rec- on the use of estimates. ognition of a specific liability adjusted periodically to fair value, over the vesting period, considering the best esti- mate possible of the number of RSU that will become ex- Grants ercisable. Provisions for risks and charges Grants are recognized at fair value when it is reasonably certain that they will be received or that the conditions for receipt have been met as provided for by the govern- ments, government agencies and similar local, national or Accruals to the provisions for risks and charges are rec- international authorities. ognized where there is a legal or constructive obligation Grants received for specific expenditure or specific assets as a result of a past event at period-end, the settlement the value of which is recognized as an item of property, of which is expected to result in an outflow of resourc- plant and equipment or an intangible asset are recognized es whose amount can be reliably estimated. Where the as other liabilities and credited to the income statement impact is significant, the accruals are determined by dis- over the period in which the related costs are recognized. counting expected future cash flows using a pre-tax dis- Operating grants are recognized fully in profit or loss at count rate that reflects the current market assessment of the time they satisfy the requirements for recognition. 155 Environmental certificates > revenues from the sale and transport of electricity and Some Group companies are affected by national regula- tions governing green certificates and white certificates, as well as the European emissions trading system. Green certificates earned in respect of electricity gener- ated by renewable energy plants and white certificates (energy efficiency certificates) earned in respect of energy savings achieved that have been certified by the compe- tent authority are treated as non-monetary operating grants and are recognized at fair value under other reve- nues and income, with recognition of an asset under other non-financial assets, if the certificates are not yet credited to the ownership account, or under inventories, if the cer- tificates have already been credited to that account. At the time the certificates are credited to the ownership account, their value is reclassified from other assets to in- ventories. In the case of sale, the difference between the sale price of those certificates and the carrying amount at the sale date is recognized under revenues from sales. For the purposes of accounting for charges in respect of regulatory requirements concerning green and white cer- tificates and CO2 emissions allowances, the Group uses the “net liability approach”. Under this treatment, environmental certificates received free of charge and those earned as a result of company operations that are to be used to meet compliance re- quirements are recognized at nominal value (zero). In ad- dition, charges incurred in acquiring certificates on the market (or obtained for consideration of some form) to make up any compliance shortfall are recognized through profit or loss on an accruals basis under other operating expenses, as they represent “system charges” consequent upon compliance with a regulatory requirement. Revenues gas refer to the quantities provided during the period, even if these have not yet been invoiced, and are de- termined using estimates as well as periodic meter readings. Where applicable, this revenue is based on the rates and related restrictions established by law or the Authority for Electricity and Gas and analogous foreign authorities during the applicable period. In par- ticular, the authorities that regulate the electricity and gas markets can use mechanisms to reduce the impact of the temporal mismatching between the setting of prices for energy for the regulated market as applied to distributors and the setting of prices by the latter for final consumers; > revenues from the rendering of services are recognized in line with the stage of completion of the services. Where it is not possible to reliably determine the value of the revenues, they are recognized in the amount of the costs that it is considered will be recovered; > revenues accrued in the period in respect of construc- tion contracts are recognized on the basis of the pay- ments agreed in relation to the stage of completion of the work, determined using the cost-to-cost method, under which costs, revenues and the related margins are recognized on the basis of the progress of the pro- ject. The stage of completion is determined as a ratio between costs incurred at the measurement date and the overall costs expected for the project. In additional to contractual payments, project revenues include any payments in respect of variations, price revisions and incentives, with the latter recognized where it is proba- ble that they will actually be earned and can be reliably determined. Revenues are also adjusted for any penal- ties for delays attributable to the Company; > revenues for fees for connection to the electricity dis- tribution grid are recognized in full upon completion of connection activities if the service provided can be recognized separately from any electricity distribution services provided on an ongoing basis. Revenues are recognized when it is probable that the future economic benefits will flow to the Company and Financial income and expense these benefits can be measured reliably. More specifically, the following criteria are used depend- ing on the type of transaction: > revenues from the sale of goods are recognized when the significant risks and rewards of ownership are transferred to the buyer and their amount can be reli- ably determined; Financial income and expense is recognized on an accru- als basis in line with interest accrued on the net carrying amount of the related financial assets and liabilities us- ing the effective interest rate method. They include the changes in the fair value of financial instruments recog- nized at fair value through profit or loss and changes in 156 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsthe fair value of derivatives connected with financial liabilities. This only occurs when the sale is highly probable transactions. and the non-current assets (or disposal groups) are availa- Income taxes ble in their current condition for immediate sale. Non-current assets (or disposal groups) classified as held for sale are first recognized in compliance with the ap- Current income taxes for the period, which are recognized propriate IFRS/IAS applicable to the specific assets or lia- under “income tax payable” net of payments on account, bilities and subsequently measured at the lower of the or under “income tax receivable” where there is a credit carrying amount and the fair value, net of costs to sell. Any balance, are determined using an estimate of taxable in- subsequent impairment losses are recognized as a direct come and in conformity with the applicable regulations. adjustment to the non-current assets (or disposal groups) Deferred tax liabilities and assets are calculated on the classified as held for sale and expensed in the income sta- temporary differences between the carrying amounts of tement. The corresponding values for the previous period assets and liabilities in the consolidated financial state- are not reclassified. ments and their corresponding values recognized for tax A discontinued operation is a component of an entity that purposes on the basis of tax rates in effect on the date the has been divested or classified as held for sale and: temporary difference will reverse, which is determined on > represents a major line of business or geographical area the basis of tax rates that are in force or substantively in of operations; force at the balance-sheet date. > is part of a single coordinated plan to dispose of a se- Deferred tax assets are recognized when recovery is prob- parate major line of business or geographical area of able, i.e. when an entity expects to have sufficient future operations; or taxable income to recover the asset. > is a subsidiary acquired exclusively with a view to resale. The recoverability of deferred tax assets is reviewed at Gains or losses on operating assets sold – whether dispo- each period-end. sed of or classified as held for sale – are shown separately Deferred tax assets and liabilities in respect of taxes levied in the income statement, net of the tax effects. The cor- by the same tax authority are offset if the Company has a legal right to offset current tax assets against current tax responding values for the previous period, where present, are reclassified and reported separately in the income sta- liabilities generated at the time they reverse. tement, net of tax effects, for comparative purposes. Current and deferred taxes are recognized in profit or Non-current assets that no longer meet the requirements loss, with the exception of those in respect of items di- for classification as held for sale or which cease to belong rectly credited or debited to equity, which are recognized to a disposal group classified as held for sale are measured directly in equity. as the lower of: Dividends > the book value before the asset (or disposal group) was classified as held for sale, adjusted for depreciation, amortization, writedowns or writebacks that would Dividends from equity investments are recognized when have been recognized if the asset (or disposal group) the shareholders’ right to receive them is established. had not been classified as held for sale; and Dividends and interim dividends payable to third parties > the recoverable value, which is equal to the greater of are recognized as changes in equity at the date they are its fair value net of costs to sell and its value in use, as approved by the Shareholders’ Meeting and the Board of calculated at the date on which the decision not to sell Directors, respectively. was taken. Discontinued operations and non- current assets held for sale Non-current assets (or disposal groups) whose carrying amount will mainly be recovered through sale, rather than through ongoing use, are classified as held for sale and shown separately from the other balance-sheet assets and 157 3 Recently issued accounting standards First-time adoption and applicable standards The Group has adopted the following amendment to international accounting standards that took effect as from January 1, 2013: financial liabilities”, issued in December 2011, in parallel with the amendments to IAS 32; the amendments esta- blish more extensive disclosures for the offsetting of financial assets and liabilities, with a view to enabling users of financial statements to assess the actual and potential effects on the entity’s financial position of net- ting arrangements, including the set-off rights associa- ted with recognized assets or liabilities. The application of the new provisions did not have a significant impact. > “IFRIC 20 - Stripping costs in the production phase of a surface mine”, issued in October 2011; the interpreta- tion sets out the accounting treatment to be applied to costs incurred for the removal of mine waste materials during the production phase, clarifying when they can be recognized as an asset. The application of the new in- > “Amendment to IAS 1 - Presentation of items of other terpretation did not have an impact on the consolidated comprehensive income”, issued in June 2011. The financial statements. amendment calls for the separate presentation of items > “Annual Improvements to IFRSs 2009-2011 Cycle”, is- of other comprehensive income (OCI) that may be re- sued in May 2012; the document contains formal modi- classified to profit or loss in the future (“recycling”) and fications and clarifications of existing standards. The ap- those that will not be recycled. The application of the plication of the new provisions did not have a significant amendment did not have a significant impact. impact for the Group. More specifically, the following > “IAS 19 - Employee benefits”, issued in June 2011; the standards have been amended: standard supersedes the current IAS 19 governing the - “IAS 1 - Presentation of financial statements”; the accounting treatment of employee benefits. The most amendment clarifies how comparative information significant change regards the requirement to recognize must be presented in the financial statements and spe- all actuarial gains/losses in OCI, with the elimination of cifies that an entity may voluntarily elect to provide ad- the corridor approach. The amended standard also in- ditional comparative information; troduces more stringent rules for disclosures, with the - “IAS 16 - Property, plant and equipment”; the disaggregation of the cost into three components; eli- amendment clarifies that if spare parts and servicing minates the expected return of plan assets; no longer equipment meet the requirements for classification as permits the deferral of the recognition of past service “property, plant and equipment” they shall be recogni- cost in profit or loss; and introduces more detailed rules zed and measured in accordance with IAS 16; otherwise for the recognition of termination benefits. The impact they shall be classified as inventory; of the application of the amended standard is summa- - “IAS 32 - Financial instruments: presentation”; the rized in note 4. amendment establishes that income taxes relating to di- > “IFRS 13 - Fair value measurement”, issued in May 2011; stributions to equity holders and to transaction costs of the standard represents a single IFRS framework to be equity transactions shall be accounted for in accordance used whenever another accounting standard requires or with IAS 12; permits the use of fair value measurement. The standard - “IAS 34 - Interim financial reporting”; the amendment sets out guidelines for measuring fair value and introdu- clarifies that interim financial reports shall specify the ces specific disclosure requirements. The overall impacts total assets and liabilities for a particular reportable seg- on profit or loss and equity of the application, on a pro- ment only if such amounts are regularly provided by the spective basis, of the new standard were a positive €4 chief operating decision maker and if there has been a million and €46 million, respectively, mainly due to the material change from the amount disclosed in the last new method used to determine counterparty risk, which annual financial statements presented. also includes non-performance risk. > “Amendments to IFRS 7 - Offsetting financial assets and- 158 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsStandards not yet applicable and not yet adopted In 2012 and 2013, the European Commission endorsed the following accounting standards and interpretations, which will be applicable to the Group in future years: > “IFRS 10 - Consolidated financial statements”, issued in May 2011; replaces “SIC 12 - Consolidation - special pur- pose entities” and, for the part concerning consolidated financial statements, “IAS 27 - Consolidated and separate financial statements”, the title of which was changed to “Separate financial statements”. The standard introduces a new approach to determining whether an entity controls another (the essential condition for consolidating an in- vestee), without modifying the consolidation procedures envisaged in the current IAS 27. This approach must be applied to all investees, including special purpose entities, which are called “structured entities” in the new standard. While current accounting standards give priority – where control does not derive from holding a majority of actual or potential voting rights – to an assessment of the risks/ benefits associated with the holding in the investee, IFRS 10 focuses the determination on three elements to be considered in each assessment: power over the investee; exposure to variable returns from the involvement in the investee; and the link between power and returns, i.e. the ability to use that decision-making power over the investee to affect the amount of returns. The accounting effects of a loss of control or a change in the ownership interest that does not result in a loss of control are unchan- ged with respect to the provisions of the current IAS 27. The new standard will take effect retrospectively for an- nual reporting periods beginning on or after January 1, 2014. The application of the new provisions will not have an impact on the Group. > “IAS 27 - Separate financial statements”, issued in May 2011. Together with the issue of IFRS 10 and IFRS 12, the current IAS 27 was amended, with changes to its title and its content. All provisions concerning the preparation of consolidated financial statements were eliminated, whi- le the other provisions were not modified. Following the amendment, the standard therefore only specifies the reco- gnition and measurement criteria and the disclosure requi- rements for separate financial statements concerning sub- sidiaries, joint ventures and associates. The new standard will take effect retrospectively for annual reporting periods beginning on or after January 1, 2014. The application of the new provisions will not have an impact on the Group. > “IFRS 11 - Joint arrangements”, issued in May 2011; repla- ces “IAS 31 - Interests in joint ventures” and “SIC 13 - Jointly controlled entities - non-monetary contributions by ventu- rers”. Unlike IAS 31, which assesses joint arrangements on the basis of the contractual form adopted, IFRS 11 assesses them on the basis of how the related rights and obliga- tions are attributed to the parties. In particular, the new standard identifies two types of joint arrangement: joint operations, where the parties to the arrangement have pro-rata rights to the assets and pro-rata obligations for the liabilities relating to the arrangement; and joint ven- tures, where the parties have rights to a share of the net assets or profit/loss of the arrangement. In the consoli- dated financial statements, accounting for an interest in a joint operation involves the recognition of the assets/ liabilities and revenues/expenses related to the arrange- ment on the basis of the associated rights/obligations, without taking account of the interest held. Accounting for an interest in a joint venture involves the recognition of an investment accounted for using the equity method (proportionate consolidation is no longer permitted). The new standard will take effect retrospectively for annu- al reporting periods beginning on or after January 1, 2014. The application of the new standard will involve a change in the measurement of joint ventures, which will now be accounted for exclusively with the equity method. More specifically, while there will be no impact on the net inco- me and equity of the Group, if IFRS 11 had been adopted for the purposes of preparing the consolidated financial statements at December 31, 2013, revenues for 2013 would have been about €1,800 million lower, while total assets at December 31, 2013 would have been about €700 million lower. > “IAS 28 - Investments in associates and joint ventures”, is- sued in May 2011. Together with the issue of IFRS 11 and IFRS 12, the current IAS 28 was amended, with changes to its title and its content. In particular, the new standard, which also includes the provisions of “SIC 13 - Jointly con- trolled entities - non-monetary contributions by venturers”, describes the application of the equity method, which in consolidated financial statements is used to account for associates and joint ventures. The new standard will take effect retrospectively for annual reporting periods begin- ning on or after January 1, 2014. The future application of the new provisions will not have an impact on the Group, with the exception of the effects discussed earlier of the application of IFRS 11. 159 > “IFRS 12 - Disclosure of interests in other entities”, issued sures to be provided in the first year of application. IFRS in May 2011; IFRS 12 brings together in a single standard 11 and IFRS 12 were amended analogously, limiting the required disclosures concerning interests held in subsi- the effects, both in terms of restatement of financial diaries, joint operations and joint ventures, associates and data and of disclosures, of initial application of IFRS 11. structured entities. In particular, the standard replaces the The amendments will take effect retrospectively for pe- disclosures called for in the current IAS 27, IAS 28 and IAS riods beginning on or after January 1, 2014. The future ap- 31 with new disclosure requirements in order to ensure the plication of the new provisions will not have a significant disclosure of more uniform and consistent information, impact on the Group. introducing new requirements for disclosures concerning > “Amendments to IFRS 10, IFRS 12 and IAS 27 - Investment subsidiaries with significant non-controlling shareholders entities”, issued in October 2012. The amendments intro- and individually material associates and joint ventures. duce an exception to the requirement under IFRS 10 to The new standard will take effect retrospectively for an- consolidate all subsidiaries if the parent qualifies as an nual reporting periods beginning on or after January 1, “investment entity”. More specifically, investment entities, 2014. The future application of the new provisions will re- as defined in the amendments, shall not consolidate their quire implementation of the new disclosure requirements. subsidiaries unless the latter provide services associated > “Amendments to IAS 32 - Offsetting financial assets and with the investment activities of the parent. Non-conso- financial liabilities”, issued in December 2011. IAS 32 esta- lidated subsidiaries shall be measured in conformity with blishes that a financial asset and a financial liability should IFRS 9 or IAS 39. The parent of an investment entity shall, be offset and the net amount reported in the balance she- however, consolidate all of its subsidiaries (including those et when, and only when, an entity: held through the investment entity) unless it also qualifies a) has a legally enforceable right to set off the amounts; as an investment entity. The amendments will take effect and retrospectively for periods beginning on or after January 1, b) intends either to settle on a net basis or to realize the 2014. The future application of the new provisions will not asset and settle the liability simultaneously. have an impact on the Group. The amendments to IAS 32 clarify the conditions that must > “Amendments to IAS 36 - Recoverable amount disclo- be met for these two requirements to be satisfied. As re- sures for non-financial assets”, issued in May 2013. The gards the first requirement, the amendment expands the amendments of IAS 36 as a consequence of the pro- illustration of cases in which an entity “currently has a legal- visions of IFRS 13 did not reflect the intentions of the ly enforceable right of set-off”, while as regards the second IASB concerning the disclosures to report about the re- the amendment clarifies that, where the entity settles the coverable amount of impaired assets. Consequently, financial asset and liability separately, for set-off to be allo- the IASB amended the standard further, eliminating the wed the associated credit and liquidity risk should be insi- disclosure requirements originally introduced by IFRS gnificant and, in this regard, specifies the characteristics that 13 and requiring specific disclosures concerning the me- gross settlement systems must have. asurement of fair value in cases in which the recovera- The amendments will take effect retrospectively for annual ble amount of impaired assets is calculated on the basis reporting periods beginning on or after January 1, 2014. of fair value less costs of disposal. The amendments also The future application of the new provisions will give rise to require disclosures on the recoverable amount of as- the reclassification of a number of items in the consolidated sets or cash generating units for which an impairment balance sheet, with no impact on consolidated equity. loss has been recognized or reversed during the period. > “Amendments to IFRS 10, IFRS 11 and IFRS 12 - Transi- The amendments will take effect retrospectively for pe- tion guidance”, issued in June 2012. The amendments riods beginning on or after January 1, 2014. The future are intended to clarify a number of issues concerning application of the new provisions will not have an impact the first-time adoption of IFRS 10, IFRS 11 and IFRS 12. In on the Group. particular, IFRS 10 was amended to clarify that the date > “Amendments to IAS 39 - Novation of derivatives and con- of initial application of the standard shall mean “the be- tinuation of hedge accounting”, issued in June 2013. The ginning of the annual reporting period in which IFRS 10 amendments are intended to allow entities, under certain is applied for the first time” (i.e. January 1, 2013). In ad- conditions, to continue hedge accounting in the case of no- dition, the amendments limited the comparative disclo- vation of the hedging instrument with a central counterpar- 160 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsty as a result of the introduction of a new law or regulation. ments”, postponing the mandatory effective date from The amendments will take effect retrospectively for pe- January 1, 2013 to January 1, 2015 and establishing new riods beginning on or after January 1, 2014. The future rules for the transition from IAS 39 to IFRS 9. These provi- application of the new provisions will not have an impact sions have been superseded by the amendments of IFRS on the Group. 9 issued in November 2013 (see previous paragraph). The amendments being discussed here also modify “IFRS In the years from 2009 to 2013, the International Accounting 7 - Financial instruments: disclosures”, introducing new Standards Board (IASB) and the International Financial Repor- comparative disclosures, which will be mandatory or ting Interpretations Committee (IFRIC) also published new optional depending on the date of transition to IFRS 9. standards and interpretations that, as of December 31, 2013, The Group is assessing the potential impact of the future ap- had not yet been endorsed by the European Commission. The plication of the new provisions. rules that could have an impact on the consolidated financial > “IFRIC 21 - Levies”, issued in May 2013. The interpretation statements of the Group are set out below: defines when a liability in respect of the obligation to pay > “IFRS 9 - Financial instruments”, issued in November 2009 a levy (other than income taxes) due to the government, and subsequently revised: the standard is the first of three whether local, national or international must be reco- phases in the project to replace IAS 39. The standard esta- gnized. More specifically, the interpretation established blishes new criteria for the classification of financial assets that the liability shall be recognized when the obliga- and liabilities. Financial assets must be classified based on ting event giving rise to the liability to pay the levy (for the business model of the entity and the characteristics of example, upon reaching a given threshold level of reve- the associated cash flows. The new standard requires finan- nue), as set out in the applicable law, occurs. If the obli- cial assets and liabilities to be measured initially at fair va- gating event occurs over a specified period of time, the lue plus any transaction costs directly attributable to their liability shall be recognized gradually over that period. assumption or issue. Subsequently, they are measured at The interpretation will take effect, subject to endorse- fair value or amortized cost, unless the fair value option is ment, for periods beginning on or after January 1, 2014. applied. As regards equity instruments not held for trading, The Group does not expect the future application of the an entity can make an irrevocable election to measure them provisions to have an impact. at fair value through other comprehensive income. Any di- > “Amendment to IAS 19 - Defined-benefit plans: em- vidend income shall be recognized through profit or loss. ployee contributions”, issued in November 2013. The In November 2013, a section on hedge accounting was amendments are intended to clarify how to recognize con- introduced. The new provisions governing the recogni- tributions from employees within a defined-benefit plan. tion of the effects of hedging relationships call for risk More specifically, contributions linked to service should be management policies to be reflected in the financial sta- recognized as a reduction in service cost: tements, eliminating inconsistencies and weaknesses in - over the periods in which employees render their servi- the hedge accounting model in IAS 39. The current version ces, if the amount of the contributions is dependent on of IFRS 9 does not address macro hedging, an issue that the number of years of service; or the IASB is still discussing. Accordingly, until the comple- - in the period in which the service is rendered, if the tion of the entire hedge accounting project, the standard amount of the contributions is independent of the num- permits entities to choose between applying the hedge ber of years of service. accounting requirements of IFRS 9 and those of IAS 39. The amendments will take effect, subject to endorsement, The amendments introduced in November 2013 also eli- for periods beginning on or after January 1, 2015. The minated the reference to a mandatory effective date for Group is assessing the potential impact of the future appli- the standard, which is available for immediate application. cation of the measures. The Group, however, will not apply the standard before > “Annual improvements to IFRSs 2010-2012 cycle”, issued endorsement. The Group is assessing the potential impact in December 2013; the document contains formal modifi- of the future application of the new provisions. cations and clarifications of existing standards that are not > “Amendments to IFRS 9 and IFRS 7 - Mandatory effec- expected to have a significant impact on the Group. More tive date and transition disclosure”, issued in December specifically, the following standards were amended: 2011. The amendment modifies “IFRS 9 - Financial instru- - “IFRS 2 - Share-based payment”; the amendment clari- 161 fies the meaning of “vesting conditions”, defining “per- clarifies that an entity is a related party if that entity, formance conditions” and “service conditions” sepa- or any member of a group of which it is a part, provi- rately. The changes will apply prospectively, subject to des key management personnel services (a so-called endorsement, to share-based payment transactions for management entity). The amendment also introduces which the grant date is on or after July 1, 2014; disclosure requirements concerning that sort of related - “IFRS 3 - Business combinations”; the amendment clari- party. The changes will apply, subject to endorsement, fies how to classify any contingent consideration agreed to annual periods beginning on or after January 1, 2015; in a business combination. Specifically, the amendment - “IAS 38 - Intangible assets”; the amendment clarifies establishes that if the contingent consideration meets that when an intangible asset is revalued, its gross the definition of financial instrument it shall be classified carrying amount shall be adjusted in a manner consi- as a financial liability or equity. In the former case, the stent with the revaluation. In addition, it also clarifies liability shall be measured at fair value and changes in that the accumulated amortization shall be calculated fair value shall be recognized in profit or loss in accor- as the difference between the gross carrying amount dance with IFRS 9. Contingent consideration that does and the carrying amount of the asset after taking ac- not meet the definition of financial instrument shall be count of accumulated impairment losses. The changes measured at fair value and changes in fair value shall be will apply, subject to endorsement, to annual periods recognized in profit or loss. The changes will apply pro- beginning on or after January 1, 2015. More specifically, spectively, subject to endorsement, to business combi- they will be applicable to revaluations recognized in the nations for which the acquisition date is on or after July year ending December 31, 2015 and in the immediately 1, 2014; preceding annual period. - “IFRS 8 - Operating segments”; the amendment intro- > “Annual improvements to IFRSs 2011-2013 cycle”, issued duces new disclosure requirements. In particular, the in December 2013; the document contains formal modifi- disclosures shall include a brief description of how cations and clarifications of existing standards that are not segments have been aggregated and what economic expected to have a significant impact on the Group. More indicators have been assessed in determining that the specifically, the following standards were amended: aggregated operating segments share similar econo- - “IFRS 3 - Business combinations”; the amendment cla- mic characteristics. The changes will apply, subject to rifies that IFRS 3 does not apply in the financial state- endorsement, to annual periods beginning on or after ments of a joint arrangement to the recognition of the January 1, 2015; formation of every type of joint arrangement (pursuant - “IFRS 13 - Fair value measurement”; the amendment cla- to IFRS 11). The changes will apply prospectively, subject rifies, within the standard’s Basis for Conclusions, that to endorsement, for annual periods beginning on or af- the IASB does not intend to modify the measurement ter January 1, 2015; requirements for short-term receivables and payables; - “IFRS 13 - Fair value measurement”; the amendment cla- - “IAS 16 - Property, plant and equipment”; the rifies that the exception provided for in that standard of amendment clarifies that, when an item of property, measuring financial assets and liabilities on the basis of plant and equipment is revalued, the gross carrying the net exposure of the portfolio shall apply to all con- amount of that asset shall be adjusted in a manner con- tracts within the scope of IAS 39/IFRS 9 even if they do sistent with the revaluation. In addition, it also clarifies not meet the definitions in IAS 32 of financial assets/ that the accumulated depreciation shall be calculated liabilities. The changes will apply, subject to endorse- as the difference between the gross carrying amount ment, for annual periods beginning on or after January and the carrying amount of the asset after taking ac- 1, 2015. More specifically, they will apply prospectively count of accumulated impairment losses. The changes from the date that the Group initially applies IFRS 13; will apply, subject to endorsement, to annual periods - “IAS 40 - Investment property”; the amendment establi- beginning on or after January 1, 2015. More specifical- shes that a property interest held by a lessee under an ly, they will be applicable to revaluations recognized in operating lease may be classified as an investment pro- the year ending December 31, 2015 and in the imme- perty if and only if the property would otherwise meet diately preceding annual period; the definition of an investment property and if the lessee - “IAS 24 - Related party disclosures”; the amendment used the fair value model to measure such investments. 162 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsThe amendment also clarifies that when an entity ac- subject to endorsement, for annual periods beginning quires an investment property, it must determine whe- on or after January 1, 2015; the amendment concerning ther that acquisition is a business combination under the acquisition of an investment property shall apply the provisions of IFRS 3. The change regarding proper- prospectively, subject to endorsement, to acquisitions ty interests held under a lease shall apply retroactively, made on or after January 1, 2015. 4 Restatement of comparative figures at December 31, 2012 Following the application, as from January 1, 2013 with ret- rospective effect, of the new version of “IAS 19/R - Employ- ee benefits”, the main effects on the income statement and balance sheet for the previous year are discussed below: > as the corridor approach may no longer be used, all actua- rial gains and losses previously unrecognized at January 1, 2012 have been recognized directly in equity. Accordingly, the amortization accruing in respect of the excess gains and losses outside the corridor was eliminated from the income statement (€19 million). The restatement of those items led to the adjustment of the respective defined-benefit obliga- tion and the net plan assets recognized in the balance sheet; > as the recognition of past service cost in the income sta- tement may no longer be deferred, for employee bene- fits already existing at December 31, 2011, the portion of the past service cost not yet recognized was recognized in its entirety in equity at January 1, 2012, increasing the employee benefit obligation. For employee benefit plans introduced in 2012, the effect of the increase in the asso- ciated obligation was recognized directly through profit or loss for that period. That recognition through profit or loss included charges of €932 million for the obligation in re- spect of the transition-to-retirement plan implemented for certain employees in Italy at the end of 2012; > in application of the new standard, net interest income on plan assets is recognized in substitution of the expected return on those assets. As a result, that interest is no longer presented under financial income but is instead deducted from the financial expense of the benefit plans. The impact of that change on the restated 2012 income statement for the Group was not material. In all cases, the theoretical tax effects and amounts pertain- ing to non-controlling interests were also calculated. In addition, in 2013, the Group adopted a new accounting policy to standardize the recognition and presentation of the various types of environmental certificates (CO2 allow- ances, green certificates, white certificates). The new ap- proach is based on the business model of the companies in- volved in the environmental certificate mechanisms and led only to a number of reclassifications in the income state- ment and consolidated balance sheet. Finally, as a result of the definitive allocation of the purchase prices of the Kafireas pipeline and of Stipa Nayaá and Eólica Zopiloapan, companies operating in the Renewable Energy Division, which was completed after December 31, 2012, the balance-sheet accounts at that date have been restated to reflect the fair value adjustment of the assets acquired and liabilities assumed in the associated business combinations. The following tables reports the changes in the income statement, statement of comprehensive income and con- solidated balance sheet following the above amendments, including the associated tax effects. The impact on the consolidated statement of cash flows is limited to a number of reclassifications among the various components, in line with the figures reported in the balance sheet and income statement. 163 Millions of euro Revenues Revenues from sales and services Other revenues and income Total revenues Costs Raw materials and consumables Services Personnel Depreciation, amortization and impairment losses Other operating expenses Capitalized costs Total costs Net income/(charges) from commodity risk management Operating income Financial income Financial expense Share of income/(expense) from equity investments accounted for using the equity method Income before taxes Income taxes Net income from continuing operations Net income from discontinued operations Net income for the year (shareholders of the Parent Company and non-controlling interests) Pertaining to shareholders of the Parent Company Pertaining to non-controlling interests 2012 IAS 19/R effect New environmental certificate policy 2012 restated 82,699 2,190 84,889 46,130 15,738 4,860 9,003 3,208 (1,747) 77,192 38 7,735 2,272 5,275 88 4,820 2,745 2,075 - 2,075 865 1,210 - - - - - 929 - - - 929 - (929) (87) (78) - (938) (305) (633) - (633) (627) (6) (268) 328 60 452 42 - - (434) - 60 - - - - - - - - - - - - 82,431 2,518 84,949 46,582 15,780 5,789 9,003 2,774 (1,747) 78,181 38 6,806 2,185 5,197 88 3,882 2,440 1,442 - 1,442 238 1,204 164 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsMillions of euro Net income for the year Other comprehensive income recyclable to profit or loss Effective portion of change in the fair value of cash flow hedges Share of income recognized in equity by companies accounted for using the equity method Change in the fair value of financial investments available for sale Change in translation reserve Other comprehensive income not recyclable to profit or loss Change in net liabilities/(assets) in respect of defined-benefit plans Income/(Loss) recognized directly in equity Comprehensive income for the period Pertaining to: - shareholders of the Parent Company - non-controlling interests 2012 2,075 (760) (7) (416) 73 - (1,110) 965 (374) 1,339 IAS 19/R effect 2012 restated (633) 1,442 - - - - (248) (248) (881) (858) (23) (760) (7) (416) 73 (248) (1,358) 84 (1,232) 1,316 Millions of euro Non-current assets Property, plant and equipment Investment property Intangible assets Deferred tax assets Equity investments accounted for using the equity method Non-current financial assets Other non-current assets Current assets Inventories Trade receivables Tax receivables Current financial assets Other current assets Cash and cash equivalents Total current assets Assets held for sale TOTAL ASSETS Total non-current assets 133,924 at Dec. 31, 2011 IAS 19/R effect at Jan. 1, 2012 restated at Dec. 31, 2012 IAS 19/R effect Renewable Energy Division PPA at Dec. 31, 2012 restated 80,592 245 39,049 6,116 1,085 6,325 512 3,148 11,570 1,251 10,466 2,136 7,015 35,586 381 - - - 90 - - (97) (7) - - - - - - - - 80,592 83,115 245 39,049 6,206 1,085 6,325 415 197 35,970 6,305 1,115 5,518 897 133,917 133,117 3,148 11,570 1,251 10,466 2,136 7,015 3,338 11,719 1,631 9,381 2,262 9,891 35,586 38,222 381 317 - - - 511 - - (97) 414 - - - - - - - - - - 27 - - - - 83,115 197 35,997 6,816 1,115 5,518 800 27 133,558 - - - - - - - - 3,338 11,719 1,631 9,381 2,262 9,891 38,222 317 169,891 (7) 169,884 171,656 414 27 172,097 165 Millions of euro Equity pertaining to the shareholders of the Parent Company Share capital Other reserves Retained earnings (Loss carried forward) Non-controlling interests TOTAL SHAREHOLDERS’ EQUITY Non-current liabilities Long-term loans Post-employment and other employee benefits Provisions for risks and charges Deferred tax liabilities Non-current financial liabilities Other non-current liabilities Current liabilities Short-term loans Current portion of long-term loans Trade payables Income tax payable Current financial liabilities Other current liabilities Liabilities held for sale TOTAL LIABILITIES TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY at Dec. 31, 2011 IAS 19/R effect at Jan. 1, 2012 restated at Dec. 31, 2012 IAS 19/R effect Renewable Energy Division PPA at Dec. 31, 2012 restated 9,403 10,348 18,899 38,650 15,650 54,300 - (131) (7) (138) (61) (199) 9,403 10,217 18,892 38,512 15,589 54,101 9,403 9,109 18,259 36,771 16,387 53,158 - (362) (634) (996) (84) (1,080) 48,703 - 48,703 55,959 - 3,000 8,057 11,505 2,307 1,313 74,885 4,799 9,672 12,931 671 3,668 8,907 40,648 58 115,591 192 - - - - 3,192 8,057 3,063 8,648 11,505 11,753 2,307 1,313 2,553 1,151 1,479 - 15 - - 192 75,077 83,127 1,494 - - - - - - - - 4,799 9,672 3,970 4,057 12,931 13,903 671 3,668 8,907 364 3,138 9,931 40,648 35,363 58 8 - - - - - - - - 192 115,783 118,498 1,494 169,891 (7) 169,884 171,656 414 - - - - 9 9 - - - 18 - - 18 - - - - - - - - 18 27 9,403 8,747 17,625 35,775 16,312 52,087 55,959 4,542 8,648 11,786 2,553 1,151 84,639 3,970 4,057 13,903 364 3,138 9,931 35,363 8 120,010 172,097 166 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts 5 Main changes in the scope of consolidation In the two periods under review, the scope of consolidation changed as a result of the following main transactions. 2012 2013 > acquisition, on January 13, 2012, of an additional 49% of > acquisition, on March 22, 2013, of 100% of Parque Eólico Rocky Ridge Wind Project, which was already a subsidi- Talinay Oriente, a company operating in the wind genera- ary (consolidated line-by-line) controlled through a 51% tion sector in Chile; stake; > acquisition, on March 26, 2013, of 50% of PowerCrop, a > acquisition, on February 14, 2012, of the remaining 50% company operating in the generation of electricity from of Enel Stoccaggi, a company in which the Group already biomass; in view of the joint control exercised with another held a 50% interest. As from that date the company has owner, the company is consolidated on a proportionate ba- been consolidated on a line-by-line basis (previously sis; consolidated proportionately in view of the joint control > disposal, on April 8, 2013, of 51% of Buffalo Dunes Wind exercised); Project, a company operating in the wind generation sec- > acquisition, on June 27, 2012, of the remaining 50% tor in the United States; of a number of companies in the Kafireas wind power > acquisition, on May 22, 2013, of 26% of Chisholm View pipeline in Greece, which had previously been includ- Wind Project and Prairie Rose Wind Project, two compa- ed under “Elica 2” and accounted for using the equity nies operating in the wind generation sector in the United method in view of its 30% stake; as from that date the States in which the Group held a stake of 49%; as a result companies have therefore been consolidated on a line- of the purchase, the companies are no longer consoli- by-line basis; dated using the equity method but are consolidated on > acquisition, on June 28, 2012, of 100% of Stipa Nayaá, a line-by-line basis; a Mexican company operating in the wind generation > acquisition, on August 9, 2013, of 70% of Domus Energia sector; (now Enel Green Power Finale Emilia), a company operat- > disposal, on August 2, 2012, of the entire capital of Water ing in the biomass generation sector; & Industrial Services Company (Wisco), which operates in > acquisition, on October 31, 2013, of 100% of Compañía the waste water treatment sector in Italy; Energética Veracruz, a company operating in the develop- > disposal, on October 9, 2012, of the entire share capital ment of hydroelectric plants in Peru; of Endesa Ireland, a company operating in the generation > disposal, on November 13, 2013, of 40% of Artic Russia, of electricity; with the consequent deconsolidation of the interest held > acquisition, on October 12, 2012, of the additional 58% by the latter in SeverEnergia; of Trade Wind Energy, a company in which the Group had > acquisition, in November and December 2013, of nine held a stake of 42%; as a result of the purchase, the com- companies (representing three business combinations) pany is no longer consolidated using the equity method operating in the development of wind power projects in but is consolidated on a line-by-line basis; the United States; > acquisition, on December 21, 2012, of 99.9% of Eólica > disposal, on December 20, 2013, of the remaining stake Zopiloapan, a Mexican company operating in the wind in Enel Rete Gas, previously consolidated using the eq- generation sector. uity method. 167 Definitive allocation of the purchase price of a number of companies of the Renewable Energy Division Following the acquisition of control in 2012 of a number of completion of the determination of their fair value; companies of the Greek Kafireas wind pipeline and 100% of > determined the tax effects associated with the above re- Stipa Nayaá and Eólica Zopiloapan, Mexican companies ope- cognition; rating in the wind generation sector, in 2013, the Group com- > allocated to non-controlling interests the portion of those pleted the allocation of the associated purchase prices to the assets pertaining to them. assets acquired and the liabilities assumed. More specifically, The following table summarizes the accounting effects as of in all cases the Group: the acquisition dates > recognized certain intangible assets as a result of the Definitive allocation of the purchase price Millions of euro Net assets acquired before allocation Adjustments for measurement at fair value: - intangible assets - deferred tax liabilities - non-controlling interests Net assets acquired after allocation Value of the transaction (1) Goodwill (1) Including incidental expenses. Kafireas pipeline Stipa Nayaá Eólica Zopiloapan 1 55 (11) (9) 36 58 22 125 14 (4) - 135 139 4 112 11 (3) - 120 126 6 Business combinations and acquisitions of joint ventures in 2013 As regards the acquisitions in 2013 that represent a business separate business combinations), the transactions were rec- combination and in compliance with the provision of IFRS 3 ognized on a provisional basis pending completion of the Revised, the following table reports the impact of the initial allocation of the purchase price pursuant to IFRS 3 Revised. recognition of those transactions. As regards the business Conversely, the business combinations with Chisholm View combinations with Parque Eólico Talinay Oriente, Compañía and Prairie Rose were already carried out on a definitive ba- Energética Veracruz, PowerCrop, a number of minor compa- sis and incorporate the remeasurement at fair value of prop- nies in the Renewable Energy Division and a number of wind erty, plant and equipment in the amounts of €4 million and projects in the United States (the latter representing three €1 million, respectively. 168 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsBusiness combinations and acquisitions of joint ventures in 2013 Business combinations Parque Eólico Talinay Oriente Chisholm View Wind Project Prairie Rose Wind US wind projects Acquisitions of joint ventures Other minor operations in the Renewable Energy Division Compañía Energética Veracruz PowerCrop 127 - 19 - - - (20) - 126 - 126 81 (2) 81 276 223 - - 8 4 (124) (29) (34) 101 - 101 35 (3) 27 - - 9 2 (108) (24) (25) 77 - 77 27 (4) 18 7 69 - - - (20) (6) - 50 - 50 - - 9 - - 1 - (2) - (3) 5 14 19 19 18 - 14 - - - - - - 14 - 14 2 2 10 2 - - 5 - (2) - 15 9 24 4 (5) 4 Millions of euro Property, plant and equipment Intangible assets Other non-current assets Cash and cash equivalents Current assets Non-current liabilities Current liabilities Non-controlling interests Net assets acquired Goodwill Price of the transaction (1) Cash flow impact Cash flow impact excluding cash and cash equivalents acquired (1) Including incidental expenses. (2) Net of the advance paid in 2012 (€27 million) and the amount still to be paid (€18 million). (3) Net of the value of the interest acquired in 2012, previously accounted for using the equity method (€66 million). (4) Net of the value of the interest acquired in 2012, previously accounted for using the equity method (€50 million). (5) Net of the advance paid in 2012 (€8 million) and the amount still to be paid (€12 million). Effects of Enersis capital increase On March 29, 2013, the capital increase of the Chilean com- > Empresa Distribuidora Sur, with an interest of 6.22%; pany Enersis was completed in the overall amount of €4,559 > Endesa Brasil, with an interest of 28.48%; million. The capital increase was subscribed by Endesa > Endesa Cemsa, with an interest of 55.00%; (60.6%) with the transfer of the equity investments includ- > Generalima, with an interest of 100.00%; ed in Cono Sur Participaciones and by other shareholders > Inversiones Distrilima, with an interest of 34.83%; (39.4%) in cash. > Inversora Dock Sud, with an interest of 57.14%; More specifically, the equity investments held directly by > Yacylec, with an interest of 22.22%. Cono Sur Participaciones at the transaction date were: > Ampla Energia e Serviços, with an interest of 7.70%; Since the capital increase was fully subscribed by existing > Ampla Investimentos e Serviços, with an interest of 7.71%; shareholders, after the operation the shareholder base of > Codensa, with an interest of 26.66%; Enersis was unchanged. For the Enel Group, the transaction > Compañia Eléctrica San Isidro, with an interest of 4.39%; qualifies as a disposal of a minority interest to the extent > Eléctrica Cabo Blanco, with an interest of 80.00%; of the dilution produced with the transfer of the assets to > Emgesa, with an interest of 21.60%; Enersis. 169 The following table summarizes the impact of the disposal on the accounts: Effects of the disposal of minority interests pertaining to the Endesa-Latin America CGU Millions of euro Determination of the value of the interest divested in the Enersis capital increase Net assets of Cono Sur Participaciones Non-controlling interests in those assets Goodwill pertaining to those assets Value of 92.06% of Cono Sur Participaciones Interest transferred in Enersis capital increase (39.4%) Determination of price for assets transferred Capital increase subscribed in cash Share pertaining to Enel Group (55.8%) Cost of transaction pertaining to Enel Group (1) Price received for disposal Net result on transaction (recognized in reserve from disposal of equity interests without loss of control) (1) Calculated on basis of total costs incurred of €94 million, net of tax effects and non-controlling interests. 2,261 (180) 357 2,438 961 1,795 1,001 54 947 (14) 6 Risk management Market risk eign currencies, such as costs, revenues, assets and liabilities, as well as the consolidation values of equity investments denominated in currencies other than the euro (translation risk). As with interest rates, changes in exchange rates can cause As part of its operations, the Enel Group is exposed to a varie- variations in the value of financial assets and liabilities meas- ty of market risks, notably the risk of changes in interest rates, ured at fair value. exchange rates and commodity prices. The Group’s policies for managing financial risks provide for the stabilization of the effects of changes in interest As part of the governance of risk management, market risks rates and exchange rates with the exclusion of translation are governed through specific policies set at both the Group risk. This objective is achieved both at the source of the risk, level and at the level of individual divisions/countries, with through the strategic diversification of the nature of finan- special Risk Committees responsible for strategic policy-ma- cial assets and liabilities, and by modifying the risk profile of king and oversight. The governance arrangements for risk exposures with derivatives entered into on over-the-counter management provide for a system of operational limits defi- markets. ned by individual risk type, which are monitored periodically by the Risk Management units. The risk of fluctuations in commodity prices is generated by the volatility of those prices and existing structural correla- The nature of the financial risks to which the Group is ex- tions. The combination of these factors creates uncertainty posed is such that changes in interest rates can cause an about the margin on transactions in fuels and energy. The increase in net financial expense or adverse changes in the variability of prices can also impact the industrial and com- value of assets/liabilities measured at fair value. mercial strategies of the Group. The Group is also exposed to the risk that changes in the In order to minimize the effects of such fluctuations and sta- exchange rates between the euro and the main foreign cur- bilize margins, strategies such as advance sourcing and hed- rencies could have an adverse impact on the value in euro of ging with derivatives are defined and planned in accordance performance and financial aggregates denominated in for- with the Group’s policies and the operational limits specified 170 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsunder risk governance arrangements. The Group also enga- on the basis of the market yield curve at the balance-sheet ges in proprietary trading activities, aimed at monitoring the date and translating amounts in currencies other than the energy commodity markets used by the Group. euro using year-end exchange rates provided by the Euro- The strategies for hedging the price risk arising from trading pean Central Bank. in commodities can be implemented by Group companies For contracts involving commodities, the measurement is through financial instruments that eliminate market risk by conducted using prices for the same instruments on both sterilizing the variable components of prices. To make the regulated and unregulated markets. process more efficient, Enel has centralized the hedging of commodity price risk using financial instruments with a spe- In accordance with the new international accounting stand- cialized organizational unit that primarily operates through ards, the Group includes a measurement of credit risk, both contracts for difference and swaps, and turns to the derivati- of the counterparty (Credit Valuation Adjustment or CVA) ves market to hedge the net balance of the exposures. and its own (Debit Valuation Adjustment or DVA), in order to adjust the fair value of financial instruments for the cor- During 2013, EMIR (European Market Infrastructure Regula- responding amount of counterparty risk. tion 648/2012 of the European Parliament) came into force. More specifically, the Group measures CVA/DVA using a Po- It is intended to regulate the OTC derivatives market in order tential Future Exposure valuation technique for the net ex- to contain the systemic and counterparty risk typical of the posure of the position and subsequently allocating the ad- market within sustainable limits, increasing the transparency justment to the individual financial instruments that make of trading and reducing the scope for market abuse. up the overall portfolio. All of the inputs used in this tech- To this end, the EMIR framework introduces an operational nique are observable on the market. model for the management of the entire life cycle of OTC Changes in the assumptions made in estimating the input derivatives, involving both financial and non-financial coun- date could have an impact on the fair value recognized for terparties. Among the main innovations, it provides for the those instruments. standardization of contracts, the obligation to use a clearing system involving a central or bilateral counterparty, and re- The notional amount of a derivative contract is the amount quirements to report to authorized entities at the European on which cash flows are exchanged. This amount can be level (trade repositories). expressed as a value or a quantity (for example tons, con- In 2013, the Enel Group, as non-financial counterparty, un- verted into euros by multiplying the notional amount by the dertook a number of initiatives to ensure compliance with agreed price). Amounts denominated in currencies other the EMIR regulatory framework. than the euro are converted into euros at the exchange rate In particular, in the more specific area of risk management provided by the European Central Bank. governance, the Group has begun monitoring the size of The notional amounts of derivatives reported here do not the OTC derivatives portfolio in relation to the threshold necessarily represent amounts exchanged between the values set by regulators for the activation of the clearing parties and therefore are not a measure of the Company’s obligations. During 2013, no overshoot of those threshold credit risk exposure. values was detected. In conformity with the international accounting standards, We report below the scale of transactions in derivative in- financial assets and liabilities associated with derivative in- struments outstanding at December 31, 2013, indicating struments are classified as: the fair value and notional amount for each class of instru- > cash flow hedge derivatives related to i) hedging the risk of ment. changes in cash flows associated with long-term floating- The fair value of a derivative contract is determined using rate borrowings; ii) hedging the exchange rate risk associ- the official prices for instruments traded on regulated mar- ated with long-term debt denominated in currencies other kets. The fair value of instruments not listed on a regulated than the currency of account or the functional currency in market is determined using valuation methods appropriate which the company holding the financial liability operates; for each type of financial instrument and market data as iii) hedging the exchange rate risk associated with the of the close of the period (such as interest rates, exchange price of fuels priced in foreign currencies; iv) hedging the rates, volatility), discounting expected future cash flows price risk associated with forecast sales of electricity at vari- 171 able prices; and v) hedging the price risk associated with change of floating-rate interest flows for fixed-rate interest sales of coal and oil commodities; flows, both of which are calculated on the basis of the no- > fair value hedge derivatives, related to hedging the expo- tional principal amount. sure to changes in the fair value of an asset, liability or firm Interest rate options involve the exchange of interest differ- commitment attributable to a particular risk; ences calculated on a notional principal amount once cer- > trading derivatives associated with proprietary trading in tain thresholds (strike prices) are reached. These thresholds commodities or hedging interest and exchange rate risk or specify the effective maximum rate (cap) or the minimum rate commodity risk which it would be inappropriate to desig- (floor) on the debt as a result of the hedge. Hedging strate- nate as cash flow hedges/fair value hedges or which do gies can also make use of combinations of options (collars) not meet the formal requirements of IAS 39. that establish the minimum and maximum rates at the same time. In this case, the strike prices are normally set so that no Interest rate risk The twin objectives of reducing the amount of debt subject to premium is paid on the contract (zero cost collars). Such contracts are normally used when the fixed interest rate changes in interest rates and of containing borrowing costs that can be obtained in an interest rate swap is considered are pursued with the use of a variety of derivatives contracts, too high with respect to Enel’s expectations for future inter- notably interest rate swaps, interest rate options and swap- est rate developments. In addition, interest rate options are tions. The term of such contracts does not exceed the matu- also considered appropriate in periods of uncertainty about rity of the underlying financial liability, so that any change in future interest rate developments, in order to benefit from the fair value and/or cash flows of such contracts is offset by any decreases in interest rates. a corresponding change in the fair value and/or cash flows of The following table reports the notional amount of interest the underlying position. rate derivatives at December 31, 2013 and December 31, Interest rate swaps normally provide for the periodic ex- 2012 broken down by type of contract:. Millions of euro Interest rate swaps Interest rate options Total Notional amount 2013 8,803 50 8,853 2012 8,294 50 8,344 The following table reports the notional amount and fair December 31, 2012, broken down by designation (IAS 39): value of interest rate derivatives at December 31, 2013 and Millions of euro Notional amount Fair value Fair value assets Fair value liabilities at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 Cash flow hedge derivatives Interest rate swaps 6,878 6,433 (386) (686) 40 Fair value hedge derivatives Interest rate swaps Trading derivatives Interest rate swaps Interest rate options Total interest rate swaps Total interest rate options TOTAL INTEREST RATE DERIVATIVES 1,121 83 49 17 804 50 8,803 50 1,778 50 8,294 50 (67) (4) (404) (4) (110) (7) (779) (7) 8,853 8,344 (408) (786) 49 2 - 91 - 91 5 17 4 - 26 - 26 (426) (691) - - (69) (4) (495) (4) (114) (7) (805) (7) (499) (812) 172 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsThe following table reports the cash flows expected in coming years from these financial derivatives: Expected cash flows from interest rate derivatives Millions of euro Notional amount CFH on interest rates Positive fair value Negative fair value FVH on interest rates Positive fair value Trading derivatives on interest rates Positive fair value Negative fair value at Dec. 31, 2013 2014 2015 2016 2017 2018 Beyond 40 (426) (7) (173) (9) (104) 49 (3) 2 (73) 2 (21) 19 1 (9) (6) (57) 14 - (7) (1) (40) 4 - (6) 4 (28) (2) - (5) 72 (117) 39 - (39) The amount of floating-rate debt that is not hedged against action categories: interest rate risk is the main risk factor that could impact the > debt denominated in currencies other than the currency income statement (raising borrowing costs) in the event of an of account or the functional currency entered into by the increase in market interest rates. holding company or the individual subsidiaries; > cash flows in respect of the purchase or sale of fuel or elec- At December 31, 2013, 9% of net long-term financial debt tricity on international markets; was floating rate (17% at December 31, 2012). Taking ac- > cash flows in respect of investments in foreign currency, count of cash flow hedges of interest rates considered ef- dividends from unconsolidated foreign companies or the fective pursuant to the IFRS-EU, net financial debt was more purchase or sale of equity investments. than 6% overhedged at December 31, 2013 (97% hedged In order to minimize this risk, the Group normally uses a variety at December 31, 2012). Including interest rate derivatives of over-the-counter (OTC) derivatives such as currency forwards, treated as hedges for management purposes but ineligible cross currency interest rate swaps and currency options. The term for hedge accounting, net financial debt was more than 6% of such contracts does not exceed the maturity of the underlying overhedged (99% hedged at December 31, 2012). financial liability, so that any change in the fair value and/or cash flows of such contracts is offset by a corresponding change in the If interest rates had been 25 basis points higher at Decem- fair value and/or cash flows of the underlying position. ber 31, 2013, all other variables being equal, shareholders’ Cross currency interest rate swaps are used to transform a long- equity would have been €68.8 million higher (€79.4 million term fixed- or floating-rate liability in foreign currency into an at December 31, 2012) as a result of the increase in the fair equivalent fixed- or floating-rate liability in euros. In addition value of CFH derivatives on interest rates. Conversely, if inter- to having notionals denominated in different currencies, these est rates had been 25 basis point lower at that date, all other instruments differ from interest rate swaps in that they provide variables being equal, shareholders’ equity would have been both for the periodic exchange of cash flows and the final ex- €68.8 million lower (€79.4 million at December 31, 2012) as change of principal. a result of the decrease in the fair value of CFH derivatives on Currency forwards are contracts in which the counterparties interest rates. agree to exchange principal amounts denominated in differ- An equivalent increase (decrease) in interest rates, all other ent currencies at a specified future date and exchange rate (the variables being equal, would have a negative (positive) im- strike). Such contracts may call for the actual exchange of the two pact on the income statement in terms of higher (lower) in- amounts (deliverable forwards) or payment of the difference terest expense on the portion of debt not hedged against between the strike exchange rate and the prevailing exchange interest rate risk of about €35 million. rate at maturity (non-deliverable forwards). In the latter case, the Exchange rate risk Exchange rate risk is mainly generated with the following trans- strike rate and/or the spot rate may be determined as averages of the official fixings of the European Central Bank. Currency options involve the purchase (or sale) of the right to 173 exchange, at an agreed future date, two principal amounts de- deliverable). In the latter case, the strike rate and/or the spot rate nominated in different currencies on specified terms (the con- may be determined as averages of the official fixings of the Eu- tractual exchange rate represents the option strike price); such ropean Central Bank. contracts may call for the actual exchange of the two amounts The following table reports the notional amount of transactions (deliverable) or payment of the difference between the strike ex- outstanding at December 31, 2013 and December 31, 2012, bro- change rate and the prevailing exchange rate at maturity (non- ken down by type of hedged item: Millions of euro Notional amount Cross currency interest rate swaps (CCIRSs) hedging debt denominated in currencies other than the euro Currency forwards hedging exchange rate risk on commodities Currency forwards hedging future cash flows in currencies other than euro Currency swaps hedging commercial paper Currency forwards hedging credit lines Other currency forward Total 2013 14,263 4,253 1,906 246 201 423 21,292 2012 13,892 6,250 1,348 232 201 - 21,923 More specifically, these include: lion used to hedge the exchange rate risk associated with > CCIRSs with a notional amount of €14,263 million to redemptions of commercial paper issued in currencies hedge the exchange rate risk on debt denominated in other than the euro (€232 million at December 31, 2012); currencies other than the euro (€13,892 million at De- > currency forwards with a total notional amount of €201 cember 31, 2012); million used to hedge the exchange rate risk associated > currency forwards with a total notional amount of €6,159 with credit lines in currencies other than the euro (€201 million used to hedge the exchange rate risk associated million at December 31, 2012). with purchases of fuel, imported electricity and expected cash flows in currencies other than the euro (€7,598 mil- The following table reports the notional amount and fair lion at December 31, 2012); value of exchange rate derivatives at December 31, 2013 and > currency swaps with a total notional amount of €246 mil- December 31, 2012, broken down by designation (IAS 39): Millions of euro Notional amount Fair value Fair value assets Fair value liabilities at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 Cash flow hedge derivatives: - currency forwards - CCIRSs 2,989 14,258 3,458 13,631 (91) (1,551) 5 261 (2) 4,040 7,029 4,573 8,031 12 (79) 14,263 13,892 (1,553) (83) (847) 18 35 (48) (829) 4 435 4 927 (95) (87) (1,986) (1,774) - 23 (2) (5) 46 50 435 74 78 950 (34) (129) (39) (126) (1,988) (1,779) 21,292 21,923 (1,632) (877) 485 1,028 (2,117) (1,905) Fair value hedge derivatives: - CCIRSs Trading derivatives: - currency forwards Total forwards Total CCIRS TOTAL EXCHANGE RATE DERIVATIVES 174 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts The following table reports the cash flows expected in coming years from these financial derivatives: Expected cash flows from exchange rate derivatives Millions of euro CFH on exchange rates Positive fair value Negative fair value FVH on exchange rates Negative fair value Trading derivatives on exchange rates Positive fair value Negative fair value Fair value at Dec. 31, 2013 Distribution of expected cash flows 2014 2015 2016 2017 2018 Beyond 439 (2,081) 164 (346) 70 (71) 52 (186) 48 (32) 32 (47) 275 (313) (2) (1) (1) 46 (34) 35 (35) - - - - - - - - - - - - - - An analysis of the Group’s debt shows that 31% of medium- As regards electricity sold by the Group, Enel uses fixed-price and long-term debt (29% at December 31, 2012) is denomi- contracts in the form of bilateral physical contracts and finan- nated in currencies other than the euro. cial contracts (e.g. contracts for differences, VPP contracts, Taking account of exchange rate hedges and the portion of etc.) in which differences are paid to the counterparty if the debt denominated in the currency of account or the functional market electricity price exceeds the strike price and to Enel in currency of the Group company holding the debt position, the the opposite case. proportion of unhedged debt decreases to 1% (2% at Decem- The residual exposure in respect of the sale of energy on the ber 31, 2012), a proportion that is felt would not have a signifi- spot market not hedged with such contracts is quantified cant impact on the Group’s earnings in the event of a change in and managed on the basis of an estimation of developments market exchange rates. in generation costs. The residual positions thus determined are aggregated on the basis of uniform risk factors that can At December 31, 2013, assuming a 10% appreciation of the be hedged in the market. Various types of derivatives are euro against the foreign currencies involved, all other vari- used to reduce the exposure to fluctuations in energy com- ables being equal, shareholders’ equity would have been modity prices (mainly forwards, swaps, commodity options, €1,539 million lower (€1,689 million at December 31, 2012), futures and contracts for differences). Enel also engages in as a result of the decrease in the fair value of CFH deriva- proprietary trading in order to maintain a presence in the tives on exchange rates. Conversely, assuming a 10% depre- Group’s reference energy commodity markets. These opera- ciation of the euro against the foreign currencies involved, tions consist in taking on exposures in energy commodi- all other variables being equal, shareholders’ equity would have been €1,881 million higher (€2,064 million at Decem- ties (oil products, gas, coal, CO2 certificates and electricity in the main European countries), using financial derivatives ber 31, 2012) as a result of the increase in the fair value of and physical contracts traded on regulated and over-the- CFH derivatives on exchange rates. counter markets, exploiting profit opportunities through arbitrage transactions carried out on the basis of expected Commodity risk The exposure to the risk of changes in commodity prices is market developments. The commodity risk management processes established at associated with the purchase of fuel for power plants and the Group level are designed to constantly monitor develop- the purchase and sale of gas under indexed contracts as ments in risk over time and to determine whether the risk well as the purchase and sale of electricity at variable prices levels, as observed for specific analytical dimensions (for ex- (indexed bilateral contracts and sales on the electricity spot ample, geographical areas, organizational structures, busi- market). ness lines, etc.), comply with the thresholds consistent with The exposures on indexed contracts are quantified by break- the risk appetite established by top management. These ing down the contracts that generate exposure into the un- operations are conducted within the framework of formal derlying risk factors. governance rules that establish strict risk limits. Compliance 175 with the limits is verified by units that are independent of of Value-at-Risk over a 1-day time horizon and a confidence those undertaking the transactions. Positions are monitored level of 95%; the sum of the limits for 2013 is equal to about monthly, assessing the Profit at Risk, in the case of industrial €33 million. portfolios, and daily, calculating Value at Risk, in the case of The following table reports the notional amount and fair val- the trading book. ue of derivative contracts relating to commodities at Decem- The risk limits for Enel’s proprietary trading are set in terms ber 31, 2013 and December 31, 2012. Millions of euro Notional amount Fair value Fair value assets Fair value liabilities at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 Cash flow hedge derivatives: - derivatives on energy - derivatives on coal - derivatives on gas - other derivatives on commodities Trading derivatives: 2,024 1,250 1,413 90 1,847 1,507 585 - - derivatives on energy 13,812 13,371 - swaps on oil commodities - futures/options on oil commodities - derivatives on coal - embedded derivatives TOTAL COMMODITY DERIVATIVES 5,426 3,357 1,442 659 3,380 4,661 1,724 126 (19) (120) (8) 6 127 (44) 30 6 (1) 19 (141) (5) - 66 (66) 5 (3) (122) 16 - - 6 268 1,621 173 69 - 23 - - - (35) (120) (8) - (4) (141) (5) - 84 (141) (18) 1,346 (1,665) (1,412) 80 84 - (143) (63) (1) (75) (87) (122) 29,473 27,201 (23) (247) 2,153 1,617 (2,176) (1,864) Cash flow hedge derivatives refer to the physical positions table shows the fair value of the derivatives and the con- in the underlying and, therefore, any negative (positive) sequent impact on shareholders’ equity at December 31, change in the fair value of the derivative instrument cor- 2013 (gross of taxes) that would have resulted, all other responds to a positive (negative) change in the fair value conditions being equal, in the event of a 10% increase or of the underlying physical commodity, so that the impact decrease in the prices of the commodities underlying the on the income statement is equal to zero. The following valuation model considered in the scenario at that date. Millions of euro Fair value of cash flow hedge derivatives on energy Fair value of cash flow hedge derivatives on coal Fair value of cash flow hedge derivatives on gas Fair value of cash flow hedge derivatives on other commodities -10% Scenario +10% at Dec. 31, 2013 121 (204) (24) 3 (19) (120) (8) 6 (159) (27) 7 5 The following table shows the fair value of derivatives and event of a 10% increase or decrease in the prices of the com- the consequent impact on the income statement and share- modities underlying the valuation model considered in the holders’ equity at December 31, 2013 (gross of taxes), that scenario at that date. would have resulted, all other conditions being equal, in the Millions of euro -10% Scenario +10% Fair value of trading derivatives on energy Fair value of trading derivatives on oil commodities Fair value of trading derivatives on coal at Dec. 31, 2013 19 (39) (18) 127 (14) 6 244 25 21 176 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Embedded derivatives relate to contracts for the purchase rate whose fair value at December 31, 2013 was nil; and sale of energy entered into by Slovenské elektrárne in b. a derivative on the price of gas whose fair value at Decem- Slovakia. The risk factors underlying the contracts are the ber 31, 2013 was a negative €1 million. price of electricity on the Slovakian market, the price of aluminum on the London Metal Exchange and the euro/ The following tables show the fair value at December 31, US dollar exchange rate. The market value at December 31, 2013, as well as the value expected from a 10% increase or 2013 came to a negative €0.8 million, composed of: decrease in the underlying risk factors. a. an embedded derivative on the euro/US dollar exchange Fair value embedded derivative (a) Millions of euro Decrease of 10% Scenario at Dec. 31, 2013 Increase of 10% Fair value embedded derivative (b) Millions of euro Decrease of 10% Scenario at Dec. 31, 2013 Increase of 10% euro/US dollar exchange rate - - - Aluminum price (14) (1) 12 The following table reports the cash flows expected in subsequent years from these financial derivatives on commodities. Millions of euro Cash flow hedge derivatives Positive fair value Negative fair value Trading derivatives Positive fair value Negative fair value Credit risk Fair value at Dec. 31, 2013 22 (163) 2,131 (2,013) Distribution of expected cash flows 2014 2015 2016 2017 2018 Beyond 10 (156) 2,192 2,096 8 (6) (20) 37 2 (1) (51) 53 2 - 10 (7) - - - - - - - - The Group’s commercial, commodity and financial oper- tored through the assessment of the related credit risk and ations expose it to credit risk, i.e. the possibility that an the request for suitable guarantees and/or security deposits unexpected change in the creditworthiness of a coun- to ensure adequate protection from counterparty default terparty has an effect on the creditor position, in terms risk. of insolvency (default risk) or changes in its market value (spread risk). Open positions in financial derivatives are entered into with leading Italian and international financial institutions, diver- As part of the sale and distribution of electricity and gas to sifying the exposure among different institutions and con- eligible customers, the selection of counterparties is moni- stantly monitoring their credit ratings. 177 In addition, Enel entered into margin agreements with the commercial portfolio. More specifically, in 2011 a five-year leading financial institutions with which it operates that call framework agreement was reached with two leading banks for the exchange of cash collateral, which significantly miti- for the ongoing non-recourse assignment of invoiced re- gates the exposure to counterparty risk. ceivables and receivables to be invoiced in respect of cus- tomers in the enhanced protection market in Italy. As regards the credit risk associated with the solvency of In subsequent years, partly in view of the macroeconomic counterparties in commodities transactions, the Group environment, the use of assignments was extended both uses a centralized assessment system that enhances the geographically and to invoiced receivables and receivables monitoring and governance of the risk. In 2013, in addition to be invoiced of companies operating in other segments of to a new centralized system that increases the effective- the electricity industry than retail sales (such as, for example, ness of risk monitoring and governance, the Group Credit receivables from generation activities, sales of electricity as Risk Committee approved the application of portfolio lim- part of energy management operations, the sale of green its for the divisions/countries involved and for the Group certificates or electricity transport services). as a whole. All of the above transactions are considered as non-recourse transactions for accounting purposes and therefore involved To manage credit risk even more effectively, for a number the full derecognition of the corresponding assigned assets of years the Group has carried out non-recourse assign- from the balance sheet, as the risks and rewards associated ments of receivables, in particular specific segments of the with them have been transferred. Liquidity risk Within the Group, Enel SpA (directly and through its subsidi- At December 31, 2013, the Enel Group had a total of about €8 ary Enel Finance International NV) manages the centralized billion in cash or cash equivalents, of which €3.3 billion held by treasury function, ensuring access to the money and capital Endesa, as well as total committed credit lines of €15.4 billion, markets. The Parent Company meets liquidity requirements of which €3.8 billion held by Endesa. The limits on the commit- primarily through cash flows generated by ordinary operations ted credit lines amounted to €16.8 billion (€1.4 billion drawn), and drawing on a range of sources of financing. In addition, it of which €3.8 billion held by Endesa (€0.05 billion drawn). In manages any excess liquidity as appropriate. addition, the Group had uncommitted credit lines totaling €0.9 billion (€0.1 billion drawn), of which €0.7 billion held by Endesa Underscoring the Enel Group’s continued capacity to access the (entirely undrawn). credit market despite the financial market crisis, in 2013 the Finally, the Group has outstanding commercial paper programs Group carried out bond issues with retail investors totaling €3.6 with a maximum ceiling of about €9.3 billion (€2.2 billion used), billion, and obtained bank loans and other financing totaling of which €3.3 billion held by Endesa through its subsidiaries €1.8 billion. (€0.8 billion used). 178 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts6.1 Derivatives contracts classified under non-current financial assets - €444 million The following table shows the notional amount and fair value of derivative contracts classified under non-current finan- cial assets. Millions of euro Cash flow hedge derivatives: - interest rates - exchange rates - commodities Total Fair value hedge derivatives: - interest rates - exchange rates Total Trading derivatives: - interest rates - exchange rates - commodities Total TOTAL Notional amount Fair value at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 Change 1,236 3,973 137 5,346 1,045 - 1,045 30 - 58 88 6,479 25 7,227 34 7,286 83 254 337 45 92 40 177 7,800 35 347 12 394 45 - 45 2 - 3 5 444 5 890 7 902 17 23 40 4 1 6 11 953 30 (543) 5 (508) 28 (23) 5 (2) (1) (3) (6) (509) At December 31, 2013, the notional amount of the cash flow Fair value hedge derivatives essentially increased due to new hedge derivative contracts classified as non-current financial hedges using interest rate swaps of the hybrid bond issued by assets came to €5,346 million, with the corresponding fair Enel SpA in the notional amount of €800 million. value of €394 million. The change in fair value hedge derivatives on exchange The cash flow hedge derivatives on interest rates are essen- rates was basically attributable to cross currency interest tially related to new hedges of loans using interest rate swaps rate swaps, with the reclassification from “non-current finan- in a notional amount of about €665 million and with a fair cial assets” to “non-current financial liabilities” of a notional value of €17 million. amount of €119 million with a fair value of €14 million, and The general increase in interest rates gave rise to a reclassifi- the reclassification from “non-current financial assets” to cation from “non-current financial liabilities” to “non-current “current financial assets” of a notional amount of €80 million. financial assets” of derivatives in a notional amount of €464 million and with a fair value of €11 million. Cash flow hedge derivatives on commodities include deriva- The cash flow hedge derivatives on exchange rates are essen- tives on energy with a fair value of €10 million and transac- tially related to transactions hedging the exchange rate risk on bond issues in currencies other than the euro using cross tions in CO2 with a fair value of €2 million. Trading derivatives essentially regard energy transactions entered into by Endesa currency interest rate swaps. (with a fair value of €3 million). Developments in the euro exchange rate against the main Non-current financial assets concerning derivatives with a currencies caused the fair value of these derivatives to de- carrying amount of €385 million were governed by mas- cline. For some derivatives positions, this change led to the re- ter netting agreements or similar agreements that do not classification to “non-current financial liabilities” of a notional meet the requirements for offsetting under the current amount of €1,848 million in respect of transactions that at version of IAS 32. December 31, 2012 had been classified under “non-current financial assets”. Finally, a notional amount of about €91 mil- For a summary of the balances of the fair value of non-current lion was reclassified from “non-current financial assets” to derivatives classified as assets, broken down by measurement “current financial assets”, as the positions expire in 2014. criteria, please see note 7 on IFRS 13 disclosures. 179 6.2 Derivatives contracts classified under current financial assets - €2,285 million The following table reports the notional amount and fair value of the derivative contracts, grouped by type and designation. Millions of euro Notional amount Fair value at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 Change Cash flow hedge derivatives: - interest rates - exchange rates - commodities Total Fair value hedge derivatives: - interest rates Total Trading derivatives: - exchange rates - commodities Total TOTAL 22 1,506 149 1,677 76 76 1,807 13,990 15,797 17,550 - 1,139 1,693 2,832 - - 2,298 16,395 18,693 21,525 5 92 10 107 4 4 46 2,128 2,174 2,285 - 41 16 57 - - 73 1,588 1,661 1,718 - 5 51 (6) 50 4 4 (27) 540 513 567 The cash flow hedge derivatives on exchange rates are es- of €4 million classified as cash flow hedges. Trading deriva- sentially related to transactions hedging the exchange rate tives regard energy transactions in the amount of €265 mil- risk on bond issues in currencies other than the euro using lion, and hedges of fuels and other commodities classified cross currency interest rate swaps. as trading transactions with a fair value of €1,863 million. For these derivatives, a notional amount of about €1,234 Current financial assets in respect of trading derivatives million with a fair value of €79 million was reclassified from on commodities have been offset in the amount of €406 “non-current financial assets” to “current financial assets”, million by the value of derivatives reported under current as the positions expire in 2014. financial liabilities where such netting is permitted under In addition, transactions in a notional amount of €758 mil- contractual and statutory provisions. lion with a fair value of €38 million expired in January 2013. Current financial assets concerning derivatives with a carry- Trading derivatives on exchange rates essentially comprise ing amount of €1,777 million were governed by master net- transactions to hedge the exchange rate risk associated ting agreements or similar agreements that do not meet with the prices of energy commodities. The decrease in the the requirements for offsetting under the current version notional amount and fair value of these derivatives is main- of IAS 32. ly associated with normal operations. Commodity derivatives regard energy derivatives with a fair derivatives classified as assets, broken down by measure- value of €6 million and transactions in CO2 with a fair value ment criteria, please see note 7 on IFRS 13 disclosures. For a summary of the balances of the fair value of current 180 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts 6.3 Derivatives contracts classified under non-current financial liabilities - €2,257 million The following table reports the notional amount and fair value of the cash flow hedge, fair value hedge and trading deriva- tives. Millions of euro Notional amount Fair value at Dec. 31, 2013 at Dec. 31, 2012 Change at Dec. 31, 2013 at Dec. 31, 2012 Change Cash flow hedge derivatives: - interest rates - exchange rates - commodities Total Fair value hedge derivatives: - exchange rates Total Trading derivatives: - interest rates - exchange rates - commodities Total TOTAL 4,275 8,825 391 6,405 5,955 282 13,491 12,642 5 5 216 14 66 296 7 7 763 30 46 839 13,792 13,488 (2,130) 2,870 109 849 (2) (2) (547) (16) 20 (543) 304 402 1,821 7 2,230 2 2 22 - 3 25 691 1,777 16 2,484 5 5 62 1 1 64 2,257 2,553 (289) 44 (9) (254) (3) (3) (40) (1) 2 (39) (296) At December 31, 2013, the notional amount of derivatives ties”, as well as new CCIRSs entered into by Enel SpA to classified under non-current financial liabilities came to hedge the tranches of the hybrid bond denominated in €13,792 million, with a corresponding fair value of €2,257 pounds sterling and US dollars in the total amount of million. Compared with December 31, 2012, these repre- €1,389 million. sent an increase of €304 million and a decrease of €296 million, respectively. Commodity derivatives classified as cash flow hedges re- The improvement in the fair value of the cash flow hedge gard hedges on gas and energy with a fair value of €7 derivatives on interest rates is mainly due to the broad rise in million. the yield curve over the course of the year. Trading derivatives on commodities include derivatives on A notional amount of €500 million with a fair value of €30 energy entered into by Endesa with a fair value of €3 million. million was reclassified from “non-current financial liabili- Non-current financial liabilities concerning derivatives with ties” to “current financial liabilities”, as the positions ex- a carrying amount of €2,030 million were governed by mas- pire in 2014. ter netting agreements or similar agreements that do not Cash flow hedge derivatives on exchange rates essential- meet the requirements for offsetting under the current ver- ly regard the hedging (using cross currency interest rate sion of IAS 32. swaps) of bond issues in currencies other than the euro. The fair value reflects the change in the euro against the For a summary of the balances of the fair value of non- hedged currencies. The increase in the notional amount current derivatives classified as liabilities, broken down by is mainly associated with the reclassification from “non- measurement criteria, please see note 7 on IFRS 13 disclo- current financial assets” to “non-current financial liabili- sures. 181 6.4 Derivatives contracts classified under current financial liabilities - €2,535 million The following table reports the notional amount and fair value of the derivative contracts. Millions of euro Notional amount Fair value at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 at Dec. 31, 2012 Change Cash flow hedge derivatives: - interest rates - exchange rates - commodities Total Trading derivatives: - interest rates - exchange rates - commodities Total TOTAL 1,345 2,943 4,100 8,388 608 2,219 10,582 13,409 21,797 3 2,768 1,930 4,701 1,020 2,153 6,781 9,954 14,655 24 260 156 440 51 34 2,010 2,095 2,535 - 84 134 218 59 38 1,713 1,810 2,028 24 176 22 222 (8) (4) 297 285 507 The substantial increase in the notional amount of interest to energy sale contracts in Slovakia, with a fair value of €1 mil- rate derivatives is entirely attributable to the reclassifica- lion. tion of a number of derivatives from “non-current financial Current financial liabilities in respect of trading derivatives liabilities” to “current financial liabilities”. on commodities have been offset in the amount of €406 The deterioration in the fair value of cash flow hedges on million by the value of derivatives reported under current exchange rates, mainly cross currency interest rate swaps financial assets where such netting is permitted under con- by Enersis, is essentially due to the reclassification of those tractual and statutory provisions. transactions from “non-current financial liabilities” to “cur- Current financial liabilities concerning derivatives with a rent financial liabilities”. carrying amount of €1,904 million were governed by mas- Cash flow hedge derivatives on commodities regard energy meet the requirements for offsetting under the current ter netting agreements or similar agreements that do not derivatives with a fair value of €2 million, contracts for differ- version of IAS 32. ences in the amount of €32 million and hedges of gas, coal and shipping contracts of €122 million; trading derivatives For a summary of the balances of the fair value of current include contracts on fuels and other commodities with a fair derivatives classified as liabilities, broken down by meas- value of €1,871 million, trading operations in energy with a urement criteria, please see note 7 on IFRS 13 disclosures. fair value of €138 million and embedded derivatives related 182 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts 7 Disclosures on the fair value of assets and liabilities Following amendments to IFRS 13, which entered force as from the current year, a number of specific disclosure re- quirements concerning such items have been introduced. In these consolidated financial statements, certain items are The following tables summarize the individual components measured at fair value, which is the price that would be re- of the consolidated balance sheet that have been measured ceived to sell an asset or paid to transfer a liability in an or- at fair value, with a breakdown of the levels of the fair value derly transaction between market participants at the meas- hierarchy (as defined in the international accounting stand- urement date. ards) to which they belong. 7.1 Assets The following table reports the value of assets measured at fair value, broken down by level of fair value inputs. Millions of euro Notes Fair value Level 1 Level 2 Level 3 at Dec. 31, 2013 Investment property (1) Equity investments in other entities Service concession arrangements Securities held to maturity Financial investments in funds or portfolio management products measured at fair value through profit or loss Cash flow hedge derivatives (current and non-current): - interest rates - exchange rates - commodities Fair value hedge derivatives (current and non-current): - interest rates Trading derivatives (current and non-current): - interest rates - exchange rates - commodities Inventories measured at fair value Assets held for sale Securities available for sale (1) Asset not measured at fair value. 20 20 27 27 6 6 6 22 28 27 216 183 618 128 24 40 439 22 49 2 46 2,131 498 198 17 - 174 - 128 24 - - 1 - - - 617 420 - 14 - 3 618 - - 40 439 21 49 2 46 1,514 - 3 - 216 6 - - - - - - - - - - 78 195 3 183 Investment property The value of investment property, presented in the table Service concession arrangements Service concession arrangements regard electricity dis- as measured using Level 3 inputs, was calculated with the tribution activities in the Brazilian market by Ampla and assistance of appraisals provided by independent experts Coelce, which are measured in accordance with IFRIC 12. who used different valuation techniques depending on The fair value was estimated as the net replacement cost the specific features of the individual properties. The fair based on the most recent available data on rates and the value rose by €9 million compared with the previous year. general price index for the Brazilian market. Equity investments in other entities The fair value of investment in listed companies was deter- Securities held to maturity Securities held to maturity are composed of bonds. mined on the basis of the market price on the closing date The following table reports changes in securities measured of the year. That of unlisted companies was determined on using Level 3 inputs. the basis of a valuation, considered reliable, of significant balance-sheet aggregates. There was no change in the Level 3 fair value compared with 2012. Millions of euro Balance at January 1, 2013 Gain/(Loss) through profit or loss Subscriptions Balance at December 31, 2013 4 (4) - - Securities classified under Level 3 comprise promissory notes issued in 2012. Financial derivatives The fair value was determined on the basis of official prices Assets held for sale/Liabilities held for sale Assets and liabilities held for sale mainly regard Marcinelle for instruments traded on regulated markets. For instru- Energie, and the associated fair value was calculated as the ments not traded on regulated markets the fair value was de- estimated realizable value. termined by discounting expected cash flows on the basis of the market yield curve at the reference date and converting the amounts in currencies other than the euro at period-end Securities available for sale There was no change in the Level 3 fair value compared exchange rates. The balance of those measured using Level with 2012. 1 inputs regards positions in futures on CO2, on Brent listed on the Intercontinental Exchange (ICE) and on gas listed on the main natural gas spot markets (NBP, TTF, NCG, PEG, etc.). Inventories measured at fair value The value of inventories measured using Level 3 inputs was calculated with the assistance of appraisals provided by independent experts who used different valuation techniques depending on the specific features of the in- dividual cases. 184 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts7.2 Liabilities The following table reports the value of liabilities measured a fair value, broken down by level of fair value inputs. Millions of euro Notes Fair value Level 1 Level 2 Level 3 Cash flow hedge derivatives (current and non-current): 6 at Dec. 31, 2013 - interest rates - exchange rates - commodities Fair value hedge derivatives (current and non-current): - exchange rates Trading derivatives (current and non-current): - interest rates - exchange rates - commodities Liabilities for acquisition of equity investments Liabilities for put options granted to non-controlling shareholders Bonds: (1) - fixed rate - floating rate Bank loans: (1) - fixed rate - floating rate Other loans: (1) - fixed rate - floating rate Short-term payables to banks (1) Commercial paper (1) Cash collateral and other financing on derivatives Other short-term financial debt (1) Liabilities held for sale (1) Liabilities not measured at fair value. 6 6 36 36 27 27 27 27 27 27 27 28 426 2,081 163 2 73 34 2,013 37 801 39,517 8,131 976 9,026 1,153 605 150 2,202 119 58 8 - - 102 - - - 1,070 - - 31,662 4,365 - - - - - - - - - 426 2,081 61 2 73 34 942 - 7,856 3,766 976 9,026 1,153 605 150 2,202 119 58 - - - - - - - 1 37 801 - - - - - - - - - - 8 Trading derivatives The balance of Level 3 items regards the embedded deriva- energy acquired, while in the second step a Monte Carlo sim- tive (identified as such in note 6 of these consolidated finan- ulation was used to determine the value of the contract. The cial statements) on the price of gas in the energy purchase fair value of the contract is equal to the difference between contract agreed by Slovenské elektrárne in Slovakia. the average of the value obtained in the simulation and the The measurement of the contract was carried out in two steps. market value of the energy acquired. The first step involved determining the market value of the The following table reports changes in the item in 2013. Millions of euro Opening balance at January 1, 2013 (Gain)/Loss through profit or loss Closing balance at December 31, 2013 Embedded derivatives of Slovenské elektrárne 48 (47) 1 185 The profit taken to the income statement is associated with of companies in North America, whose fair value was deter- Slovenské elektrárne’s termination of the embedded deriva- mined on the basis of the contractual conditions of the agree- tive on the price of gas (€48 million) and the opening of a new ments between the parties. embedded derivative position on the price of aluminum, en- tered into by the same company in December 2013. Medium and long-term loans In the case of transactions directly observable and quoted on Liabilities for put options granted to non-con- trolling shareholders Of the overall liability, €778 million is accounted for by the liability in respect of the options on Enel Distributie Muntenia and Enel En- the market, fair value is determined using official prices (mar- ergie Muntenia and was determined in relation to the vesting con- ket approach). In cases where such variables are not present, ditions specified in the associated contracts. The remainder of €23 the valuation techniques are adopted as appropriate for each million regards the liability in respect of the put options on Reno- category of financial instrument (income and cost approaches). vables de Guatemala and Maicor Wind, whose fair value was de- Liabilities for acquisition of equity investments The liability regards the debt for the purchase of a number termined using the binominal option pricing model (BOPM) and the discounted cash flow model (DCF). There were no changes in the Level 3 fair values compared with the previous year. 8 Segment information The representation of performance and financial position For more information on developments in performance and by business area presented here is based on the approach financial position during the year, please see the appropriate used by management in monitoring Group performance section of the report on operations. for the two periods being compared. Segment information for 2013 and 2012 Results for 2013 (1) Millions of euro Sales GEM Infra. & Networks Iberia and Latin America Renewable Energy Int’l Other, eliminations and adjustments Total Revenues from third parties Revenues from other segments Total revenues Total costs Net income/(charges) from commodity risk management Depreciation and amortization Impairment losses/ Reversals Operating income Capital expenditure 16,699 18,878 3,669 30,825 7,103 2,337 1,024 80,535 222 16,921 15,973 4,041 22,919 21,578 4,029 7,698 3,690 110 30,935 24,041 (82) (165) - (148) 101 403 362 99 516 106 554 318 977 2,700 3 3,028 1,046 210 3,836 2,181 634 7,737 6,328 (4) 486 834 85 924 490 2,827 1,060 21 526 91 1,171 1,307 (2) (9,526) (8,502) (9,524) - 80,535 63,146 - (378) 103 11 908 84 5,409 1,658 9,944 5,959 (1) Segment revenues include both revenues from third parties and revenue flows between the segments. An analogous approach was taken for other income and costs for the period. (2) Does not include €1 million regarding units classified as “held for sale”. 186 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Results for 2012 restated (1) (2) Millions of euro Sales GEM Infra. & Networks Iberia and Latin America Renewable Energy Int’l Other, eliminations and adjustments Total Revenues from third parties Revenues from other segments Total revenues Total costs Net income/ (charges) from commodity risk management Depreciation and amortization Impairment losses/ Reversals Operating income Capital expenditure 18,170 18,869 3,820 33,708 8,015 2,264 103 84,949 181 18,351 17,759 6,375 25,244 24,284 4,297 8,117 4,494 461 34,169 26,778 688 8,703 7,110 432 (12,434) 2,696 1,049 (12,331) (12,296) - 84,949 69,178 17 87 419 103 97 131 626 (40) 505 403 - (161) 925 2,892 69 2,629 1,497 2,663 1,675 2,497 (3) 1,161 57 453 219 978 (6) 487 73 1,081 1,257 - 38 126 5,596 4 (165) 163 (4) 3,407 6,806 7,075 (1) Segment revenues include both revenues from third parties and revenue flows between the segments. An analogous approach was taken for other income and costs for the period. (2) The figures have been restated to take account of the impact of the change, with retrospective effect, of the accounting policy. (3) Does not include €73 million regarding units classified as “held for sale”. (4) Does not include €1 million regarding units classified as “held for sale”. Financial position by segment At December 31, 2013 Millions of euro Sales GEM Infra. & Networks Iberia and Latin America Property, plant and equipment Intangible assets Trade receivables Other 39 775 4,015 250 9,615 651 3,068 2,506 15,096 117 1,706 1,240 35,936 27,264 3,615 2,009 Other, eliminations and adjustments Renewable Energy 10,224 2,212 371 408 504 282 (1,830) (204) Int’l 9,847 1,928 595 471 Total 81,261 33,229 11,540 6,680 Operating assets 5,079 15,840 (1) 18,159 68.824 12,841 (2) 13,215 (4) (1,248) 132,710 Trade payables Sundry provisions Other Operating liabilities 3,070 234 1,959 5,263 3,570 1,218 729 5,517 2,488 2,536 2,994 8,018 4,226 4,131 4,371 832 2,744 1,123 762 180 496 12,728 4,699 (3) 1,438 (5) (1,937) 700 (1,546) (2,783) 13,011 11,743 10,126 34,880 (1) Of which €6 million regarding units classified as “held for sale”. (2) Of which €194 million regarding units classified as “held for sale”. (3) Of which €1 million regarding units classified as “held for sale”. (4) Of which €26 million regarding units classified as “held for sale”. (5) Of which €8 million regarding units classified as “held for sale”. 187 At December 31, 2012 restated (1) Millions of euro Sales GEM Infra. & Networks Iberia and Latin America Renewable Energy Int’l Other, eliminations and adjustments Property, plant and equipment Intangible assets Trade receivables Other Operating assets Trade payables Sundry provisions Other Operating liabilities 34 780 4,198 261 5,273 3,874 306 1,886 6,066 Total 83,328 35,997 11,719 6,200 9,833 687 3,564 2,164 15,212 125 2,149 722 38,481 29,037 3,746 2,524 10,085 2,840 773 463 9,124 2,229 571 231 559 299 (3,282) (165) 16,248 18,208 73,788 14,161 (2) 12,155 (2,589) 137,244 3,765 1,363 533 5,661 2,669 2,585 2,943 8,197 5,154 5,023 3,154 1,058 2,972 1,230 1,072 (3,688) 192 479 749 (88) 13,331 5,260 (3) 1,743 (3,027) 13,904 13,190 10,137 37,231 (1) The figures have been restated to take account of the impact of the change, with retrospective effect, of the accounting policy used for of employee benefits under the new version of IAS 19/R, as well as the completion of the allocation of the purchase price of the assets acquired and the liabilities assumed of the Kafireas pipeline and of Stipa Nayaá and Eólica Zopiloapan. For further information please see note 4. (2) Of which €217 million regarding units classified as “held for sale”. (3) Of which €1 million regarding units classified as “held for sale”. The following table reconciles segment assets and liabilities and the consolidated figures. Millions of euro Total assets Equity investments accounted for using the equity method Non-current financial assets Long-term tax receivables included in “other non-current assets” Current financial assets Cash and cash equivalents Deferred tax assets Tax receivables Financial and tax assets of “assets held for sale” Segment assets Total liabilities Long-term loans Non-current financial liabilities Short-term loans Current portion of long-term loans Current financial liabilities Deferred tax liabilities Income tax payable Other tax payables Financial and tax liabilities of “liabilities held for sale” Segment liabilities 188 at Dec. 31, 2013 at Dec. 31, 2012 restated 164,148 172,097 647 6,401 494 7,877 8,030 6,239 1,735 15 1,115 5,518 401 9,381 9,891 6,816 1,631 100 132,710 137,244 111,309 51,113 2,257 2,529 4,690 3,640 10,905 308 976 11 34,880 120,010 55,959 2,553 3,970 4,057 3,138 11,786 364 945 7 37,231 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsRevenues 9.a Revenues from sales and services - €77,258 million Millions of euro Revenues from the sale and transport of electricity and contributions from Electricity Equalization Fund and similar bodies Revenues from the sale and transport of natural gas to end users Revenues from fuel sales Connection fees for the electricity and gas networks Revenues for contract work in progress Other sales and services Total 2013 2012 restated Change 67,285 4,451 2,635 998 6 1,883 77,258 71,322 (4,037) 4,402 1,931 1,413 21 3,342 82,431 49 704 (415) (15) (1,459) (5,173) -5.7% 1.1% 36.5% -29.4% -71.4% -43.7% -6.3% “Revenues from the sale and transport of electricity and million in revenues from the sale and transport of natural contributions from Electricity Equalization Fund and simi- gas in Italy (€2,473 million in 2012) and €2,074 million in lar bodies” amounted to €67,285 million (€71,322 million sales of natural gas abroad (€1,929 million in 2012). in 2012). Among others, they include €33,135 million in “Revenues from fuel sales” amounted to €2,635 million revenues from the sale of electricity to end users (€36,756 in 2013, which includes €2,161 million in sales of natural million in 2012), €17,525 million in revenues from the sale gas (€1,460 million in 2012), while the sale of other fuels of electricity to wholesale buyers (€16,974 million in 2012), amounted to €474 million (€471 million in 2012). €4,520 million in revenues from electricity trading activities “Other sales and services” declined mainly owning to the (€5,763 million in 2012), and €9,611 million in revenues from the transport of electricity (€9,031 million in 2012). reduction of €1,287 million in trading in CO2 emission allow- ances and other environmental certificates. “Revenues from the sale and transport of natural gas to end The table below gives a breakdown of revenues from sales users” came to €4,451 million in 2013 and include €2,377 and services by geographical area: Millions of euro Italy Europe - EU Europe - non EU America Other Total 2013 32,556 31,070 3,305 9,720 607 77,258 2012 restated 32,427 35,034 3,390 11,006 574 82,431 189 9.b Other revenues and income - €3,277 million Millions of euro Cost contributions and other fees Grants for environmental certificates Sundry reimbursements Gains on disposal of assets Measurement at fair value after changes in control Gains on sale of property, plant and equipment and intangible assets Service continuity bonuses Proceeds from reimbursement of charges for elimination of Electrical Worker Pension Fund Other revenues Total 2013 73 848 183 944 21 38 96 - 1,074 3,277 2012 restated 99 553 195 6 16 43 99 615 892 2,518 Change (26) 295 (12) 938 5 (5) (3) (615) 182 759 -26.3% 53.3% -6.2% - 31.2% -11.6% -3.0% -100.0% 20.4% 30.1% “Cost contributions and other fees” regard revenues on Acciona for the sale of La Cinqueta (€43 million). certain connections to the electricity and gas networks, The gain from “measurement at fair value after changes while “grants for environmental certificates” are incentives in control” amounted to €21 million and regarded the paid to renewables generation plants or for energy effi- remeasurement of the net assets still held in the Buffalo ciency activities. Dunes Wind Project (49% of the company) following the “Sundry reimbursements” are accounted for by reimburse- disposal that led to the loss of control. ments from customers and suppliers in the amount of €76 “Proceeds from reimbursement of charges for elimination million (€136 million in 2012) and insurance settlements of Electrical Worker Pension Fund” recognized in 2012 totaling €107 million (€59 million in 2012). regards the authorization of the reimbursement of costs “Gains on disposal of assets” amounted to €944 million incurred for the elimination of the pension fund by the Au- in 2013, mainly in respect of the gain on the disposal of thority for Electricity and Gas with its Resolution 157/2012. Artic Russia (and indirectly the stake held by the latter in The increase in “Other revenues” is mainly accounted for SeverEnergia) in the amount of €964 million and of 51% of by the government grant of €381 million to the Argentine the Buffalo Dunes Wind Project (€20 million). These factors distribution company Edesur under the provisions of Reso- were partially offset by the cancellation of the gain posted lución 250/13 regarding the Mecanismo de Monitoreo de in 2009 owing to the withdrawal of the agreement with Costos. 190 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Costs 10.a Raw materials and consumables - €41,612 million Millions of euro Electricity Fuel and gas Materials Total - of which capitalized costs for materials 2013 28,297 11,738 1,577 41,612 (737) 2012 restated 30,080 13,379 3,123 46,582 (989) Change (1,783) (1,641) (1,546) (4,970) 252 -5.9% -12.3% -49.5% -10.7% -25.5% Purchases of “electricity” comprise those from the Single tially offset by an increase in purchases on electricity ex- Buyer in the amount of €5,135 million (€5,992 million in changes. 2012) and purchases from the Energy Markets Operator Purchases of “fuel and gas” include €6,142 million in natu- in the amount of €4,451 million (€3,290 million in 2012). ral gas purchases (€6,630 million in 2012) and €5,596 mil- The decline in the item is mainly due to the reduction in lion in purchases of other fuels (€6,642 million in 2012). costs for electricity purchases through bilateral contracts Purchases of “materials” fell mainly as a result of a decline and on national and international markets, essentially as a result of the decline in demand. These factors were par- in sourcing of CO2 emission allowances and other environ- mental certificates, which were mainly used for resale. 10.b Services - €15,551 milion Millions of euro Electricity and gas wheeling Maintenance and repairs Telephone and postal costs Communication services IT services Leases and rentals Other Total 2013 9,601 1,338 253 119 264 619 3,357 15,551 2012 restated 9,819 1,337 276 130 254 569 3,355 15,780 Change (218) (39) (23) (11) 10 50 2 (229) -2.2% -2.8% -8.3% -8.5% 3.9% 8.8% 0.1% -1.5% Costs for services came to €15,551 million in 2013, declin- crease in electricity demand in the main markets in which ing with respect to 2012 largely due to the decline in elec- the Group operates. tricity transported for third parties as a result of the de- 191 10.c Personnel - €4,596 million Millions of euro Wages and salaries Social security contributions Post-employment benefits Other costs Total - of which capitalized 2013 3,406 917 117 156 4,596 (714) 2012 restated 3,511 896 119 1,263 5,789 (759) Change (105) 21 (2) (1,107) (1,193) 45 -3.0% 2.3% -1.7% -87.6% -20.6% -5.9% Personnel costs amounted to €4,596 million in 2013, a de- ing €970 million. In 2013, the termination of that plan had a crease of €1,193 million. positive impact on profit or loss of €1,028 million (equal to The workforce contracted by 2,308, due to the effect of the reversal of the initial provision of €970 million plus cur- the balance between hirings and terminations (a decrease rent service costs and interest costs accrued in the period of of 2,336 employees), only partially offset by the increase re- €58 million), which fully offset the charges connected with lated to the change in the scope of consolidation largely as- the application of the union agreements to implement, for sociated with the acquisition of PowerCrop (28 employees). a number of companies in Italy, the mechanism provided At December 31, 2013 the number of employees associated for under Article 4, paragraphs 1-7-ter, of Law 92/2012 (the with assets held for sale (the Belgian company Marcinelle En- Fornero Act), which amounted to €898 million. ergie) was 37. For more information on employee benefit plans, please see The decline in “other costs” for personnel reflects the net note 30 below. effect of the termination of the transition-to-retirement The table below shows the average number of employees plan established for certain employees in Italy at the end of by category compared with the previous year, and the actual 2012, which had prompted the recognition of a charge total- number of employees at December 31, 2013. Senior managers Middle managers Office staff Workers Total Average number (1) Headcount (1) 2013 1,374 14,552 39,833 17,224 72,983 2012 1,375 14,232 40,610 18,393 74,610 Change at Dec. 31, 2013 (2) (1) 320 (777) (1,169) (1,627) 1,374 14,630 38,818 16,572 71,394 (1) For companies consolidated on a proportionate basis, the headcount corresponds to Enel percentage share of the total. (2) Of which 37 in units classified as “held for sale”. 192 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts 10.d Depreciation, amortization and impairment losses - €7,067 million Millions of euro Depreciation Amortization Impairment losses Total 2013 4,583 826 1,658 7,067 2012 restated 4,708 888 3,407 9,003 Change (125) (62) (1,749) (1,936) -2.7% -7.0% -51.3% -21.5% Depreciation and amortization (comprising property, plant impairment loss on the assets held for sale of Marcinelle En- and equipment and intangible assets) decreased by €187 ergie (€14 million) following developments in negotiations million in 2013, essentially due to the end of the useful life of with the potential purchasers and the consequent adjust- a number of generation plants and the revision of the useful ment of the value of the assets to their estimated realiz- life of the nuclear generation plants in Slovakia and a num- able value (an analogous impairment loss of €145 million ber of conventional thermal generation plants, as well as as- was recognized for the same company in 2012), as well as sets previously classified as to be relinquished free of charge impairment losses on property, plant and equipment and following the enactment of Law 134 of August 7, 2012. For intangible assets of €242 million (€95 million in 2012), es- the latter, the new law impacted all of 2013, while in 2012 it sentially in respect of a number of generation and storage was in effect only as from August. facilities in Italy, photovoltaic manufacturing plants in Italy “Impairment losses” mainly regard writedowns of trade re- ous year, the item included the impairment of goodwill of ceivables amounting to €656 million (€588 million in 2012), the cash generating units “Endesa-Iberia” in the amount of the impairment of the goodwill recognized on Enel OGK-5 €2,392 million and Endesa Ireland in the amount of €67 mil- in the amount of €744 million (€112 million in 2012), the lion. and geothermal generation plants in Nicaragua. The previ- 10.e Other operating expenses - €2,837 million Millions of euro Provisions for risks and charges System charges - emissions allowances Charges for white certificates Charges for green certificates Taxes and duties Other Total 2013 85 335 295 270 1,468 384 2,837 2012 restated 468 47 366 95 1,225 573 2,774 Change (383) -81.8% 288 (71) 175 243 (189) 63 - -19.4% - 19.8% -33.0% 2.3% Other operating expenses totaled €2,837 million, up €63 mil- effect of which was only partially offset by the reduction in lion, mainly due to an increase of €175 million in costs for the taxes on electricity companies established by Brazilian regula- purchase of green certificates and increased charges for com- tors with Medida Provisória 579/2012 and the subsequent De- pliance with environmental restrictions in the amount of €288 cree 7891/2013. These increases were also partially offset by million. An additional factor was the increase of €243 million a reduction in provisions for risks and charges for the year and in taxes and duties for the period, largely attributable to the the downward revision of estimates for provisions recognized tax on emissions introduced in Spain with Law 15/2012, the in prior years in the amount of €383 million. 193 10.f Capitalized costs - €(1,450) million Capitalized costs consist of €714 million in personnel €759 million and €988 million, respectively, in 2012). costs and €736 million in materials costs (compared with Net income/(charges) from commodity risk management 11. Net charges from commodity risk management - €(378) million Net income from commodity risk management reflects ing the year and €114 million in unrealized net charges on €264 million in net income realized on positions closed dur- open positions in derivatives at December 31, 2013. Millions of euro Income Unrealized on positions open at the end of the period Realized on positions closed during the period Total income Charges Unrealized on positions open at the end of the period Realized on positions closed during the period Total charges NET INCOME/(CHARGES) FROM COMMODITY RISK MANAGEMENT - of which trading/non-IFRS/IAS hedge derivatives - of which ineffective portion of CFH 2013 2012 restated Change 1,815 739 2,554 (1,929) (1,003) (2,932) (378) (265) (2) 1,368 220 1,588 (1,549) (1) (1,550) 38 88 (3) 447 519 966 (380) (1,002) (1,382) (416) (353) 1 32.7% - 60.8% 24.5% - 89.2% - - -33.3% 194 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts12. Financial income/(expense) - €(2,813)million Financial income Millions of euro Total interest and other income from financial assets (current and non- current): - interest income at effective rate on non-current securities and receivables - financial income on non-current securities at fair value through profit or loss - interest income at effective rate on short-term financial investments Total interest and other income from financial assets Foreign exchange gains Income from derivative instruments: - income from cash flow hedge derivatives - income from derivatives at fair value through profit or loss - income from fair value hedge derivatives Total income from derivative instruments Income from equity investments Other income TOTAL FINANCIAL INCOME 2013 2012 restated Change 56 2 293 351 847 232 455 70 757 86 412 49 2 284 335 640 218 273 34 525 218 467 2,453 2,185 7 - 9 16 207 14 182 36 232 (132) (55) 268 14.3% - 3.2% 4.8% 32.3% 6.4% 66.7% 105.9% 44.2% -60.6% -11.8% 12.3% Financial income amounted to €2,453 million, an increase Medgaz (€64 million) and Endesa Gas T&D (€12 million). In of €268 million compared with the previous year. 2012, the item included the proceeds from the disposal of “Income from derivative instruments” came to €757 mil- the stake in Terna (€185 million). lion, of which €362 million realized (€380 million in 2012) “Other income” for 2013 include financial income in the total and €395 million unrealized (€145 million in 2012). amount of €103 million (€180 million in 2012) recognized as The increase in foreign exchange gains mainly reflects the an increase in the financial assets recognized in application of positive impact of exchange rate changes on debt denomi- IFRIC 12 in Brazil following the entry into force of the Medida nated in currencies other than the euro. Provisória 579/2012. The item also includes €43 million in inter- “Income from equity investments” for 2013 came to €86 est paid to Edesur in Argentina on the government grant to that million, mainly in respect of the gains on the disposals of company under the provisions of Resolución 250/2013. 195 Financial expense Millions of euro Interest expense and other charges on financial debt (current and non-current): - interest expense on bank loans - interest on bonds - interest expense on other loans - financial expense on securities at fair value through profit or loss - commissions on unused lines of credit Total interest expense and other charges on financial debt Foreign exchange losses Expense on derivative instruments: - expense on cash flow hedge derivatives - expense on derivatives at fair value through profit or loss - expense on fair value hedge derivatives Total expense on derivative instruments Accretion of post-employment and other employee benefits Accretion of other provisions Charges on equity investments Other charges TOTAL FINANCIAL EXPENSE 2013 536 2,170 111 - 66 2,883 583 812 397 9 1,218 163 203 7 209 2012 restated Change 577 2,206 149 - 38 2,970 573 491 269 17 777 281 259 12 325 (41) (36) (38) - 28 (87) 10 321 128 (8) 441 (118) (56) (5) (116) 69 -7.1% -1.6% -25.5% - 73.7% -2.9% 1.7% 65.4% 47.6% -47.1% 56.8% -42.0% -21.6% -41.7% -35.7% 1.3% 5,266 5,197 Financial expense totaled €5,266 million, up €69 million com- and €697 million in unrealized charges (€243 million in 2012). pared with 2012. Expense from accretion, with regard to both employee ben- More specifically, the decrease in “interest expense and other efits and other provisions, decreased by a total of €174 million, charges on financial debt” is mainly attributable to the gener- largely due to the reduction of the provisions themselves, as alized decline in interest rates compared with 2012, as well as well as of the discount rates used in the measurement of the the debt refinancing strategy to optimize the financial struc- provisions. ture and lengthen the average maturity of the debt of the Other charges for 2013 amounted to €209 million (€325 mil- Group. lion in 2012), and reflect the positive impact of €66 million “Expense on derivative instruments” came to €1,218 million, from the writeback of the value of the receivable due from of which €521 million in realized charges (€534 million in 2012) the Slovakian National Nuclear Fund. 13. Share of income/(expense) from equity investments accounted for using the equity method - €86 million Millions of euro Income from associates Expense on associates Total 2013 119 (33) 86 2012 restated 123 (35) 88 Change (4) 2 (2) -3.3% -5.7% -2.3% For more information on the composition of the balance, please see note 19. The share of income and expense from equity investments accounted for using the equity method is largely in line with the previous year. 196 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts 14. Income taxes - €2,437 million Millions of euro Current taxes Adjustments for income taxes related to prior years Deferred tax liabilities Deferred tax assets Total 2013 2,458 (178) (250) 407 2,437 2012 restated 2,898 (319) 489 (628) 2,440 Change (440) 141 (739) 1,035 (3) -15.2% -44.2% - - -0.1% Income taxes for 2013 amounted to €2,437 million, equal to new international accounting standards, which had a signifi- 33.8% of taxable income, compared with 62.9% in 2012. cant impact on deferred tax assets in respect of employee ben- These developments reflect the recognition in 2012 of the efits, the adjustment recognized in 2012 of the deferred taxes impairment losses on goodwill, which did not generate a cor- of the Chilean and Slovakian companies following the rise in responding tax benefit, and the impact of the increase in es- tax rates in those two countries as from January 1, 2013, and sentially tax-exempt gains recognized in 2013, as well as adjust- changes in provisions for risks recognized in 2012 and 2013. ments of taxes for previous years, which include an adjustment of €56 million of the receivable in respect of the request for the The following table reconciles the theoretical tax rate with IRES/IRAP reimbursement made under the provisions of Article the effective tax rate. Please note that the estimated tax li- 4, paragraph 12, of Decree Law 16 of March 2, 2012. ability of Group companies outside of Italy is €890 million Developments in deferred tax assets and liabilities reflect the (€1,025 million in 2012). Millions of euro Income before taxes Theoretical taxes Theoretical tax effect on impairment losses on goodwill Permanent differences, effect of different foreign tax rates, and minor items IRES surtax (Decree Law 112/2008) Difference on estimated income taxes from prior years for Italian companies IRAP Total 2013 2012 restated 7,217 1,985 205 (281) 363 (174) 339 2,437 - 27.5% 2.8% -3.9% 5.0% -2.4% 4.7% 33.8% 3,882 1,068 707 69 495 (272) 373 2,440 - 27.5% 18.2% 1.8% 12.8% -7.0% 9.6% 62.9% 197 15. Basic and diluted earnings per share Both metrics are calculated on the basis of the average num- shares, adjusted for the diluting effect of outstanding stock ber of ordinary shares in the period, equal to 9,403,357,795 options (zero euro in both periods). 2012 restated Change Millions of euro Net income from continuing operations pertaining to shareholders of the Parent Company (millions of euro) Net income from discontinued operations pertaining to shareholders of the Parent Company (millions of euro) Net income pertaining to shareholders of the Parent Company (millions of euro) Number of ordinary shares Dilutive effect of stock options Basic and diluted earnings per share (euro) Basic and diluted earnings from continuing operations per share (euro) Basic and diluted earnings from discontinued operations per share (euro) 2013 3,235 - 3,235 238 - 238 9,403,357,795 9,403,357,795 - 0.34 0.34 - - 0.03 0.03 - 2,997 - 2,997 - - 0.31 0.31 - Please note that existing stock option plans for top manage- Between the balance-sheet date and the date of publication ment could dilute basic earnings per share in the future. For of the financial statements, no events or transactions took more information on those plans, please see the appropriate place that changed the number of ordinary shares or poten- section of these notes. tial ordinary shares in circulation at the end of the year. 198 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Information on the Consolidated Balance Sheet 16. Property, plant and equipment - €81,050 million Changes in property, plant and equipment for 2012 and 2013 are shown below: (237) (4,261) (21) (105) Millions of euro Land Buildings Plant and machinery Industrial and commercial equipment Cost 580 10,564 142,608 Accumulated depreciation - 5,262 79,054 580 5,302 63,554 Balance at Jan. 1, 2012 restated Capital expenditure Assets entering service Exchange rate difference Change in scope of consolidation Depreciation Impairment losses Other changes Remeasurement at fair value after changes in control Reclassification from/to “assets held for sale” Total changes Cost 6 10 8 1 - (78) 62 - - 9 58 222 29 1,633 4,828 363 - 215 32 160 - (4) 260 (14) 242 - (314) 2,692 589 11,101 149,109 Accumulated depreciation - 5,539 82,863 Balance at Dec. 31, 2012 restated Capital expenditure Assets entering service Exchange rate differences Change in scope of consolidation Depreciation Impairment losses Other changes Reclassification from/to “assets held for sale” Total changes Cost Accumulated depreciation Balance at Dec. 31, 2013 589 2 15 (24) 9 - 30 (40) - (8) 581 - 581 5,562 66,246 60 188 1,094 3,341 (134) (1,740) 30 (223) (9) (5) (3) (96) 590 (4,145) (90) (612) (14) (1,576) 11,174 149,155 5,708 5,466 84,485 64,670 Assets under con- struction and advances Leasehold improve- ments Total 223 152 71 5 40 - - (18) - (1) - - 26 261 164 97 8 14 - - 9,556 166,648 - 86,056 9,556 4,633 (5,127) 63 6 - (13) 29 4 - (405) 80,592 6,436 - 468 222 (4,700) (73) 484 4 (318) 2,523 9,151 173,382 - 90,267 9,151 83,115 4,110 (3,698) 5,346 - (419) (2,358) (45) 584 (19) - (4,560) - 5 - 8 286 181 105 (94) (141) (180) (880) - (17) (287) (2,065) 8,864 173,144 - 92,094 8,864 81,050 Other assets 1,468 1,101 Leased assets 1,232 162 367 1,070 68 23 (3) - - (30) - - (47) 1,463 1,143 13 3 8 - (58) - 19 - - (15) 1,275 220 320 1,055 49 59 (17) - (101) (13) (12) - (35) 1,431 1,146 285 8 76 (24) - (53) - (76) - (69) 1,203 217 986 417 325 92 20 1 - - - 3 - - 3 433 338 95 15 5 - - (19) (4) 1 - (2) 450 357 93 “Plant and machinery” includes assets to be relinquished free of network (€3,688 million at December 31, 2012). charge with a net carrying amount of €9,864 million (€11,002 “Leased assets” include certain assets which the Group is using million at December 31, 2012), €5,120 million of which related in Spain, France, Greece, Italy, Latin America and Slovakia. More to power generation plants (€5,986 million at December 31, specifically, in Spain the assets relate to a 25-year “tolling” con- 2012) and €3,192 million to Endesa’s electricity distribution tract for which an analysis pursuant to IFRIC 4 identified an em- 199 bedded finance lease, under which Endesa has access to the - hydroelectric generation capacity of a combined-cycle plant for which the toller, Elecgas, has undertaken to transform gas into electricity in exchange for a toll at a rate of 9.62%. The other lease agree- ments regard wind plants that the Group uses in France (with a term of 15 years expiring in 2024-2025), in Greece (with a term of 10 years expiring in 2014) and in Italy (with a term of 18 years expiring in 2029-2031). In Latin America, the assets relate to leased power transmis- sion lines and plant (Ralco-Charrúa), with a residual term of 10 years on the lease at a 6.5% rate, a lease of a combined-cycle plant (Talara) with a term of 9 years at a fixed rate of 5.8%, as well as a number of combined cycle plants in Peru (residual lease term of three years bearing a floating rate). The leased assets in Slovakia essentially relate to the sale and lease back agreements for the V1 nuclear power plant at Jaslovske Bo- hunice and the hydroelectric plant at Gabcikovo. The leasing arrangements were a necessary condition for the start of the privatization of the Slovakian electricity system. The lease for the V1 plant covers the entire remaining useful life of the asset and the period between the end of generation and the start of the decommissioning process, while the lease for the Gab- cikovo plant has a 30-year term as from April 2006. The following table reports the minimum lease payments and the related present value. Millions of euro Minimum lease payments Present value 2013 2014-2017 After 2017 Total at Dec. 31, 2012 70 300 687 1,057 70 198 492 760 Millions of euro Minimum lease payments Present value 2014 2015-2018 After 2018 Total at Dec. 31, 2013 68 353 606 1,027 68 224 440 732 - geothermal - nuclear - alternative resources Total power plants Electricity distribution network Land, buildings and other assets and equipment TOTAL 557 226 722 942 3,185 2,022 139 5,346 656 214 802 911 3,535 2,782 119 6,436 Capital expenditure on power plants totaled €3,185 million, a decrease of 350 million on the previous year. This mainly reflects lower investment in conventional thermal plants and nuclear power plants in Italy, eastern Europe and Latin America. These effects were only partially offset by increased investment in renewable generation plants by the Renewable Energy Division. Capital expenditure for the electricity distribution network to- taled €2,022 million, a decrease of €760 million over the previ- ous year. The decrease is essentially attributable to a selective approach to work on the medium and low voltage grids in Italy and Spain. The “change in scope of consolidation” for the period mainly concerned the acquisitions of control of the US companies Chisholm View Wind Project and Prairie Rose Wind Project (€499 million), the acquisition of a 100% stake in Parque Eólico Talinay Oriente, a company operating in the wind generation sector in Chile (€127 million), and of 50% of PowerCrop, which operates in biomass generation in Italy (€10 million). These factors were partially offset by the impact of the deconsolidation of the Buf- falo Dunes Wind Project (€64 million). “Impairment losses” on property, plant and equipment amount- ed to €180 million, mainly accounted for by the impairment loss- es recognized in respect of a number of generation plants and fuel storage facilities in view of changes in plans for their future use as well as an increase in impairment losses on photovoltaic manufacturing facilities in Italy, a number of geothermal plants in Nicaragua and a number of specific projects in North America and the Iberian peninsula. Owing to the persistence of the economic crisis in Italy and in The table below summarizes capital expenditure in 2013 by view of the adverse impact of that crisis on the traditional gen- category. These expenditures, totaling €5,346 million, fell by eration sector, although the Group has already incorporated €1,090 million compared with 2012. assumptions of a slow economic recovery in the business plan Millions of euro Power plants: - thermal 200 approved in March 2013, we have found that the continuation of economic distress could represent evidence of impairment in 2013 2012 accordance with IAS 36. Accordingly, we conducted an impair- 738 952 generating unit (whose assets are represented by conventional ment test at December 31, 2013 of the Enel Produzione cash EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsgeneration facilities in Italy). No impairment losses requiring rec- “Other changes” include, among other items, the effect of the ognition were found by those tests. capitalization of interest on specific loans for capital expendi- The model used in that testing was a unlevered discounted cash ture in the amount of €129 million (€91 million in 2012), as flow (DCF) approach applied to pre-tax amounts, with a time ho- well as the change (positive in 2012 and negative in 2013) in rizon based on an explicit period of 10 years plus a terminal value the change in decommissioning plans for nuclear plants (see calculated as a perpetuity with stable growth. The assumptions note 31). concerning the growth rate and the discount rate were analo- gous to those adopted for other CGUs. In particular, the growth “Reclassification to ‘assets held for sale’” essentially reports the rate was determined on the basis of the average forecast for me- property, plant and equipment of the French company WP France dium/long-term electricity demand and set at 1.1%, while the 3, which in view of the decisions taken by management meets the discount rate was determined as the pre-tax WACC of 9.9%. requirements of IFRS 5 for classification as assets held for sale. 17. Intangible assets - €33,229 million Changes in intangible assets for 2012 and 2013 are shown below: Millions of euro Cost Accumulated amortization Balance at Jan. 1, 2012 restated Capital expenditure Assets entering service Exchange rate differences Change in scope of consolidation Amortization Impairment losses Other changes Remeasurement at fair value after changes in control Reclassification from/to “assets held for sale” Total changes Cost Accumulated amortization Balance at Dec. 31, 2012 restated Capital expenditure Assets entering service Exchange rate differences Change in scope of consolidation Amortization Impairment losses Other changes Reclassification from/to “assets held for sale” Total changes Cost Accumulated amortization Balance at Dec. 31, 2013 Industrial patents and intellec- tual property rights Concessions, licenses, trademarks and similar rights Service concession arrangements Develop- ment costs 30 9 21 12 (1) 1 1 (4) - (3) - - 6 41 14 27 8 8 (4) - (4) - (4) - 4 47 16 31 2,185 1,609 576 117 130 (2) - 17,558 1,262 16,296 5 19 93 35 4,412 1,466 2,946 94 143 (300) - Other 1,487 936 551 34 25 (5) 25 (250) (289) (213) (128) - 2 - - (3) 2,432 1,859 573 86 116 (8) - (270) - (26) - (102) 2,522 2,051 471 2 11 1 (44) (167) 17,605 1,476 16,129 3 - (1,160) 14 (236) (1) (50) (2) (1,432) 16,208 1.511 14,697 - (202) - - (478) 4,196 1,728 2,468 242 - (416) - (196) (44) (36) - (450) 3,671 1,653 2,018 (1) 5 - - (45) 1,595 1,089 506 30 16 (8) - (117) (3) 83 - 1 1,667 1,160 507 Assets under de- velopment and advances Goodwill Total 317 18,342 44,331 - 317 365 (316) - 74 (4) - - 5,282 18,342 39,049 - - 28 60 - 627 - (185) 195 (888) (2,517) (2,516) (63) (3) (253) 11 - 67 - - 12 (44) (2,432) (3,052) 384 15,910 42,163 - 384 241 (140) (6) 71 - (1) (59) - 106 490 - - 6,166 15,910 35,997 - - 610 - (160) (1,762) 23 - (745) (13) 108 (823) (794) (105) - (2) (895) (2,768) 15,015 39,620 - 6,391 490 15,015 33,229 201 The “change in scope of consolidation” for the period, net tion is calculated on a straight-line basis over the average of the increase in “goodwill”, mainly concerned a number duration of the relationships with the customers acquired or of wind projects in the United States and the acquisition of the concessions. The item includes assets with an indefinite Compañía Energética Veracruz in Peru. useful life in the amount of €9,995 million (€10,622 million at “Industrial patents and intellectual property rights” relate December 31, 2012), essentially accounted for by concessions mainly to costs incurred in purchasing software and open- for distribution activities in Spain (€5,676 million), Colombia ended software licenses. The most important applications (€2,034 million), Chile (€1,669 million) and Peru (€616 mil- relate to invoicing and customer management, the develop- lion), for which there is no statutory or currently predictable ment of Internet portals and the management of company expiration date. On the basis of the forecasts developed, cash systems. Amortization is calculated on a straight-line basis flows for each of the electricity distribution concessions are over the asset’s residual useful life (on average between three sufficient to recover the value of the intangible assets. and five years). “Service concession arrangements”, recognized pursuant to “Concessions, licenses, trademarks and similar rights” include IFRIC 12, regard certain infrastructure serving electricity distri- costs incurred by the gas companies and the foreign electric- bution concessions in Brazil. ity distribution companies to acquire customers. Amortiza- “Goodwill” amounted to €15,015 million, a decrease of €895 million over the previous year. Millions of euro at Dec. 31, 2012 restated Accumulat- ed impair- ment Net car- rying amount Cost Change in scope of consolida- tion Exchange rate differences Impairment losses Other changes Endesa Enel OGK-5 Gruppo Enel Green Power (1) Slovenské elektrárne Enel Energia Enel Distributie Muntenia Enel Energie Muntenia RusEnergoSbyt Nuove Energie Enel Stoccaggi Enel Lab Artic Russia Total 14,259 (2,392) 11,867 1,257 (112) 1,145 - - - - (138) (744) 974 697 579 548 113 45 26 1 - 10 (85) - - - - - - - - (10) 889 697 579 548 113 45 26 1 - - 18,509 (2,599) 15,910 22 (16) - - - - - - - 1 - 23 - - (1) - (5) - - - - - - - - - - - (1) - - at Dec. 31, 2013 Accumulat- ed impair- ment Net car- rying amount Cost 14,259 (2,392) 11,867 1,119 (856) 263 967 697 579 547 113 40 26 1 1 - (85) - - - - - - (1) - - 882 697 579 547 113 40 26 - 1 - - - (13) - - - - - - - - - (160) (745) (13) 18,349 (3,334) 15,015 (1) EGP España, EGP Latin America, EGP North America, EGP Hellas, Enel Panama, EGP France, EGP Romania, EGP Bulgaria, Powercrop, EGP Finale Emilia, EGP South Africa, EGP Portoscuso and other minor companies. The “change in the scope of consolidation” mainly regards business, on the operational rules and regulations of the mar- the acquisition of 50% of PowerCrop, which operates in the kets in which Enel operates and on the corporate organiza- biomass generation sector, and other minor acquisitions by tion, including technical and management factors, as well as the Renewable Energy Division. on the level of reporting monitored by management. “Impairment losses” are recognized following impairment tests, as discussed below. The recoverable value of the goodwill recognized was esti- The criteria used to identify the cash generating units (CGUs) mated by calculating the value in use of the CGUs using dis- were essentially based (in line with management’s strategic counted cash flow models, which involve estimating expect- and operational vision) on the specific characteristics of their ed future cash flows and applying an appropriate discount 202 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts rate, selected on the basis of market inputs such as risk-free term developments in the main variables that determine rates, betas and market risk premiums. cash flows, the average residual useful life of assets or the Cash flows were determined on the basis of the best informa- duration of the concessions. tion available at the time of the estimate and drawn: More specifically, the terminal value was calculated as a per- > for the explicit period, from the 10-year business plan ap- petuity or annuity with a nominal growth rate equal to the proved by the Board of Directors of the Parent Company long-term rate of growth in electricity and/or inflation (de- containing forecasts for volumes, revenues, operating pending on the country and business involved) and in any costs, capital expenditure, industrial and commercial or- case no higher than the average long-term growth rate of ganization and developments in the main macroeconomic the reference market. The value in use calculated as described variables (inflation, nominal interest rates and exchange above was found to be greater than the amount recognized rates) and commodity prices. More specifically, the explicit on the balance sheet, with the exceptions discussed below. period of cash flows considered in impairment testing dif- In order to verify the robustness of the value in use of the fers in accordance with the specific features and business CGUs, sensitivity analyses were conducted for the main drivers cycles of the various CGUs being tested. These differences of the values, in particular WACC and the long-term growth are generally associated with the different average times rate, the outcomes of which fully supported that value. needed to build and bring into service the plant and other works that characterize the investments of the specific The table below reports the composition of the main goodwill businesses that make up the CGU (conventional thermal values according to the company to which the CGU belongs, generation, nuclear power, renewables, distribution, etc.); along with the discount rates applied and the time horizon > for subsequent years, from assumptions concerning long- over which the expected cash flows have been discounted. 203 Amount at Dec. 31, 2012 8,607 3,260 1,145 697 661 579 407 270 107 38 45 26 25 24 13 5 - - - 1 1.90% - (5) 1.20% 1.00% 2.40% 0.40% 2.00% 3.40% 2.20% 2.00% 0.40% 2.00% 1.90% 2.40% 3.00% - - - - 8.00% 9.50% 13.30% 9.60% 10.30% 11.50% 8.40% 9.90% 7.70% 16.80% 16.50% 9.20% 10.10% 7.80% 11.50% 9.30% - - - 10 years 10 years 10 years 10 years 10 years 10 years 5 years 5 years 5 years 10 years 10 years 10 years 10 years 5 years 5 years 10 years - - - Perpetuity Perpetuity Perpetuity Perpetuity Perpetuity 10 years 17 years 21 years 20 years 20 years 18 years 15 years 18 years 20 years 12 years - - - - 0.40% 8.80% 10 years 31 years Millions of euro Amount Growth rate (1) Discount rate pre-tax WACC (2) Explicit period of cash flows Terminal value (3) Growth Rate (1) Discount rate pre-tax WACC (2) Explicit period of cash flows Terminal value (3) Endesa-Iberia (4) Endesa-Latin America Enel OGK-5 Slovenské elektrárne Enel Romania (6) Enel Energia EGP España EGP Latin America EGP North America EGP Hellas RusEnergoSbyt Nuove Energie EGP Portoscuso and other minor EGP France EGP Romania EGP Bulgaria PowerCrop EGP Finale Emilia EGP South Africa Enel Stoccaggi at Dec. 31, 2013 8,607 3,260 263 697 660 579 403 262 103 33 40 26 21 29 13 5 9 3 1 - 1.80% - (5) 1.20% 1.00% 2.40% 0.70% 2.00% 3.40% 2.10% 2.00% - 0.70% 2.00% 1.90% 2.40% 3.00% 2.00% 2.00% 1.90% - 8.40% 8.90% 12.20% 8.80% 9.90% 12.70% 7.90% 8.50% 7.70% 13.60% 15.60% 9.90% 10.00% 7.60% 10.60% 8.20% 11.50% 12.00% 9.80% - 10 years 10 years 10 years 10 years 10 years 10 years 5 years 5 years 5 years 10 years 10 years 10 years 10 years 5 years 10 years 10 years 10 years 10 years 5 years - Perpetuity Perpetuity Perpetuity Perpetuity Perpetuity 10 years 14 years 23 years 19 years 18 years - 17 years 18 years 19 years 13 years 11 years 7 years 7 years 23 years - (1) Perpetual growth rate of cash flows after explicit period. (2) Pre-tax WACC calculated using the iterative method: the discount rate that ensures that the value in use calculated with pre-tax cash flows is equal to that calculated with post-tax cash flows discounted with the post-tax WACC. (3) The terminal value has been estimated on the basis of a perpetuity or an annuity with a rising yield for the years indicated in the column. (4) Goodwill includes the portion referring to EGP España. (5) Growth rate equal to 4.0% (3.8% at December 31, 2012) for the first 10 years after the explicit period, followed by a perpetuity at a growth rate of 1.0% (1.0% at December 31, 2012). (6) Includes all companies operating in Romania. At December 31, 2013, impairment testing found impairment At December 31, 2012 the following impairment losses had losses of €744 million on the Enel OGK-5 CGU. The assessment been recognized: reflects, largely to the same extent as the other parameters > €2,392 million on the Endesa-Iberia CGU, to reflect the used in the determination, the expected contraction in esti- decrease in the expected cash flows from the assets be- mated future cash flows as a result of the persistent signs of a longing to the CGU, partly as a result of various measures slowdown in economic growth and a consequent contraction adopted by the Spanish government in the energy field in forecasts for price increases in the medium term. In parti- during 2012, and from the rise in country risk, which is fac- cular, in 2013 the local government implemented a number tored into the discount rate; of measures to contain energy spending that have helped > €112 million on the Enel OGK-5 CGU, reflecting the emer- heighten uncertainty concerning the timetable for the full libe- gence of the first signs of a change in industry conditions, ralization of gas prices in Russia, which is considered a key step prompting management to recognize a deterioration in in making the electricity industry attractive to foreign investors, the earnings potential of the CGU. making it possible to upgrade plants. 204 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsMillions of euro Amount Growth rate (1) pre-tax WACC (2) cash flows Discount rate Explicit period of at Dec. 31, 2013 Endesa-Iberia (4) Endesa-Latin America Enel OGK-5 Slovenské elektrárne Enel Romania (6) Enel Energia EGP España EGP Latin America EGP North America EGP Hellas RusEnergoSbyt Nuove Energie EGP France EGP Romania EGP Bulgaria PowerCrop EGP Finale Emilia EGP South Africa Enel Stoccaggi EGP Portoscuso and other minor 8,607 3,260 263 697 660 579 403 262 103 33 40 26 21 29 13 5 9 3 1 - 1.80% - (5) 1.20% 1.00% 2.40% 0.70% 2.00% 3.40% 2.10% 2.00% - 0.70% 2.00% 1.90% 2.40% 3.00% 2.00% 2.00% 1.90% - 8.40% 8.90% 12.20% 8.80% 9.90% 12.70% 7.90% 8.50% 7.70% 13.60% 15.60% 9.90% 10.00% 7.60% 10.60% 8.20% 11.50% 12.00% 9.80% - 10 years 10 years 10 years 10 years 10 years 10 years 5 years 5 years 5 years 10 years 10 years 10 years 10 years 5 years 10 years 10 years 10 years 10 years 5 years - Terminal value (3) Perpetuity Perpetuity Perpetuity Perpetuity Perpetuity 10 years 14 years 23 years 19 years 18 years 17 years 18 years 19 years 13 years 11 years 7 years 7 years 23 years - - (1) Perpetual growth rate of cash flows after explicit period. (2) Pre-tax WACC calculated using the iterative method: the discount rate that ensures that the value in use calculated with pre-tax cash flows is equal to that calculated with post-tax cash flows discounted with the post-tax WACC. (3) The terminal value has been estimated on the basis of a perpetuity or an annuity with a rising yield for the years indicated in the column. (5) Growth rate equal to 4.0% (3.8% at December 31, 2012) for the first 10 years after the explicit period, followed by a perpetuity at a growth rate of 1.0% (1.0% (4) Goodwill includes the portion referring to EGP España. at December 31, 2012). (6) Includes all companies operating in Romania. Amount at Dec. 31, 2012 8,607 3,260 1,145 697 661 579 407 270 107 38 45 26 25 24 13 5 - - - 1 Growth Rate (1) Discount rate pre-tax WACC (2) Explicit period of cash flows Terminal value (3) 1.90% - (5) 1.20% 1.00% 2.40% 0.40% 2.00% 3.40% 2.20% 2.00% - 0.40% 2.00% 1.90% 2.40% 3.00% - - - 8.00% 9.50% 13.30% 9.60% 10.30% 11.50% 8.40% 9.90% 7.70% 16.80% 16.50% 9.20% 10.10% 7.80% 11.50% 9.30% - - - 10 years 10 years 10 years 10 years 10 years 10 years 5 years 5 years 5 years 10 years 10 years 10 years 10 years 5 years 5 years 10 years - - - Perpetuity Perpetuity Perpetuity Perpetuity Perpetuity 10 years 17 years 21 years 20 years 20 years - 18 years 15 years 18 years 20 years 12 years - - - 0.40% 8.80% 10 years 31 years 205 18. Deferred tax assets and liabilities - €6,239 million and €10,905 million The following table details changes in deferred tax assets tions. The table also reports the amount of deferred tax and liabilities by type of timing difference and calculated assets that, where allowed, can be offset against deferred based on the tax rates established by applicable regula- tax liabilities. Increase/ (Decrease) taken to income statement Change in scope of consolidation Other changes Exchange rate differences Millions of euro at Dec. 31, 2012 restated Deferred tax assets: - differences in the value of intangible assets, and property, plant and equipment - accruals to provisions for risks and charges and impairment losses with deferred deductibility - tax loss carried forward - measurement of financial instruments - other items Total Deferred tax liabilities: - differences on non-current and financial assets - measurement of financial instruments - other items Total Non-offsettable deferred tax assets Non-offsettable deferred tax liabilities Offsettable deferred tax liabilities 1,805 102 2,307 116 650 1,938 6,816 8,942 220 2,624 (258) (22) (45) (184) (407) (337) 14 73 11,786 (250) - - - - 1 1 22 - - 22 13 21 23 (123) 3 (63) 16 (62) (22) (68) at Dec. 31, 2013 1,893 2,042 111 472 1,721 6,239 8,095 170 2,640 (27) (28) (6) (10) (37) (108) (548) (2) (35) (585) 10,905 2,664 4,626 2,704 At December 31, 2013 “deferred tax assets” totaled €6,239 nal allocation of the cost of acquisitions made in the various million (€6,816 million at December 31, 2012). years and the deferred taxation in respect of the differences It should also be noted that no deferred tax assets were re- between depreciation charged for tax purposes, including corded in relation to prior tax losses in the amount of €1,069 accelerated depreciation, and depreciation based on the million, because, on the basis of current estimates of future estimated useful lives of assets. The exchange rate losses, taxable income, it is not certain that such assets will be re- amounting to €585 million, are essentially attributable to covered. More specifically, the losses include those attribut- the Latin American companies. able to the holding companies located in the Netherlands Finally, no deferred tax liabilities were recognized for the (€363 million). subsidiary Enel Energy Europe in respect of the difference (€537 million) between the carrying amount and the value “Deferred tax liabilities”, which totaled €10,905 million at used for tax purposes for the company in application of the December 31, 2013 (€11,786 million at December 31, 2012), exemption provided for under IAS 12, paragraph 39. That essentially include the determination of the tax effects of difference was generated by the distribution of a special the value adjustments to assets acquired as part of the fi- dividend by Endesa to its direct subsidiary in December 2013. 206 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts 19. Equity investments accounted for using the equity method - €647 million Investments in associated companies accounted for using the equity method are as follows: Millions of euro % holding Change in scope of con- solidation Income effect Reclassified to “assets held for sale“ Other changes % holding Elica 2 LaGeo Buffalo Dunes Wind Project CESI ENEOP-Eólicas de Portugal Tecnatom Tirme Suministradora Eléctrica de Cádiz Eevm - Empreendimentos Eólicos do Vale do Minho Compañía Eólica Tierras Altas Chisholm View Wind Project Prairie Rose Wind Project Endesa Gas T&D (formerly Nubia 2000) SeverEnergia Enel Rete Gas Other Total at Dec. 31, 2012 restated 134 103 30.00% 36.20% - 35 36 29 21 16 7 14 60 48 32 292 125 163 1,115 42.70% 35.96% 45.00% 40.00% 33.50% 50.00% 35.63% 49.00% 49.00% 20.00% 19.60% 14.80% - 31 (1) 2 16 1 2 3 16 1 6 2 (6) 9 8 (4) 86 - - 63 - - - - - - - (66) (50) (26) - - - - - - - - - - - - - - - - (269) (126) - (79) (395) at Dec. 31, 2013 30.00% 36.20% 49.00% 42.70% 35.96% 45.00% 40.00% 33.50% 50.00% 35.63% 135 98 69 37 55 30 23 17 15 14 - - - - - 154 647 1 (36) 7 - 3 - - (2) (8) (1) - - - (32) (7) (5) (80) The “change in scope of consolidation” item includes €63 are now consolidated on a full line-by-line basis. million in respect of the sale of 51% of the Buffalo Dunes The item “reclassified to ‘assets held for sale’” regards the Wind Project, a company previously consolidated on a full interests held in SeverEnergia and Enel Rete Gas that in line-by-line basis and now accounted for using the equity consideration of management decisions were classified as method. That change was partially offset by the acquisition such during the year in accordance with IFRS 5. The equity of control of Chisholm View Wind Project and Prairie Rose investments were sold in the final quarter of 2013. Wind Project for a total amount of €116 million, which had The main income statement and balance-sheet data for the been accounted for using the equity method but following principal equity investments in associates are reported in the acquisition of an additional 26% stake in share capital the following table. 207 Millions of euro Elica 2 LaGeo Buffalo Dunes Wind Project CESI ENEOP-Eólicas de Portugal Tecnatom Tirme Suministradora Eléctrica de Cádiz Eevm - Empreendimentos Eólicos do Vale do Minho Compañía Eólica Tierras Altas Millions of euro Elica 2 LaGeo CESI ENEOP-Eólicas de Portugal Tecnatom Tirme Suministradora Eléctrica de Cádiz Eevm - Empreendimentos Eólicos do Vale do Minho Compañía Eólica Tierras Altas Non- current assets Current assets Non-current liabilities Current liabilities Revenues Net income/ (loss) 7 258 328 60 1,214 69 424 75 274 45 at Dec. 31, 2013 6 142 20 94 278 69 104 17 53 16 - 11 158 18 1,249 33 446 22 234 6 - 54 50 40 159 39 24 19 61 15 - 176 2 91 195 100 73 16 89 20 - 85 - 10 40 2 4 9 32 4 Non- current assets Current assets Non-current liabilities Current liabilities Revenues Net income/ (loss) at Dec. 31, 2012 restated 2 170 88 260 70 125 19 37 5 - 18 16 1,149 23 477 25 255 10 9 243 54 1,126 61 472 73 288 50 1 49 46 147 43 49 20 56 7 - 197 61 147 111 100 17 74 29 20. Non-current financial assets - €6,401 million Millions of euro Equity investments in other companies Receivables and securities included in net financial debt (see note 27.3) Derivative contracts (see note 6.1) Service concession arrangements Prepaid non-current financial expense Total at Dec. 31, 2013 at Dec. 31, 2012 restated Change 285 4,951 444 618 103 6,401 362 (77) 3,576 953 594 33 5,518 1,375 (509) 24 70 883 “Equity investments in other companies” includes invest- whose fair value could not be readily determined and, in the ments measured at fair value in the amount of €183 million, absence of plans to sell the holdings, were therefore recog- while the remainder of €102 million regarded investments nized at cost less impairment losses. 208 - 94 8 20 8 5 9 28 11 -21.3% 38.5% -53.4% 4.0% - 16.0% EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts More specifically, equity investments in other companies break down as follows: Millions of euro Bayan Resources Echelon Galsi Other Total % holding % holding at Dec. 31, 2013 at Dec. 31, 2012 restated Change 169 5 15 96 285 10.00% 7.07% 15.61% 222 6 15 119 362 10.00% 7.36% 15.61% (53) (1) - (23) (77) The change with respect to 2012 is essentially attributable to nancial assets, please see note 6.1. both the disposal of a number of minor equity investments “Service concession arrangements” regard amounts due in Spain and a reduction in the fair value of Bayan Resources. from the grantor for the construction and/or improve- ment of infrastructure used to provide public services on a For more on “receivables and securities included in net fi- concession basis and recognized in application of IFRIC 12. nancial debt”, please see note 27.3. For more on derivatives classified under non-current fi- measurement criteria, please see note 7 on IFRS 13 disclosures. For a summary of the fair value balances, broken down by 21. Other non-current assets - €837 million Millions of euro Receivables due from Electricity Equalization Fund and similar bodies Net assets of employee benefit programs Other receivables Total at Dec. 31, 2013 at Dec. 31, 2012 restated Change 46 21 770 837 51 - 749 800 (5) 21 21 37 -9.8% - 2.8% 4.6% “Receivables due from Electricity Equalization Fund and simi- ployees, net of actuarial liabilities. lar bodies” at December 31, 2013 include only the receivable “Other receivables” at December 31, 2013 are mainly com- in respect of the Electricity Equalization Fund claimed by the posed of tax receivables in the amount of €494 million Italian distribution companies. (€401 million at December 31, 2012) and advances to sup- “Net assets of employee benefit programs” reports assets pliers in the amount of €154 million (€263 million at the backing a number of employee benefit plans for Endesa em- end of 2012). 22. Inventories - €3,586 million Millions of euro Raw materials, consumables and supplies: - fuel - materials, equipment and other inventories Total Buildings available for sale Advances TOTAL at Dec. 31, 2013 at Dec. 31, 2012 restated Change 1,824 1,627 3,451 77 58 3,586 2,271 983 3,254 79 5 3,338 (447) 644 197 (2) 53 248 -19.7% 65.5% 6.1% -2.5% - 7.4% 209 Raw materials, consumables and supplies consist of fuel inventories to cover the requirements of the generation item also includes CO2 emission allowances in the amount of €525 million at December 31, 2013 (€384 million at Decem- companies and trading activities, as well as materials and ber 31, 2012). The buildings available for sale are related to equipment for the operation, maintenance and construc- remaining units from the Group’s real estate portfolio and tion of generation plants and distribution networks. The in- are primarily civil buildings. crease for the year is mainly attributable to the rise in green Inventories measured at fair value amounted to €498 mil- and environmental certificate inventories, which more than lion. For more information on the level of fair value inputs offset the contraction in stocks of gas and other fuels. The and the measurement policies, please see note 7. 23. Trade receivables - €11,533 million Millions of euro Customers: - sale and transport of electricity - distribution and sale of natural gas - other activities Total Trade receivables due from associates Receivables for contract work in progress at Dec. 31, 2013 at Dec. 31, 2012 restated Change 8,738 1,524 1,200 11,462 34 37 8,838 1,570 1,243 11,651 29 39 (100) (46) (43) (189) 5 (2) (186) -1.1% -2.9% -3.5% -1.6% 17.2% -5.1% -1.6% TOTAL 11,533 11,719 Trade receivables from customers are recognized net of ing balance of €1,421 million. The table below shows the allowances for doubtful accounts, which totaled €1,482 changes in these allowances. million, at the end of the year, as compared with an open- 1,661 588 (802) (26) 1,421 654 (546) (47) 1,482 Millions of euro Total at January 1, 2012 Accruals Utilization Other changes Total at December 31, 2012 restated Accruals Utilization Other changes Total at December 31, 2013 210 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts Trade receivables that had not been written down at December 31, 2013 break down by maturity as follows: Millions of euro Not past due Past due: - from 0 to 6 months - from 6 to 12 months - from 12 to 24 months - more than 24 months Total at December 31, 2013 7,600 1,890 438 740 865 11,533 In a number of residual cases with no material impact on the against trade payables where permitted under contractual financial statements, trade receivables have been netted and statutory provisions. 24. Tax receivables - €1,735 million Tax receivables at December 31, 2013 amounted to €1,735 lion (€593 million at December 31, 2012) and receivables for million and are essentially related to income tax credits in other taxes and tax surcharges in the amount of €134 mil- the amount of €995 million (€528 million at December 31, lion (€394 million at December 31, 2012). 2012), credits for indirect taxes in the amount of €435 mil- 25. Current financial assets - €7,877 million Millions of euro Current financial assets included in net financial position (see note 27.4) Derivative contracts (see note 6.2) Other Total at Dec. 31, 2013 at Dec. 31, 2012 restated Change 5,489 2,285 103 7,877 7,571 1,718 92 9,381 (2,082) 567 11 (1,504) -27.5% 33.0% 12.0% -16.0% For more on “current financial assets included in net finan- For more information on “derivative contracts”, please see cial position”, please see note 27.4. note 6.2. 211 26. Other current assets - €2,562 million Millions of euro Receivables due from Electricity Equalization Fund and similar bodies Receivable due from employees Receivables due from others Accrued operating income and prepaid expenses Total at Dec. 31, 2013 at Dec. 31, 2012 restated 745 37 1,517 263 2,562 936 40 1,092 194 2,262 Change (191) -20.4% (3) 425 69 300 -7.5% 38.9% 35.6% 13.3% “Receivables due from Electricity Equalization Fund and sim- to €791 million (€987 million at December 31, 2012), offset ilar bodies” include receivables in respect of the Italian sys- by payables of €3,312 million (€3,371 million at December tem in the amount of €669 million (€454 million at Decem- 31, 2012). ber 31, 2012) and the Spanish system in the amount of €76 The increase in “receivables due from others” is mainly at- million (€482 million at December 31, 2012). Including the tributable to the increase in receivables for expired deriva- portion of receivables classified as long-term (€46 million), tives positions that have not yet been settled in the amount operating receivables due from the Electricity Equalization of €203 million and the change of €142 million in receiva- Fund and similar bodies at December 31, 2013 amounted bles for grants to be received in respect of green certificates. 27. Net financial position and long-term financial receivables and securities - €39,862 million The following table reports the net financial position and of the items on the consolidated balance sheet. long-term financial receivables and securities on the basis Millions of euro Long-term loans Short-term loans Current portion of long-term loans Non-current financial assets included in debt Current financial assets included in debt Cash and cash equivalents Total Notes at Dec. 31, 2013 at Dec. 31, 2012 restated Change 27.1 27.2 27.1 27.3 27.4 27.5 51,113 2,529 4,690 (4,951) (5,489) (8,030) 39,862 55,959 3,970 4,057 (3,576) (7,571) (9,891) 42,948 (4,846) (1,441) 633 (1,375) 2,082 1,861 (3,086) -8.7% -36.3% 15.6% -38.5% 27.5% 18.8% -7.2% Pursuant to the CONSOB instructions of July 28, 2006, the fol- cial debt as provided for in the presentation methods of the lowing table reports the net financial position at December Enel Group. 31, 2013, and December 31, 2012, reconciled with net finan- 212 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsMillions of euro Cash and cash equivalents on hand Bank and post office deposits Securities Liquidity Short-term financial receivables Factoring receivables Short-term portion of long-term financial receivables Current financial receivables Short-term bank debt Commercial paper Short-term portion of long-term bank debt Bonds and preference shares (short-term portion) Other loans (short-term portion) Other short-term financial payables Total short-term financial debt Net short-term financial position Debt to banks and financing entities Bonds and preference shares Other loans Long-term financial position Net financial position as per CONSOB instructions Long-term financial receivables and securities NET FINANCIAL DEBT There are no transactions with related parties for these items. at Dec. 31, 2013 at Dec. 31, 2012 restated Change 1,065 6,965 17 8,047 2,232 263 2,977 5,472 (150) (2,202) (1,788) (2,649) (253) (177) (7,219) 6,300 (8,287) (41,483) (1,343) (51,113) (44,813) 4,951 (39,862) 1,027 8,864 42 9,933 1,923 288 5,318 7,529 (283) (2,914) (714) (3,115) (228) (773) (8,027) 9,435 (13,282) (41,509) (1,168) (55,959) (46,524) 3,576 (42,948) 38 (1,899) (25) (1,886) 309 (25) (2,341) (2,057) 133 712 (1,074) 466 (25) 596 808 (3,135) 4,995 26 (175) 4,846 1,711 1,375 3,086 3.7% -21.4% -59.5% -19.0% 16.1% -8.7% -44.0% -27.3% 47.0% 24.4% - 15.0% -11.0% 77.1% 10.1% -33.2% 37.6% 0.1% -15.0% 8.7% 3.7% 38.5% 7.2% 213 27.1 Long-term loans (including the portion falling due within 12 months) - €55,803 million The aggregate includes long-term liabilities in respect of bon- The following table shows long-term debt and repayment ds, bank loans and other loans in euro and other currencies, schedules at December 31, 2013, grouped by loan and in- including the portion falling due within twelve months. terest rate type. Millions of euro Maturing Balance Nominal value Balance Current portion than 12 months Maturing in at Dec. 31, 2013 at Dec. 31, 2012 2015 2016 2017 2018 Beyond Bonds: - listed, fixed rate - listed, floating rate - unlisted, fixed rate - unlisted, floating rate Total bonds Bank loans: - fixed rate - floating rate - use of revolving credit lines Total bank loans Preference shares: (2) - floating rate Total preference shares Non-bank loans: - fixed rate - floating rate Total non-bank loans TOTAL 2014-2097 (1) 2014-2031 2014-2039 2014-2032 2014-2046 2014-2035 2014-2017 2013 2014-2035 2014-2030 30,730 6,506 5,463 1,433 44,132 966 8,031 1,078 10,075 - - 1,065 531 1,596 55,803 31,021 6,545 5,479 1,434 44,479 974 8,048 1,078 10,100 - - 1,065 531 1,596 56,175 29,882 6,507 6,460 1,594 44,443 853 11,814 1,329 13,996 181 181 915 481 1,396 60,016 (1) The maturity dates of listed fixed-rate bonds reported here are based on the assumption that the option to extinguish the hybrid bonds issued in September 2013 is exercised at the first possible date for each issue, as reported below. The amortized cost was also calculated using the same assumption. (2) The preference shares issued by Endesa Capital Finance LLC are perpetual, with an option for early redemption at par as from 2013. 214 Portion falling due at more 30,263 5,371 4,477 1,372 41,483 928 7,138 221 8,287 - - 949 394 1,343 51,113 467 1,135 986 61 2,649 38 893 857 1,788 - - 116 137 253 4,690 2,589 1,436 - 63 4,088 66 753 161 980 - - 103 65 168 5,236 3,693 1,177 108 64 5,042 75 839 60 974 - - 98 61 159 6,175 2,480 346 1,085 65 3,976 72 1,114 - - - 91 76 167 5,329 5,545 770 - 66 6,381 279 760 - - - 96 49 145 15,956 1,642 3,284 1,114 21,996 436 3,672 - - - 561 143 704 7,565 26,808 1,186 1,039 4,108 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsMillions of euro Maturing Balance Nominal value Balance Current portion Portion falling due at more than 12 months Maturing in at Dec. 31, 2013 at Dec. 31, 2012 2015 2016 2017 2018 Beyond - use of revolving credit lines Bonds: - listed, fixed rate - listed, floating rate - unlisted, fixed rate - unlisted, floating rate Total bonds Bank loans: - fixed rate - floating rate Total bank loans Preference shares: (2) - floating rate Total preference shares Non-bank loans: - fixed rate - floating rate Total non-bank loans TOTAL 2014-2097 (1) 2014-2031 2014-2039 2014-2032 2014-2046 2014-2035 2014-2017 2013 2014-2035 2014-2030 30,730 6,506 5,463 1,433 44,132 966 8,031 1,078 10,075 - - 1,065 531 1,596 55,803 31,021 6,545 5,479 1,434 44,479 974 8,048 1,078 10,100 - - 1,065 531 1,596 56,175 29,882 6,507 6,460 1,594 44,443 853 11,814 1,329 13,996 181 181 915 481 1,396 60,016 (1) The maturity dates of listed fixed-rate bonds reported here are based on the assumption that the option to extinguish the hybrid bonds issued in September 2013 is exercised at the first possible date for each issue, as reported below. The amortized cost was also calculated using the same assumption. (2) The preference shares issued by Endesa Capital Finance LLC are perpetual, with an option for early redemption at par as from 2013. 467 1,135 986 61 2,649 38 893 857 1,788 - - 116 137 253 4,690 30,263 5,371 4,477 1,372 41,483 928 7,138 221 8,287 - - 949 394 1,343 51,113 2,589 1,436 - 63 4,088 66 753 161 980 - - 103 65 168 5,236 3,693 1,177 108 64 5,042 75 839 60 974 - - 98 61 159 6,175 2,480 346 1,085 65 3,976 72 1,114 - 1,186 - - 91 76 167 5,329 5,545 770 - 66 6,381 279 760 - 1,039 - - 96 49 145 15,956 1,642 3,284 1,114 21,996 436 3,672 - 4,108 - - 561 143 704 7,565 26,808 215 The balance for bonds regards, net of €734 million, the in portfolio, while Enel.Re (now Enel Insurance NV) holds unlisted floating-rate “Special series of bonds reserved for bonds issued by Enel SpA totaling €30 million. employees 1994-2019”, which the Parent Company holds The table below reports long-term financial debt by currency and interest rate. Long-term financial debt by currency and interest rate Millions of euro Euro US dollar Pound sterling Colombian peso Brazilian real Swiss franc Chilean peso/UF Peruvian sol Russian ruble Japanese yen Other currencies Balance Nominal value Balance Current average interest rate Current effective interest rate at Dec. 31, 2013 at Dec. 31, 2012 at Dec. 31, 2013 38,482 38,741 8,467 4,486 1,662 746 593 461 302 243 238 123 8,504 4,546 1,662 748 595 473 302 243 238 123 3.71% 6.04% 6.00% 7.60% 3.86% 6.29% 6.15% 7.60% 10.00% 10.20% 2.85% 7.30% 6.60% 7.79% 2.35% 2.91% 9.20% 6.60% 8.39% 2.38% 42,777 8,380 4,102 1,600 839 603 532 349 347 304 183 17,239 60,016 Total non-euro currencies TOTAL 17,321 17,434 55,803 56,175 Long-term financial debt denominated in currencies other in dollars, Russian rubles and the Latin American currencies, than the euro increased by €82 million. The change is largely partially offset by new borrowing in dollars, pounds sterling, attributable to repayments of loans falling due denominated Brazilian reais and Colombian pesos. Change in the nominal value of long-term debt Millions of euro Nominal value Repayments Change in own bonds Change in scope of consolidation New financing Exchange rate differences Bonds Bank loans Preference shares Other loans Total financial debt at Dec. 31, 2012 44,794 14,066 181 1,396 (2,952) (5,448) (181) (173) (101) - - - 60,437 (8,754) (101) - - - 265 265 3,571 1,573 (833) (91) 192 (81) 5,336 (1,005) Other Nominal value at Dec. 31, 2013 - - - (3) (3) 44,479 10,100 - 1,596 56,175 Compared with December 31, 2012, the nominal value of the United States that had previously entered into tax part- long-term debt at December 31, 2013 decreased by €4,262 nership agreements, and €3 million in other items. million, which is the net effect of €8,754 million in repay- ments, repurchases of €101 million of own bonds, €5,336 The main repayments in 2013 concerned bonds and pref- million in new loans and €1,005 million in exchange rate erence shares in the amount of €3,133 million, bank loans losses, of which €265 million due to the change in the scope totaling €5,448 million and other loans for €173 million. of consolidation, mainly attributable to the acquisition of a More specifically, the main bonds maturing in 2013 included: number of companies in the renewable generation sector in > $1,000 million in respect of a fixed-rate bond, issued by 216 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsEnel Finance International, maturing January 2013; maturing in 2014 and renegotiated a bilateral revolving > €700 million in respect of a fixed-rate bond issued by Inter- credit facility in the total amount of €800 million struc- national Endesa, maturing in February 2013; tured in the following tranches: €400 million falling due in > €181 million in respect of the early repayment of Endesa 2015 and €400 million falling due in 2016; Capital Finance preference shares in March 2013; > on November 14, 2013, Enel Distribuzione entered into > €750 million in respect of a fixed-rate bond, issued by Enel a 20-year European Investment Bank loan worth €270 SpA, maturing in June 2013; million; > $400 million in respect of a fixed-rate bond, issued by > on November 28, 2013, Enel Green Power International Endesa Chile, maturing in August 2013. entered into a 15-year European Investment Bank loan worth €200 million; The main repayments of bank loans in the years included > on December 16, 2013, Enel Green Power International the following: entered into a 12-year loan agreement worth €100 million > €341 million in respect of repayments of revolving credit with the Danish Export Credit Agency; lines by Endesa; > on December 19, 2013, Enel Green Power Latin America > €293 million in respect of floating-rate bank loans of entered into a 5-year loan agreement worth $150 million; Endesa; > on December 19, 2013, Inelec entered into a 5-year loan > €100 million in respect of repayments of a revolving credit agreement worth $150 million; line by Enel SpA; > on December 27, 2013, Slovenské elektrárne entered into a > €100 million in respect of repayments of a credit line of 7-year project financing arrangement worth €133 million; Enel Finance International; > €250 million in respect of the early repayment of bilateral The main financing operations carried out in 2013 include: term loans falling due in 2017 by Enel Finance Interna- > the private placement in February, March and April under tional; the Global Medium-Term Notes program of bonds by Enel > €617 million in respect of the tranche falling due in 2014 Finance International, with an Enel guarantee, in the total of the 2009 Credit Facility by Enel SpA and Enel Finance amount of €485 million, with the following characteristics: International; - €100 million fixed-rate 5% maturing on February 18, > €3,200 million in respect of the early repayment of the 2023; Credit Facility falling due in 2017 by Enel Finance Interna- - €50 million floating-rate maturing on March 27, 2023; tional; - €50 million floating-rate maturing on April 4, 2025; > €360 million in respect of the repayment of subsidized - €50 million fixed-rate 4.875% maturing on April 19, loans held by Group companies. 2028; - €180 million fixed-rate 4.45% maturing on April 23, The main financing contracts finalized in 2013 include: 2025; > on January 15, 2013, Enel SpA renegotiated a bilateral re- - €55 million fixed-rate 4.75% maturing on April 26, 2027; volving credit facility in the total amount of €500 million > in September, Enel SpA issued hybrid bonds, with the fol- falling due in 2014; lowing characteristics: > on February 8, 2013, Enel SpA and Enel Finance Interna- - €1,250 million fixed-rate 6.50%, maturing on January tional entered into a revolving forward starting credit facil- 10, 2074 with a call option vesting on January 10, 2019; ity of about €9.4 billion, falling due in April 2018, which - £400 million fixed-rate 7.75%, maturing on September will replace the current €10 billion revolving credit line as 10, 2075 with a call option vesting on September 10, from the expiry of the latter, which is scheduled for 2015 2020; under the terms of the contract; - $1,250 million fixed-rate 8.75%, maturing on Septem- > on March 18, 2013, Enel Latin America entered into a ber 24, 2073 with a call option vesting on September 24, 5-year loan agreement in the total amount of $100 million; 2023; > on July 30, 2013, Enel Latin America (Chile) entered into a > in September, Emgesa issued bonds in Colombian pesos 5-year loan agreement in the total amount of $100 million; totaling €212 million; > on July 18, 2013, Enel SpA extinguished a bilateral revolv- > in November, Codensa issued bonds in Colombian pesos ing credit facility early, in the total amount of €500 million totaling €141 million; 217 > an increase in drawings by Slovenské elektrárne on com- > drawings by Endesa on other financing in the total amount mitted revolving credit lines in the amount of €185 million; of €179 million. > drawings by Endesa on an European Investment Bank (EIB) loan in the total amount of €150 million; The following table compares the carrying amount and the > drawings by Enel Green Power International floating-rate fair value of long-term debt, including the portion falling bank loans in the amount of €170 million; due within 12 months, broken down by category. For listed > drawings by Enel Distribuzione on financing with EIB funds debt instruments, the fair value is given by official prices. in the amount of €270 million maturing on June 15, 2033; For unlisted instruments the fair value is determined using > drawings by Enel Green Power Latin America on floating- appropriate valuation models for each category of financial rate bank loans in the total amount of €225 million; instrument and market data at the closing date of the year, > drawings by Inelec on fixed-rate bank loans in the total including the credit spreads of Enel SpA. amount of €185 million; > drawings by Endesa on floating-rate bank loans in the to- tal amount of €171 million; Millions of euro Carrying amount Fair value Carrying amount Fair value at Dec. 31, 2013 at Dec. 31, 2012 Bonds: - fixed rate - floating rate Total bonds Bank loans: - fixed rate - floating rate Total bank loans Preference shares: - floating rate Total preference shares Other loans: - fixed rate - floating rate Total other loans TOTAL 36,193 7,939 44,132 966 9,109 10,075 - - 1,065 531 1,596 55,803 39,517 8,131 47,648 976 9,026 10,002 - - 1,153 605 1,758 59,408 36,342 8,101 44,443 853 13,143 13,996 181 181 915 481 1,396 60,016 38,338 7,891 46,229 932 12,982 13,914 181 181 959 476 1,435 61,759 The following tables show the changes in long-term loans for the period, distinguishing current amounts from amounts falling due at more than 12 months. 218 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsLong-term loans (excluding current portion) Millions of euro Carrying amount at Dec. 31, 2013 at Dec. 31, 2012 Change Bonds: - fixed rate - floating rate Total bonds Bank loans: - fixed rate - floating rate Total bank loans Preference shares: - floating rate Total preference shares Other loans: - fixed rate - floating rate Total other loans TOTAL 34,740 6,743 41,483 928 7,359 8,287 - - 949 394 1,343 51,113 33,624 7,885 41,509 803 12,479 13,282 - - 816 352 1,168 55,959 1,116 (1,142) (26) 125 (5,120) (4,995) - - 133 42 175 (4,846) 219 Current portion of long-term loans Millions of euro Carrying amount at Dec. 31, 2013 at Dec. 31, 2012 Bonds: - fixed rate - floating rate Total bonds Bank loans: - fixed rate - floating rate Total bank bonds Preference shares: - floating rate Total preference shares Other loans: - fixed rate - floating rate Total other loans TOTAL 1,453 1,196 2,649 38 1,750 1,788 - 116 137 253 4,690 2,718 216 2,934 50 664 714 181 181 99 129 228 4,057 Change (1,265) 980 (285) (12) 1,086 1,074 181 181 17 8 25 633 The Group’s main long-term financial debts are governed by > specification of default events, whose occurrence (e.g. in- covenants containing undertakings by the borrowers (Enel, solvency, failure to pay principal or interest, initiation of Endesa and the other Group companies) and in some cases the liquidation proceedings, etc.) constitutes a default; under Parent Company as guarantor that are commonly adopted in cross-default clauses, the occurrence of a default event in international business practice. The main covenants regard the respect of any financial liability (above a threshold level) is- bond issues carried out within the framework of the Global sued by the issuer or “significant” subsidiaries (i.e. consoli- Medium-Term Notes program, loans granted by the EIB and dated companies whose gross revenues or total assets are Cassa Depositi e Prestiti, the €10 billion revolving line of credit at least 10% of gross consolidated revenues or total con- agreed in April 2010, the Forward Start Facility Agreement en- solidated assets) constitutes a default in respect of the li- tered into on February 8, 2013 in the amount of €9.44 billion ability in question, which becomes immediately repayable; and issues of subordinated unconvertible hybrid bonds. > early redemption clauses in the event of new tax require- To date none of the covenants have been triggered. ments, which permit early redemption at par of all out- The main commitments in respect of the bond issues in the standing bonds. Global Medium-Term Notes program can be summarized as The main covenants governing the loans granted to a num- follows: ber of Group companies by the EIB can be summarized as > negative pledge clauses under which the issuer may not follows: establish or maintain (except under statutory requirement) > negative pledge clauses, under which Enel undertakes not mortgages, liens or other encumbrances on all or part of its to establish or grant to third parties additional guarantees assets to secure any listed bond or bond for which listing is or privileges with respect to those already established in planned unless the same guarantee is extended equally or the individual contracts by the company or other subsidi- pro rata to the bonds in question; aries of the Group, unless an equivalent guarantee is ex- > pari passu clauses, under which the securities constitute a tended equally or pro rata to the loans in question; direct, unconditional and unsecured obligation of the issu- > clauses that require the guarantor (whether Enel SpA or er and are issued without preferential rights among them banks acceptable to the EIB) to maintain its rating above a and have at least the same seniority as other present and specified grade; in the case of guarantees provided by Enel future bonds of the issuer itself; SpA, the Group’s equity may not fall below a specified level; 220 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts > material changes clauses, under which the occurrence of a period (half yearly), Enel’s consolidated net financial debt specified event (mergers, spin-offs, disposal or transfer of shall not exceed 4.5 times annual consolidated EBITDA. business units, changes in company control structure, etc.) gives rise to the consequent adjustment of the contract, The main covenants for the €10 billion revolving line of credit without which the loan shall become repayable immedi- and the Forward Start Facility Agreement are substantially si- ately without payment of any commission; milar and can be summarized as follows: > requirements to report periodically to the EIB; > negative pledge clauses under which the borrower (and > requirement for insurance coverage and maintenance of its significant subsidiaries) may not establish or maintain property, possession and use of the works, plant and ma- (with the exception of permitted guarantees) mortgages, chinery financed by the loan over the entire term of the liens or other encumbrances on all or part of its assets to agreement; secure any present or future financial liability; > contract termination clauses, under which the occur- > pari passu clauses, under which the payment undertak- rence of a specified event (serious inaccuracies in docu- ings constitute a direct, unconditional and unsecured ob- mentation presented in support of the contract, failure ligation of the borrower and bear no preferential rights to repay at maturity, suspension of payments, insol- among them and have at least the same seniority as other vency, special administration, disposal of assets to credi- present and future loans; tors, dissolution, liquidation, total or partial disposal of > change of control clause, which is triggered in the event assets, declaration of bankruptcy or composition with (i) control of Enel is acquired by one or more parties other creditors or receivership, substantial decrease in equity, than the Italian State or (ii) Enel or any of its subsidiaries etc.) triggers immediate repayment. transfer a substantial portion of the Group’s assets to par- ties outside the Group such that the financial reliability of In 2009 Cassa Depositi e Prestiti granted a loan to Enel Dis- the Group is significantly compromised. The occurrence of tribuzione that was amended in 2011. The main covenants one of the two circumstances may give rise to (a) the re- governing the loan and the guarantee issued by the Parent negotiation of the terms and conditions of the financing Company can be summarized as follows: or (b) compulsory early repayment of the financing by the > a termination and acceleration clause, under which the oc- borrower; currence of a specified event (such as failure to pay princi- > specification of default events, whose occurrence (e.g. fail- pal or interest installments, breach of contract obligations ure to make payment, breach of contract, false statements, or occurrence of a substantive prejudicial event, etc.) enti- insolvency or declaration of insolvency by the borrower or tles Cassa Depositi e Prestiti to terminate the loan; its significant subsidiaries, business closure, government > a clause forbidding Enel or its significant subsidiaries intervention or nationalization, administrative proceeding (defined in the contract and the guarantee as subsidi- with potential negative impact, illegal conduct, nation- aries pursuant to Article 2359 of the Italian Civil Code alization and government expropriation or compulsory or consolidated companies whose turnover or total acquisition of the borrower or one of its significant sub- gross assets are at least 10% of consolidated turnover sidiaries) constitutes a default. Unless remedied within a or consolidated gross assets) from establishing addition- specified period of time, such default will trigger an obli- al liens, guarantees or other encumbrances except for gation to make immediate repayment of the loan under those expressly permitted unless Cassa Depositi e Pres- an acceleration clause; titi gives it prior consent; > under cross-default clauses, the occurrence of a default > clauses requiring Enel to report to Cassa Depositi e Pres- event in respect of any financial liability (above a thresh- titi both periodically and upon the occurrence of speci- old level) of the issuer or “significant” subsidiaries (i.e. fied events (such as a change in Enel’s credit rating, or consolidated companies whose gross revenues or to- breach in an amount above a specified threshold in re- tal assets are at least equal to a specified percentage spect of any financial debt contracted by Enel, Enel Dis- amounting to 10% of gross consolidated revenues or to- tribuzione or any of their significant subsidiaries). Viola- tal consolidated assets) constitutes a default in respect tion of such obligation entitles Cassa Depositi e Prestiti of the liabilities in question, which become immediately to exercise an acceleration clause; repayable; > a clause, under which, at the end of each measurement > periodic reporting requirements. 221 The main covenants covering the hybrid bonds can be sum- > pari passu clauses, under which the securities and guar- marized as follows: antees have at least the same seniority as all other pre- > specification of default events, whose occurrence (e.g. sent and future unsecured and unsubordinated securi- failure to pay principle or interest, insolvency, initiation ties issued by Endesa Capital or Endesa. of liquidation proceedings, etc.) constitutes a default in Finally, the loans granted to Endesa, International Endesa respect of the liability in question, which in some cases BV and Endesa Capital do not contain cross-default claus- becomes immediately repayable; es regarding the debt of subsidiaries in Latin America. > subordination clauses: each hybrid bond is subordinate to all other bonds issued by the Company and ranks pari Undertakings in respect of project financing granted to passu with all other hybrid financial instruments issued, subsidiaries regarding renewables and other subsidiaries in being senior only to equity instruments; Latin America contain covenants commonly adopted in in- > prohibition on mergers with other companies, the sale ternational business practice. The main commitments regard or leasing of all or a substantial part of the Company’s clauses pledging all the assets assigned to the projects in fa- assets to another company, unless the latter succeeds in vor of the creditors. all obligations of the issuer. A residual portion of the debt of Enersis and Endesa Chile (both controlled indirectly by Endesa) is subject to cross-de- The undertakings in respect of the bond issues carried out fault clauses under which the occurrence of a default event by Endesa Capital under the Global Medium-Term Notes (failure to make payment or breach of other obligations) in program can be summarized as follows: respect of any financial liability of a subsidiary of Enersis or > cross-default clauses under which debt repayment Endesa Chile constitutes a default in respect of the liability in would be accelerated in the case of failure to make pay- question, which becomes immediately repayable. ment (above specified amounts) on any financial liabil- In addition, many of these agreements also contain cross- ity of Endesa or Endesa Capital that is listed or could be acceleration clauses that are triggered by specific circum- listed on a regulated market; stances, certain government actions, insolvency or judicial > negative pledge clauses under which the issuer may not expropriation of assets. establish mortgages, liens or other encumbrances on all In addition to the foregoing, a number of loans provide for or part of its assets to secure any financial liability that early repayment in the case of a change of control over Ende- is listed or could be listed on a regulated market, unless sa or the subsidiaries. an equivalent guarantee is extended equally or pro rata to the bonds in question; 222 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts27.2 Short-term loans - €2,529 million At December 31, 2013 short-term loans amounted to €2,529 million, a decrease of €1,441 million compared with December 31, 2012. They break down as follows. Millions of euro Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value at Dec. 31, 2013 at Dec. 31, 2012 restated Change Short-term amounts due to banks Commercial paper Cash collateral and other financing on derivatives Other short-term financial payables Short-term financial debt 150 2,202 119 58 2,529 150 2,202 119 58 2,529 283 2,914 691 82 3,970 283 2,914 691 82 (133) (712) (572) (24) (133) (712) (572) (24) 3,970 (1,441) (1,441) Short-term amounts due to banks totaled €150 million. The noamérica) and Enersis. payables represented by commercial paper relate to issues At December 31, 2013 issues under these programs totaled outstanding at the end of December 2013 in the context €2,202 million, of which €1,388 million pertaining to Enel Fi- of the €6,000 million program launched in November 2005 nance International and €814 million to Endesa Latinoamérica. by Enel Finance International and guaranteed by Enel SpA, which was renewed in April 2010, as well as the €3,209 mil- For a summary of the fair value balances, broken down by lion program of Endesa Internacional BV (now Endesa Lati- measurement criteria, please see note 7. 27.3 Non-current financial assets included in debt - €4,951 million Millions of euro Securities held to maturity Financial investments in funds or portfolio management products at fair value through profit or loss Securities available for sale Financial receivables in respect of Spanish electrical system deficit Other financial receivables Total at Dec. 31, 2013 at Dec. 31, 2012 Change 128 24 - 1,498 3,301 4,951 130 12 4 - 3,430 3,576 (2) 12 (4) 1,498 (129) 1,375 -1.5% 100.0% -100.0% - -3.8% 38.5% For a summary of the fair value balances, broken down by a result of the introduction of a number of new regulations measurement criteria, please see note 7. in 2013 is recognized under “non-current financial assets” rather than under “current financial assets” as was done the “Financial receivables in respect of Spanish electrical sys- previous year. tem” represent amounts due to Endesa Distribución in re- At December 31, 2013, “other financial receivables” include, spect of the rate deficit system in Spain, which substantially among other things: defers part of the remuneration due to distributors for costs > receivables in respect of the State Decommissioning Fund incurred that are not covered by billing of ordinary rate rev- of Slovakia in the amount of €813 million (€653 million at enues. The mechanism, which in substance is equivalent to a December 31, 2012); loan from Endesa Distribución to the Spanish electrical sys- > receivables in respect of the Electricity Equalization Fund tem, has given rise to a receivable of €1,498 million, which as in the amount of €434 million (unchanged at December 223 31, 2013 and 2012) for reimbursement of the extraordi- > the receivable of the Argentine generation companies in nary costs incurred for the early replacement of electrome- respect of the wholesale electricity market deposited with chanical meters with digital meters; the FONINVEMEM (Fondo Nacional de Inversión Mercado > receivables in respect of the reimbursement established by Eléctrico Mayorista) in the amount of €216 million (€281 the Authority with Resolution 157/2012 of costs incurred million at December 31, 2012). The sum was for the con- with the termination of the Electrical Worker Pension Fund struction of three combined cycle plants, two of which in the amount of €448 million (€504 million at December were completed in 2010, and will be reimbursed to the 31, 2012). Under the provisions of that resolution, the generation companies within 120 months of the entry into amounts will be recovered by Enel Distribuzione SpA in service of those plants. The loans earn interest at an annual equal installments until 2020; rate of Libor +1%. 27.4 Current financial assets included in debt - €5,489 million Millions of euro Short-term portion of long-term financial receivables Receivables for factoring advances Securities: - securities available for sale Financial receivables and cash collateral Other financial receivables Total at Dec. 31, 2013 at Dec. 31, 2012 restated Change 2,977 263 17 1,720 512 5,489 5,318 288 42 1,402 521 7,571 (2,341) (25) (25) 318 (9) (2,082) -44.0% -8.7% -59.5% 22.7% -1.7% -27.5% “Short-term portion of long-term financial receivables” con- the effects of reimbursements in respect of extra-peninsular sists of the financial receivable in respect of the Spanish elec- generation, of which €3,541 million through the assignment tricity system deficit in the amount of €1,648 million (€4,839 of the receivables to the special securitization fund as estab- million at December 31, 2012). The change for the period lished by the Spanish government). essentially reflects new receivables accrued in 2013 (€3,165 million including new receivables for extra-peninsular gen- For a summary of the fair value balances, broken down by eration) and collections received (€4,858 million including measurement criteria, please see note 7. 27.5 Cash and cash equivalents - €8,030 million Cash and cash equivalents, detailed in the table below, are (€194 million at December 31, 2012) primarily in respect of not restricted by any encumbrances, apart from €195 million deposits pledged to secure transactions. Millions of euro Bank and post office deposits Cash and cash equivalents on hand Total 224 at Dec. 31, 2013 6,965 1,065 8,030 at Dec. 31, 2012 restated 8,864 1,027 9,891 Change (1,899) 38 (1,861) -21.4% 3.7% -18.8% EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts 28. Assets and liabilities held for sale - €241 million and €20 million Changes in assets held for sale during the year are reported in the following table: Millions of euro Property, plant and equipment Intangible assets Deferred tax assets Equity investments accounted for using the equity method Non-current financial assets Cash and cash equivalents Inventories, trade receivables and other current assets Total at Dec. 31, 2012 restated Reclassification from/to current and non-current assets Disposals and change in scope of consolidation Other changes at Dec. 31, 2013 214 - 11 - 89 - 3 317 12 2 - 395 2 12 7 430 - - - (391) (86) - - (477) (15) (1) (11) (3) (1) (2) 4 (29) 211 1 - 1 4 10 14 241 “Assets held for sale” amounted to €241 million at December The change for the period also reflects the disposal of the in- 31, 2013. They essentially include the assets of Marcinelle En- terest in Medgaz in the 1st Half of the year. ergie and other assets of smaller companies. Other material changes mainly regard the interests held in SeverEnergia and “Liabilities held for sale” amounted to €20 million at Decem- Enel Rete Gas, which, after being reclassified to this account ber 31, 2013. They comprise the liabilities of Marcinelle Ener- during the year, were sold in the final quarter of 2013. gie and other certain liabilities of smaller companies. Changes in liabilities held for sale during the year are as follows: Millions of euro Deferred tax liabilities Trade payables and other current liabilities Total at Dec. 31, 2012 restated Reclassification from current and non- current liabilities Disposals and change in scope of consolidation Other changes at Dec. 31, 2013 7 1 8 - 10 10 - - - - 2 2 7 13 20 The decrease in all items of assets and liabilities held for sale For a summary of the fair value balances, broken down by compared with December 31, 2012 essentially reflects the measurement criteria, please see note 7 of IFRS 13 disclosures. disposals carried out in 2013 noted above. 225 29. Shareholders’ equity - €52,839 million 29.1 Equity pertaining to the shareholders of the Parent Company - €35,941 million Share capital - €9,403 million At December 31, 2013 (as at December 31, 2012), the share pursuant to Article 120 of Legislative Decree 58 of February 24, capital of Enel SpA – considering that no options were ex- 1998, as well as other available information, no shareholders ercised as part of stock option plans in 2013 – amounted to held more than 2% of the total share capital, apart from the €9,403,357,795 fully subscribed and paid up, represented by Ministry for the Economy and Finance, which holds 31.24%, 9,403,357,795 ordinary shares with a par value of €1.00 each. and Natixis SA, which holds a 2.64% stake, held as June 27, At the same date, based on the shareholders register and the 2013 for asset management purposes. notices submitted to CONSOB and received by the Company Other reserves - €7,084 million Share premium reserve - €5,292 million Legal reserve - €1,881 million The legal reserve is formed of the part of net income that, pursuant to Article 2430 of the Italian Civil Code, cannot be distributed as dividends. Other reserves - €2,262 million These include €2,215 million related to the remaining por- tion of the value adjustments carried out when Enel was transformed from a public entity to a joint-stock company. Pursuant to Article 47 of the Uniform Tax Code, this amount does not constitute taxable income when distributed. Reserve from translation of financial statements in currencies other than euro - €(1,100) million The further decrease in this aggregate for the year is attrib- utable to the net depreciation of the functional currency against the foreign currencies used by subsidiaries. Reserve from measurement of financial in- struments - €(1,490) million This item includes net losses recognized directly in equity re- sulting from the measurement of cash flow hedging deriva- tives, as well as net unrealized losses arising in respect of the fair value measurement of financial assets. Reserve from disposal of equity interests without loss of control - €721 million This item reports the gain posted on the public offering of 226 Enel Green Power shares, net of expenses associated with the disposal and the related taxation. The change for the period reflects the sale of minority interests recognized as a result of the Enersis capital increase. Reserve from transactions in non-controlling interests - €62 million The reserve reports the amount by which equity acquired following purchases by third parties of additional stakes in companies already controlled in Latin America (Ampla Ener- gia e Serviços, Ampla Investimentos e Serviços and Eléctrica Cabo Blanco) exceeds the purchase prices. On June 17, 2013 the agreement for the sale of the entire share capital of Enel. si by Enel Green Power to Enel Energia was ratified. Accord- ingly, the change for the period largely regards the difference between the disposal price acquired by third parties of Enel Green Power and the associated share of equity of Enel.si. Reserve from equity investments accounted for using the equity method - €(16) million The reserve reports the share of comprehensive income to be recognized directly in income for companies accounted for using the equity method. Reserve for employee benefits - €(528) million Following application as from January 1, 2013 of IAS 19 Re- vised, the reserve includes all actuarial gains and losses, net of tax effects. The change is attributable to the increase in actuarial gains recognized during the period. EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsThe table below shows the changes in gains and losses recognized directly in other comprehensive income, including non- controlling interests, with specific reporting of the related tax effects. Millions of euro Reserve from translation of financial statements in currencies other than euro Reserve from measurement of financial instruments Share of OCI of equity investments accounted for using the equity method Remeasure- ment of net liabilities (as- sets) for defined-bene- fit plans Total gains/(losses) recognized in equity at Dec. 31, 2012 restated Change at Dec. 31, 2013 Of which share- holders of Parent Company Of which non- controlling interests Gains/ (Losses) recognized in equity for the year Total Released to income statement Taxes Total Of which share- holders of Parent Company Of which non- controlling interests Of which share- holders of Parent Company Of which non- controlling interests Total 682 92 590 (3,197) - - (3,197) (1,290) (1,907) (2,515) (1,198) (1,317) (1,350) (1,253) (97) (697) 499 (81) (279) (237) (42) (1,629) (1,490) (139) 8 8 - (29) - - (29) (24) (5) (21) (16) (5) (440) (362) (78) (262) - 74 (188) (170) (18) (628) (532) (96) (1,100) (1,515) 415 (4,185) 499 (7) (3,693) (1,721) (1,972) (4,793) (3,236) (1,557) 227 Capital management The Group’s objectives for managing capital comprise In this context, the Group manages its capital structure safeguarding the business as a going concern, creating and adjusts that structure when changes in economic con- value for stakeholders and supporting the development ditions so require. There were no substantive changes in of the Group. In particular, the Group seeks to maintain objectives, policies or processes in 2013. an adequate capitalization that enables it to achieve a To this end, the Group constantly monitors developments satisfactory return for shareholders and ensure access to in the level of its debt in relation to equity. The situation external sources of financing, in part by maintaining an at December 31, 2013 and 2012 is summarized in the fol- adequate rating. lowing table. Millions of euro Non-current financial position Net current financial position Non-current financial receivables and long-term securities Net financial debt Equity pertaining to the shareholders of the Parent Company Non-controlling interests Shareholders’ equity Debt/Equity ratio at Dec. 31, 2013 at Dec. 31, 2012 restated 51,113 (6,300) (4,951) 39,862 35,941 16,898 52,839 0.75 55,959 (9,435) (3,576) 42,948 35,775 16,312 52,087 0.82 29.2 Non-controlling interests - €16,898 million The following table reports the composition of non-controlling interests by division. Millions of euro Millions of euro Iberia and Latin America International Renewable Energy Generation and Energy Management Total at Dec. 31, 2013 at Dec. 31, 2012 restated 12,017 2,361 2,306 214 16,898 11,690 2,257 2,161 204 16,312 Change (4,846) 3,135 (1,375) (3,086) 166 586 752 (0.07) Change 327 104 145 10 586 228 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts30. Post-employment and other employee benefits - €3,696 million The Group provides its employees with a variety of benefits, employees opted to participate and as a significant num- including termination benefits, additional months’ pay for ha- ber of those entitled subsequently elected to participate ving reached age limits or eligibility for old-age pension, loyalty in the plan provided for in the agreements reached under bonuses for achievement of seniority milestones, supplemen- the provisions of Article 4 of Law 92/2012. For the foreign tal retirement and healthcare plans, residential electricity di- companies, the item reports post-employment benefits; scounts (which for companies in Italy only regard certain reti- > the item “electricity discount” comprises, for the Italian red employees) and similar benefits. More specifically: companies, a number of benefits regarding residential > for Italy, the item “pension benefits” regards estimated electricity supply. Until 2011 the discount was granted accruals made to cover benefits due under the supple- to current and retired employees, but, following an mental retirement schemes of retired executives and the agreement with the unions, has now been replaced by benefits due to personnel under law or contract at the other forms of remuneration for current employees and time the employment relationship is terminated. As from therefore remains in effect only for retired employees; December 2012, the item also includes the benefit plan in- > the item “health insurance” reports benefits for current or troduced in December 2012. The plan is dependent on fu- retired employees covering medical expenses; ture service to be performed and provides for benefits for > “other benefits” comprise liabilities in respect of de- a maximum of 48 months as from termination of the em- fined-benefit plans and other benefits not included in ployment relationship. That plan was terminated by the the previous items. Group in 2013, as discussed in greater detail below, as no The table below reports changes in post-employment and at December 31, 2013), net of plan assets (€21 million at other employee benefits at December 31, 2013 and 2012 December 31, 2013), with the actuarial defined-benefit and the reconciliation of that obligation (€3,696 million obligation. Millions of euro 2013 2012 restated Pension benefits Electricity discount Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits Total Actuarial defined-benefit obligation at January 1 Assets not recognized in accounts Accounting defined- benefit obligation at January 1 Changes through profit or loss Changes through other comprehensive income Contributions/Benefits paid Other changes Accounting defined- benefit obligation at December 31 Assets not recognized in accounts Actuarial defined-benefit obligation at December 31 2,330 1,683 236 246 4,495 1,225 1,500 250 190 3,165 47 - - - 47 27 - - - 27 2,377 1,683 236 246 4,542 1,252 1,500 250 190 3,192 (924) 63 14 94 (753) 1,065 73 18 74 1,230 (4) 205 (16) 77 262 169 194 (27) 23 359 (158) (40) (96) 2 (15) (13) (49) (7) (318) (58) (130) 21 (88) 4 (16) 11 (42) (276) 1 37 1,251 1,857 206 361 3,675 2,377 1,683 236 246 4,542 (58) - - - (58) (47) - - - (47) 1,193 1,857 206 361 3,617 2,330 1,683 236 246 4,495 229 Millions of euro 2013 2012 restated Pension benefits Electricity discount Health insurance Other benefits Changes through profit or loss: Service cost Net interest cost Other changes Total (993) 69 - (924) 6 57 - 63 2 12 - 14 96 10 (12) 94 Changes through other comprehensive income: Total (889) 148 (12) Pension benefits Electricity discount Health insurance Other benefits Total 998 68 (1) 5 68 - 73 1 17 - 18 63 10 1 74 1,067 163 - 1,230 (753) 1,065 (Gains)/Losses from changes in demographic assumptions (Gains)/Losses from changes in demographic assumptions (Gains)/Losses from changes in demographic assumptions (Gains)/Losses from changes in financial assumptions Change in asset ceiling/ IFRIC 14 Total 3 (1) 1 30 33 80 - 6 7 93 (104) 177 (13) (7) 53 24 (57) (12) - (45) (6) 29 (4) 54 73 217 251 (21) 16 463 84 19 (4) - - - - - - 205 (16) 77 84 (172) 19 262 20 169 - - - - - - 194 (27) 23 (172) 20 359 The pension benefit obligation at December 31, 2012 re- termination of the 2012 plan led to the reversal of the asso- ports the charge (€970 million) in respect of past service cost ciated liability at the termination date in the total amount of recognized following the introduction at the end of 2012 €1,028 million, of which €970 million in respect of the rever- of the transition-to-retirement plan, which provided for the sal of the initial provision and €58 million in current service payment of post-employment benefits to the employees costs and interest costs accrued in the period. In addition, of the wholly-owned Italian subsidiaries of the Group who, the application of a number of supplementary provisions of having met specific requirements, opted to terminate their the union agreements implementing Article 4 led to the ad- employment four years before the statutory retirement age justment of the liabilities of other employee benefit plans, set out in current labor legislation. with a positive impact of €38 million. As discussed in note 4, that obligation was recognized in full The employees of the foreign companies included in the frame- following the entry into force of the new IAS 19, which elim- work agreement of October 25, 2000 in Spain participate in a inated the possibility of deferring recognition of the past specific defined-contribution pension plan and, in cases of dis- service cost of new employee benefit plans. This prompted ability or death of employees in service, a defined-benefit plan the restatement of the comparative figures in the 2012 in- which is covered by appropriate insurance policies. In addition, come statement. the company has certain obligations to retired ex-workers, During 2013, the Group terminated the transition-to-retire- mainly concerning the supply of electricity. Outside Spain, de- ment plan after virtually no employees opted to participate fined-benefit pension plans are also in force, notably in Brazil. and a significant number of those entitled to participate The obligation recognized at the end of the year is report- in that plan instead opted to participate in the mechanism ed net of the fair value of the plan assets (where this is not provided for under Article 4, paragraphs 1-7-ter, of the Law greater than that of the related liabilities), which are attrib- 92/2012, as the latter offers better financial and organiza- utable entirely to Endesa, in the amount of €1,185 million at tional conditions, making the earlier plan unattractive. The December 31, 2013. The plan assets break down as follows. 230 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsMillions of euro 2013 2012 Shares Fixed-income securities Property Assets held by insurance companies Other Total Spain Brazil Total - - - 128 612 740 73 321 34 - 17 73 321 34 128 629 445 1,185 Spain 183 449 - - 48 680 Brazil 84 469 47 - 27 627 Total 267 918 47 - 75 1,307 At December 31, 2013, shares and fixed-income securities The main actuarial assumptions used to calculate the li- included shares or bonds issued by Endesa Group compa- abilities in respect of employee benefits and the plan assets, nies in the amount of €6 million (€7 million at December which are consistent with those used the previous year, are 31, 2012). set out in the following table. Italy Iberian peninsula Latin America Other Italy Iberian peninsula Latin America Other 2013 2012 Discount rate 0.75%-3.00% 1.72%-3.64% 5.40%-2.43% 3.15%-7.90% 1.60%-3.20% 1.22%-3.74% 5.50%-9.80% 4.20%-7.00% Rate of wage increases 2.00%-4.00% 2.30% 0.00%-7.61% 2.00%-6.00% 2.00%-4.00% 2.30% 0.00%-7.61% 3.00%-6.00% Rate of increase in healthcare costs Expected rate of return on plan assets 3.00% 3.50% 4.50% - 1.57% - 3.61% 5.40%-2.43% - - 3.00% 3.50% 4.50%- 11.57% - 3.74% 9.98% - - The following table reports the outcome of a sensitivity analysis that demonstrates the effects on the defined-benefit obligation as a result of changes reasonably possible at the end of the year in the individual actuarial assumptions used in estimating the obligation. Millions of euros Pension benefits Electricity discount Health insurance Other benefits A decrease of 0.5% in discount rate An increase of 0.5% in discount rate An increase of 0.5% in inflation rate An increase of 0.5% in remuneration An increase of 0.5% in pensions currently being paid An increase of 1% in healthcare costs An increase of 1 year in life expectancy of active and retired employees 145 (115) 46 25 19 19 55 102 (135) 39 (23) (23) (23) 64 11 (13) (5) 7 7 24 7 13 (7) 7 12 5 5 9 The sensitivity analysis used an approach that extrapolates able changes in an individual assumption, leaving the other the effect on the net defined-benefit obligation of reason- assumptions unchanged. The contributions expected to be paid into defined-benefit plans in the subsequent year amount to €16 million. The following table reports expected benefit payments in the coming years for employee benefits. Millions of euro Within 12 months In 2–5 years More than 5 years 2013 397 1,066 1,527 231 31. Provisions for risks and charges - €8,047 million Millions of euro Taken to income statement Utilization at Dec. 31, 2012 restated Provision for litigation, risks and other charges: - nuclear decommissioning - non-nuclear plant retirement and site restoration - litigation - environmental certificates charges - taxes and duties - other Total Provision for early-retirement incentives TOTAL 3,538 615 1,142 363 411 1,273 7,342 1,306 8,648 (23) (2) 115 290 14 422 816 958 1,774 at Dec. 31, 2013 of which short term (821) (20) (174) (356) (37) (450) (1,858) (517) (2,375) 2,694 593 1,083 297 388 1,245 6,300 1,747 8,047 52 3 46 164 7 633 905 588 1,493 Nuclear decommissioning provision The nuclear decommissioning provision includes the following: > €2,175 million (€2,511 million at December 31, 2012) for the V1 and V2 plants at Jasklovske Bohunice and the EMO 1 and 2 plants at Mochovce, and also includes the provision for nuclear waste disposal in the amount of €114 million (same amount at December 31, 2012), the provision for spent nu- clear fuel disposal in the amount of €1,296 million (€1,542 million at December 31, 2012) and the provision for nuclear plant retirement in the amount of €765 million (€855 mil- lion at December 31, 2012). The estimated timing of the outlays described above takes account of current knowl- edge of environmental regulations, the operating time used in estimating the costs, and the difficulties presented by the extremely long time span over which such costs could arise. The charges covered by the provisions are reported at their present value using discount rates of between 4.15% and 4.55%. The net decrease in 2013 amounted to €336 million, reflecting the change in the estimates of prices and quanti- ties of certain types of radioactive waste and a new assess- ment of the estimated useful lives of certain components of the costs that will be incurred at the time of decommis- sioning of nuclear plants by Enresa, a Spanish public en- terprise responsible for such activities in accordance with Royal Decree 1349/03 and Law 24/2005. Quantification of the costs is based on the standard contract between Enresa and the electricity companies approved by the Min- istry for the Economy in September 2001, which regulates the retirement and closing of nuclear power plants. The time horizon envisaged, three years, corresponds to the period from the termination of power generation to the transfer of plant management to Enresa (post-operational costs). The change for 2013, recognized as a decrease in the assets as provided for under IFRIC 1, reflects regula- tory changes in Spain following the introduction of Law 16/2013, which modified the mechanism established the previous year with Law 15/2012, which had increased the burden on generators operating nuclear power plants. Non-nuclear plant retirement and site restoration provision the Jasklovske Bohunice and Mochovce plants. The decline The provision for “non-nuclear plant retirement and site res- was also affected by the adoption of a new decommission- toration” represents the present value of the estimated cost ing strategy, approved by the government on January 15, for the retirement and removal of non-nuclear plants where 2014, which provides for a more conservative approach there is a legal or constructive obligation to do so. that pays closer attention to technical, financial and safety issues, with the consequent discounting of the liability over a longer period; Litigation provision > €519 million (€1,027 million at December 31, 2012) for The “litigation” provision covers contingent liabilities in re- 232 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsspect of pending litigation and other disputes. It includes an the liability for such taxes, both for the purposes of quanti- estimate of the potential liability relating to disputes that fying the probable risk associated with pending litigation arose during the period, as well as revised estimates of the and generating a reasonable valuation of probable future potential costs associated with disputes initiated in prior pe- charges on positions that have not yet been assessed by riods. The estimates are based on the opinions of internal Land Agency offices and municipalities. and external legal counsel. Other provisions Provision for early-retirement incentives Other provisions cover various risks and charges, mainly in The provision for early-retirement incentives includes the connection with regulatory disputes and disputes with lo- estimated charges related to binding agreements for the cal authorities regarding various duties and fees. In partic- voluntary termination of employment contracts in re- ular, as regard current and potential disputes concerning sponse to organizational needs. In addition to uses essen- local property tax (whether the Imposta Comunale sugli tially associated with the early retirement provision (ERE) in Immobili or “ICI” or the new Imposta Municipale Unica or Spain, the change for the year also reflects the liability of “IMU”) in Italy, the Group has taken due account of the cri- €800 million recognized at December 31, 2013 in respect teria introduced with circular 6 of the Public Land Agency of the union agreements signed on September 6, 2013, im- (which resolved interpretive issues concerning the valua- plementing, for a number of Italian companies, the mecha- tion methods for movable assets considered relevant for nism provided for under Article 4, paragraphs 1-7-ter, of property registry purposes, including certain assets typi- Law 92/2012 (the Fornero Act). cal to generation plants, such as turbines) in estimating 32. Non-current financial liabilities - €2,257 million The item reports the fair value of derivatives only. For more information, please see note 6.3. 33. Other non-current liabilities - €1,266 million Millions of euro at Dec. 31, 2013 at Dec. 31, 2012 restated Accrued operating expenses and deferred income Other items Total 956 310 1,266 910 241 Change 46 69 5.1% 28.6% 1,151 115 10.0% At December 31, 2013, this item essentially consisted of revenues for electricity and gas connections and grants received for specific assets. 34. Trade payables - €13,004 million The item, which amounts to €13,004 million, includes payables in respect of energy supplies, fuel, materials, equipment associ- ated with tenders and other services. Trade payables break down by maturity at December 31, 2013 as follows. 233 Millions of euro By June 30, 2014 Between July 1 and December 31, 2014 Beyond Total at December 31, 2013 11,320 1,137 547 13,004 In a number of residual cases with no material impact on against trade receivables where permitted under contrac- the financial statements, trade payables have been netted tual and statutory provisions. 35. Current financial liabilities - €3,640 million Millions of euro Deferred financial liabilities Derivative contracts Other items Total at Dec. 31, 2013 at Dec. 31, 2012 restated Change 978 2,535 127 3,640 921 2,028 189 3,138 57 507 (62) 502 6.2% 25.0% -32.8% 16.0% Fore more on “derivative contracts”, please see note 6.4. 36. Other current liabilities - €9,834 million Millions of euro Payables due to customers Payables due to Electricity Equalization Fund and similar bodies Payables due to employees Other tax payables Payables due to social security institutions Payables for put options granted to minority shareholders Payables for acquisition of equity investments Other Total at Dec. 31, 2013 at Dec. 31, 2012 restated Change 1,563 3,312 453 976 216 801 37 2,476 9,834 1,637 3,371 519 945 226 814 81 2,338 9,931 (74) (59) (66) 31 (10) (13) (44) 138 (97) -4.5% -1.8% -12.7% 3.3% -4.4% -1.6% -54.3% 5.9% -1.0% “Payables due to customers” include €1,090 million (€1,101 “Payables due to Electricity Equalization Fund and similar million at December 31, 2012) in security deposits related bodies” mainly include payables arising from the applica- to amounts received from customers as part of electricity tion of equalization mechanisms to electricity purchases and gas supply contracts. Following the finalization of the on the Italian market amounting to €1,922 million (€1,862 contract, deposits for electricity sales, the use of which is million at December 31, 2012) and on the Spanish market not restricted in any way, are classified as current liabilities amounting to €1,390 million (€1,491 million at December given that the Company does not have an unconditional 31, 2012). right to defer repayment beyond 12 months. The item “Payables for put options granted to minority 234 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsshareholders” at December 31, 2013 includes the liability America in the amount of €37 million. to Enel Distributie Muntenia and Enel Energie Muntenia in “Other” payables include €76 million in respect of the li- the total amount of €778 million (unchanged on Decem- ability associated with the application of the union agree- ber 31, 2012) and that in respect of Renovables de Guate- ments to implement the provisions of Article 4 of the mala and Maicor Wind in the amount of €23 million. Fornero Act with regard to other forms of incentive award- “Payables for acquisition of equity investments” regard ed under those agreements for persons who at December the purchase in 2013 of a number of companies in North 31, 2013 were no longer employed with Enel. 37. Related parties As an operator in the field of generation, distribution, directly or indirectly controlled by the Italian State, the transport and sale of electricity and the sale of natural gas, Group’s controlling shareholder. Enel carries out transactions with a number of companies The table below summarizes the main types of transactions carried out with such counterparties. Related party Single Buyer Relationship Fully controlled (indirectly) by the Ministry for the Economy and Finance Nature of main transactions Purchase of electricity for the enhanced protection market Sale of electricity for own use EMO - Energy Markets Operator Fully controlled (indirectly) by the Ministry for the Economy and Finance ESO - Energy Services Operator Fully controlled (directly) by the Ministry for the Economy and Finance Sale of electricity on the Power Exchange Purchase of electricity on the Power Exchange for pumping and plant planning Sale of electricity for own use Sale of subsidized electricity Payment of A3 component for renewable resource incentives Sale of electricity for own use Sale of electricity on the Ancillary Services Market Purchase of transport, dispatching and metering services Sale of electricity for own use Sale of electricity transport services Purchase of fuels for generation plants, storage services and natural gas distribution Sale of electricity for own use Indirectly controlled by the Ministry for the Economy and Finance Directly controlled by the Ministry for the Economy and Finance Terna Eni Group Finmeccanica Group Poste Italiane Group Directly controlled by the Ministry for the Economy and Finance Purchase of IT services and supply of goods Sale of electricity for own use Fully controlled (directly) by the Ministry for the Economy and Finance Purchase of postal services Sale of electricity for own use Finally, Enel also maintains relationships with the pension All transactions with related parties were carried out on funds FOPEN and Fondenel, Fondazione Enel and Enel Cu- normal market terms and conditions, which in some cases ore, an Enel non-profit company devoted to providing so- are determined by the Authority for Electricity and Gas. cial and healthcare assistance. 235 1 18 19 46 91 53 - - - - - - - - - - 3 - - - - - - - - - - - - - 33 1 - 295 1 12 17 1 - - - - - - - - - - - - - 4 15 32 4 8 - 4 3 50 37 9 21 22 1 - 35 1 Total balance- 6,401 837 11,533 7,877 2,562 1,266 13,004 3,640 9,834 41,612 15,551 2,837 (378) 2,453 5,266 4 15 1,268 4 152 3,647 2 4 24 10,266 2,510 30 78 35 4 4 15 34 4 26 - 81 4 3 116 10 112 387 2 - 35 4 0.1% 1.8% 11.0% 0.1% 5.9% 0.2% 28.0% 0.1% 0.2% 24.7% 16.1% 1.1% -20.6% 1.4% 0.1% 8,753 77,258 11.3% 401 3,277 12.2% The following table summarizes transactions with related parties and with associated companies outstanding at December 31, 2013 and carried out during the period, respectively. Related parties Associated companies Millions of euro Single Buyer EMO Terna ENI ESO Poste Italiane Other Total GNL Chile Enel Rete Gas CESI Other Total Overall total sheet item % of total Balance sheet Non-current financial assets Other non-current assets Trade receivables Current financial assets Other current assets Other non-current liabilities Trade payables Current financial liabilities Other current liabilities Income statement Revenues from sales Other revenues and income Raw materials and consumables Services Other operating expenses Net income from commodity risk management Financial income Financial expense - - 491 - 29 - 538 - 21 - - 3 - - - - - 453 - - - 885 515 - - - - - - 5,135 4,451 - 2 (22) - - 75 7 - - - 198 1,814 9 100 - - - - 209 - 9 - - - 19 - 88 - - - - - - - 247 1,269 72 - - - 355 89 2 - - - - - 102 297 1 3 - - - - - - - - - 113 - - - - 6,523 1,316 658 74 16 - - 59 - - 2 40 - - 38 4 14 29 8 - - - - - 1,234 - 126 2 3,566 - 21 8,637 391 10,154 2,123 28 78 - - In November 2010, the Board of Directors of Enel SpA appro- parties. It was adopted in implementation of the provisions of ved a procedure governing the approval and execution of tran- Article 2391-bis of the Italian Civil Code and the implementing sactions with related parties carried out by Enel SpA directly or regulations issued by CONSOB. In 2013, no transactions were through subsidiaries. The procedure (available at http://www. carried out for which it was necessary to make the disclosures enel.com/en-GB/group/governance/rules/related_parties/) required in the rules on transactions with related parties adop- sets out rules designed to ensure the transparency and pro- ted with CONSOB Resolution 17221 of March 12, 2010, as cedural and substantive propriety of transactions with related amended with Resolution 17389 of June 23, 2010. 236 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts The following table summarizes transactions with related parties and with associated companies outstanding at December 31, 2013 and carried out during the period, respectively. Trade receivables 3 453 491 209 59 1,234 Balance sheet Non-current financial assets Other non-current assets Current financial assets Other current assets Other non-current liabilities Trade payables Current financial liabilities Other current liabilities Income statement Revenues from sales Other revenues and income Raw materials and consumables Services Net income from commodity risk management Financial income Financial expense Other operating expenses 29 9 885 515 538 247 1,269 72 - - - - - - - - - - 74 75 7 - - - - - 21 16 198 1,814 9 100 - - - - - - - - - - - - 355 89 2 6,523 1,316 658 5,135 4,451 - - - - - - - - - - - - 2 (22) 19 88 - - - - - - 102 297 1 3 - - - - - - - - - - - - - - - - - - - 113 - - - - - - 2 40 38 4 14 29 8 - - - - - - 126 3,566 2 - 21 8,637 391 10,154 2,123 28 78 - - Related parties Associated companies Millions of euro Single Buyer EMO Terna ENI ESO Poste Italiane Other Total GNL Chile Enel Rete Gas CESI Other Total Overall total Total balance- sheet item % of total - - 1 - 18 - 19 - - 46 - 91 53 - - - 3 - - - - - - - - - 33 1 - 295 - - - - - - 1 - - - 12 - - - - - 17 1 - - - 4 15 32 4 8 - 50 4 3 37 9 21 22 1 - 35 1 4 15 34 4 26 - 81 4 3 116 10 112 387 2 - 35 4 4 15 1,268 4 152 2 3,647 4 24 6,401 837 11,533 7,877 2,562 1,266 13,004 3,640 9,834 0.1% 1.8% 11.0% 0.1% 5.9% 0.2% 28.0% 0.1% 0.2% 8,753 77,258 11.3% 401 3,277 12.2% 10,266 2,510 30 78 35 4 41,612 15,551 2,837 (378) 2,453 5,266 24.7% 16.1% 1.1% -20.6% 1.4% 0.1% 237 38. Contractual commitments and guarantees The commitments entered into by the Enel Group and the guarantees given to third parties are shown below. Millions of euro Guarantees given: - sureties and other guarantees granted to third parties Commitments to suppliers for: - electricity purchases - fuel purchases - various supplies - tenders - other Total TOTAL at Dec. 31, 2013 at Dec. 31, 2012 Change 5,685 42,181 55,789 2,176 2,001 2,696 104,843 110,528 5,586 50,634 62,576 2,120 1,922 2,315 119,567 125,153 99 (8,453) (6,787) 56 79 381 (14,724) (14,625) Guarantees granted to third parties amounted to €5,685 The expected cash flow of the operating lease contracts of million, an increase of €99 million on 2012. The item inclu- Endesa is as follows: des commitments relating to the sale of real estate assets, > 2014: €50 million; in connection with the regulations that govern the termina- > 2015-2016: €87 million; tion of leases and the related payments, for a period of six > 2017 and beyond: €232 million. years and six months renewable from July 2004. The value Commitments for electricity amounted to €42,181 million at of such guarantees (€438 million at December 31, 2013) is December 31, 2013, of which €23,296 million refer to the reduced annually by a specified amount. period 2014-2018, €8,401 million to the period 2019-2023, The expected cash flow of the lease contracts, including fo- €3,651 million to the period 2024-2028 and the remaining recast inflation, is as follows: €6,833 million beyond 2028. Commitments for the purcha- > 2014: €46 million; > 2015: €47 million; > 2016: €47 million; > 2017: €48 million; > 2018: €49 million. se of fuels are determined with reference to the contrac- tual parameters and exchange rates applicable at the end of the period (given that fuel prices vary and are mainly set in foreign currencies). The total at December 31, 2013 was €55,789 million, of which €33,459 million refer to the period 2014-2018, €14,467 million to the period 2019-2023, €4,621 million to the period 2024-2028 and the remaining €3,242 million beyond 2028. 238 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts39. Contingent liabilities and assets Porto Tolle thermal plant - Air pollution - Criminal proceedings against Enel directors and employees damages requested for economic and environmental losses is about €100 million, which Enel has contested. During 2013, an agreement was reached – with no admis- sion of liability by Enel/Enel Produzione – with the public entities of Emilia Romagna to express social solidarity in line with the general sustainability policies of the Group. The The Court of Adria, in a ruling issued March 31, 2006, convict- suits with the Ministry and private parties (individuals and ed former directors and employees of Enel for a number of environmental associations) remain open. At the hearing of incidents of air pollution caused by emissions from the Porto January 8, 2014, the suit was taken for decision, with the es- Tolle thermoelectric plant. The decision held the defendants tablishment of the time limits for filing briefs. and Enel (as a civilly liable party) jointly liable for the payment of damages for harm to multiple parties, both natural per- In August 2011, the Public Prosecutor’s Office of Rovigo asked sons and public authorities. Damages for a number of mainly that a number of directors, former directors, officers, former of- private parties (individuals and environmental associations), ficers and employees of Enel and Enel Produzione be remanded were set at the amount of €367,000. The calculation of the for trial on the charge of willful omission to take precautionary amount of damages owed to certain public entities (Ministry actions to prevent a disaster in respect of the alleged emissions for the Environment, a number of public entities of Veneto from the Porto Tolle plant. Subsequently, the public prosecu- and Emilia Romagna, including the area’s park agencies) was tor filed charges of willfully causing a disaster. During 2012, postponed to a later civil trial, although a “provisional award” the pre-trial hearing judge of Rovigo, granting the request of of about €2.5 million was immediately due. the Public Prosecutor’s Office of Rovigo, ordered the commit- An appeal was lodged against the ruling of the Court of tal for trial of all of the accused for both offences. The Ministry Adria and, on March 12, 2009, the Court of Appeal of Venice for the Environment, the Ministry of Health and other actors, partially reversed the lower court decision. It found that the mainly local authorities in Emilia Romagna and Veneto, as well former directors had not committed a crime and that there as the park agencies of the area, joined the case as injured par- was no environmental damage and therefore ordered recov- ties, seeking unspecified damages from the above individuals, ery of the provisional award already paid. The prosecutors without citing Enel or Enel Produzione as liable parties. Evi- and the civil claimants lodged an appeal against the ruling dence was submitted during 2013. During the year, as part of with the Court of Cassation. In a ruling on January 11, 2011, the agreement mentioned earlier, most of the public entities the Court of Cassation granted the appeal, overturning the withdrew their suits. decision of the Venice Court of Appeal, and referred the case At the hearing of March 31, 2014, the Court sitting en banc to the civil section of the Venice Court of Appeal to rule as issued its ruling of first instance, acquitting all of the accused regards payment of damages and the division of such dam- of the charge of willful omission to take precautionary safety ages among the accused. As regards amounts paid to a num- measures. The Court also acquitted all of the accused of the ber of public entities in Veneto, Enel has already made pay- charge of willfully causing a disaster, with the exception of the ment under a settlement agreement reached in 2008. With two former Chief Executive Officers of Enel SpA (although the a suit lodged in 2011, the Ministry for the Environment, the Court did not grant the request for recognition of aggravating public entities of Emilia Romagna and the private actors who circumstances as provided for when the disaster actually oc- had already participated as injured parties in the criminal curs). The former Chief Executive Officers were then ordered to case asked the Venice Court of Appeal to order Enel SpA and pay unspecified damages in a separate civil action, with a total Enel Produzione to pay civil damages for harm caused by the provisional ruling of €410,000 and payment of court costs for emissions from the Porto Tolle power station. The amount of the remaining civil parties to the action. 239 Brindisi Sud thermal generation plant - Criminal proceedings against Enel employees Distribuzione The Court of Cassation has also consistently ruled in favor of Enel Distribuzione. At December 31, 2013 pending cases numbered about 28,000 as a result of ad- ditional appeals filed despite the abandonment of suits by the plaintiffs and/or joinder of proceedings. In addition, in view of the rulings in Enel’s favor by both the courts of ap- A criminal proceeding is under way before the Court of peal and the Court of Cassation, the flow of new claims has Brindisi concerning the Brindisi Sud thermal plant. A number come to a halt. Beginning in 2012, a number of actions for of employees of Enel Produzione – cited as a liable party in recovery were initiated and settlements reached to obtain civil litigation – have been accused of causing criminal dam- repayment of amounts paid by Enel in execution of the rul- age and dumping of hazardous substances with regard to the ings in the courts of first instance. alleged contamination of land adjacent to the plant with coal In May 2008, Enel served its insurance company (Cattoli- dust between 1999 and 2011. At the end of 2013, the accusa- ca) a summons to ascertain its right to reimbursement of tions were extended to cover 2012 and 2013. As part of the amounts paid in settlement of unfavorable rulings. The proceeding, injured parties, including the Province and City case also involved a number of reinsurance companies in of Brindisi, have submitted claims for total damages of about the proceedings, which have challenged Enel’s claim. In €1.3 billion. The argument phase has begun and hearings of a ruling of October 21, 2013, the Court of Rome granted witnesses are under way. Enel’s petition, finding the insurance coverage to be valid Criminal proceedings are also under way before the Courts companies, to hold Enel harmless in respect of amounts of Reggio Calabria and Vibo Valentia against a number of paid or to be paid to users and their legal counsel as well employees of Enel Produzione for the offense of illegal waste as, within the limits established by the policies, to pay de- and ordering Cattolica, and consequently the reinsurance disposal in connection with alleged violations concerning the fense costs. disposal of waste from the Brindisi plant. Enel Produzione has not been cited as a liable party for civil damages. Mass litigation The following mass litigation is currently pending. Out-of-court disputes and litigation connected with the blackout of September 28, 2003 Litigation concerning free bill payment procedures In its ruling 2507/2010 of May 3, 2010, the Council of State granted the appeal of the Authority for Electricity and Gas (the Authority) against ruling 321/2008 of February 13, 2008 with which the Lombardy Regional Court had voided Resolu- tion 66/2007. With the latter, the Authority had fined Enel Distribuzione €11.7 million for violation of the provisions of Resolution 55/2000 concerning the transparency of invoices. Enel Distribuzione lodged an appeal with the Council of State asking for it to revoke the ruling but the appeal was denied on February 24, 2011. In the wake of the blackout that occurred on September 28, The appeal lodged on October 29, 2010 with the European 2003, numerous claims were filed against Enel Distribuzione Court of Human Rights in Strasbourg is still pending. The ap- for automatic and other indemnities for losses. These peal seeks a judgment against the Italian State and damages claims gave rise to substantial litigation before justices equal to the amount paid with the fine. In Enel’s view, with of the peace, mainly in the regions of Calabria, Campania the ruling the Council of State adopted an interpretation of and Basilicata, with a total of some 120,000 proceedings. the legal concept of legality that differs from that usually Charges in respect of such indemnities could be recovered adopted in the case law of the European court. in part under existing insurance policies. Most of the ini- Since the end of 2006, Enel has been sued by numerous cus- tial rulings by these judges found in favor of the plaintiffs, tomers, especially in Campania and Calabria (with the support while appellate courts have nearly all found in favor of Enel of a number of consumer associations), alleging violations of 240 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsa number of Authority Resolutions (200/1999, 55/2000 and tachment of receivables) to conserve any receivables of 66/2007) concerning the requirement to provide at least one Enel SpA in respect of Enel France. JP Morgan Bank Lux- free method for paying invoices and to publicize that method embourg SA was also served with an analogous order in in invoices themselves. In the civil suits, the customers have respect of any receivables of Enel SpA. requested restitution of amounts paid for postal expenses Albania BEG Ambient Shpk subsequently sued Enel SpA and, often, further damages. and Enelpower SpA in the state of New York seeking rec- At December 31, 2013, pending cases numbered about ognition of the Albanian sentence in the state of New 47,900, but the number of new suits is declining, especially York. Pending the first hearing, the judge enjoined the following the judgment of the Court of Cassation in 2011 two companies from disposing of their assets up to the that the rule set out in Authority Resolution 200/1999 did amount of $597,493,543. not have supplementary validity for existing supply contracts, Enel SpA and Enelpower SpA will contest all aspects of the thereby finding the action for non-performance of contract foundation of the plaintiff’s case, taking all steps avail- advanced by customers to be unfounded, because it was able to them to defend their interests. Furthermore, pro- based on a non-existent clause. BEG litigation Following an arbitration proceeding initiated by BEG SpA in Italy, Enelpower obtained a ruling in its favor in 2002, which was upheld by the Court of Cassation in 2010, which entire- ly rejected the complaint with regard to alleged breach by Enelpower of an agreement concerning the construction of a hydroelectric power station in Albania. ceedings continue in the suit lodged by Enelpower SpA and Enel SpA with the Court of Rome asking the Court to ascertain the liability of BEG SpA for having evaded com- pliance with the arbitration ruling issued in Italy in favor of Enelpower, through the legal action taken by Albania BEG Ambient Shpk in Albania. With this action, Enelpow- er and Enel are asking the Court to find BEG liable and or- der it to pay damages in the amount that one or the other could be required to pay to Albania BEG Ambient Shpk in the event of the enforcement of the sentence issued by the Albanian courts. The next hearing is scheduled for Subsequently, BEG, acting through its subsidiary Albania March 12, 2015. BEG Ambient Shpk, filed suit against Enelpower and Enel SpA in Albania concerning the matter, obtaining a ruling, upheld by the Albanian Supreme Court of Appeal, order- ing Enelpower and Enel to pay tortious damages of about €25 million for 2004 as well as an unspecified amount of tortious damages for subsequent years. Following the rul- Violations of Legislative Decree 231/2001 ing, Albania BEG Ambient Shpk demanded payment of The following four cases for alleged violation of Legislative more than €430 million. Decree 231/2001 concerning the administrative liability of le- As the Albanian Court of Cassation upheld the ruling of the gal persons are pending. Three involve Enel Produzione and court of first instance, Enelpower SpA and Enel SpA then one involves Enel Distribuzione, for omission of accident pre- filed an appeal with the European Court of Human Rights vention measures: for violation of the right to a fair trial and the rule of law, > for a fatal accident involving an employee of a subcontrac- asking the Court to order the Republic of Albania to pay tor at the Enel Federico II plant at Brindisi in 2008, Enel Pro- damages for financial and non-financial losses incurred by duzione has been charged with administrative liability for Enel SpA and Enelpower SpA. That suit is pending. manslaughter; In addition, in February 2012, Albania BEG Ambient Shpk > for an accident involving an employee of a subcontractor filed suit against Enel and Enelpower with the Tribunal de at the Enel Federico II plant at Brindisi in 2009, Enel Pro- Grande Instance in Paris in order to render the ruling of the duzione has been charged with administrative liability for Albanian court enforceable in France. Enel and Enelpower negligent personal injury; have challenged the suit. The proceeding is still under way. > for a fatal accident involving an employee of a subcontrac- Subsequently, again at the initiative of Albania BEG Am- tor at the Enel plant at Termini Imerese in 2008, Enel Pro- bient Shpk, Enel France was served with two “Saise Con- duzione has been charged with administrative liability for servatoire de Créances” (orders for the precautionary at- manslaughter; 241 > for a fatal accident involving an employee of a subcon- tractor in Palermo in 2008, Enel Distribuzione has been CIEN litigation - Brazil charged with administrative liability for manslaughter. The above proceedings are still in the argument phase. Josel litigation - Spain In 1998 the Brazilian company CIEN signed an agreement with Tractebel for the delivery of electricity from Argentina through its Argentina-Brazil interconnection line. As a re- sult of Argentine regulatory changes introduced as a conse- quence of the economic crisis in 2002, CIEN was unable to make the electricity available to Tractebel. In October 2009, In March 2009, Josel SL sued Endesa Distribución Eléctrica SL Tractebel sued CIEN, which submitted its defense. CIEN cited to withdraw from the contract for the sale of several buildings force majeure as a result of the Argentine crisis as the main due to changes in their zoning status, requesting the restitu- argument in its defense. As part of the dispute, Tractebel has tion of about €85 million plus interest. Endesa Distribución expressed its intention to acquire 30% of the transmission Eléctrica SL opposed the request for withdrawal. On May 9, line involved. The case is continuing. The amount involved in 2011, the court granted the request to permit withdrawal from the dispute is estimated at about R$118 million (about €36 the contract and ordered Endesa to repay the amounts paid million), plus unspecified damages. for the sale plus interest and costs. Endesa has appealed the For analogous reasons in May 2010 the company Furnas also ruling. On February 13, 2012, the Audiencia Provincial de Palma filed suit against CIEN for failure to deliver electricity, request- de Mallorca overturned the initial ruling. The latter judgment ing payment of about R$520 million (about €160 million), in was appealed by Josel with the Tribunal Supremo on March 19, addition to unspecified damages. 2012. Endesa Distribución Eléctrica SL opposed the appeal in a brief of December 14, 2012. In alleging non-performance by CIEN, Furnas is also seeking to acquire ownership (in this case 70%) of the interconnec- Basilus litigation (formerly Meridional) - Brazil The Brazilian construction company Basilus S/A Serviço, Emprendimiento y Participações (formerly Meridional) tion line. CIEN’s defense is similar to the earlier case. The evidentiary stage of the trial has been completed and the ruling at first instance is pending. Bocamina II arbitration - Chile held a contract for civil works with the Brazilian company Litigation is under way concerning the contract for the con- CELF (owned by the State of Rio de Janeiro), which with- struction of the second unit of the Bocamina thermal plant drew from the contract. As part of its privatization, CELF (“Bocamina II”). The contract was agreed in 2007 by Endesa transferred its assets to Ampla Energia e Serviços (Ampla). Chile with a consortium made up of Ingeniería y Construc- In 1998, Basilus filed suit against Ampla, arguing that the ción Tecnimont Chile Compañía Limitada, Tecnimont SpA, transfer had infringed its rights and that it had been de- Tecnimont do Brasil Construção and Administração de Pro- frauded. jetos Ltda (together, “Tecnimont”), Slovenske Energeticke In March 2009, the Brazilian court granted the complaint, and Strojarne AS and Ingeniería y Construcción SES Chile Limitada Ampla and the State of Rio de Janeiro filed appeals against (together “SES”). On October 16, 2012, following substantial the decision, which were granted in December 2009 by the violations of contractual undertakings by the consortium (in- Tribunal de Justiça Estadual. Following that decision, Basilus cluding the failure to complete the works on time), Endesa lodged a further appeal (Mandado de segurança) in June Chile sought execution of the guarantees securing its posi- 2011. That request was denied. Subsequently Basilus lodged tion. In any event, the guarantees of SES have not yet been a new appeals with the Tribunal Superior de Justiça, some of collected pending resolution of a number of precautionary which are still pending. proceedings initiated by SES in Slovakia. On October 17, 2012 The amount involved in the dispute is about R$1,052 million Endesa Chile submitted a request for arbitration before the (about €322 million). International Chamber of Commerce in Paris, citing the non- 242 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsperformance of the consortium and claiming damages (sub- Enel transferred the entire capital of the two companies to sequently quantified in the amount of about $373 million, or Enel Investment Holding BV (EIH). about €270 million). On July 5, 2013, Electrica notified Enel SpA, Enel Invest- During the arbitration proceedings, the consortium filed a ment Holding, EMS and EEM (limited to a number of counterclaim against Endesa Chile in the amount of about claims) of a request for arbitration before the Internation- $1,300 million – about €940 million (most of which in the al Chamber of Commerce in Paris, claiming damages for form of damages for the alleged harm to the image of Tec- alleged violations of the Privatization Agreement. nimont following the execution of the bank guarantees by More specifically, the plaintiff claimed payment of penal- Endesa Chile). In April 2013, the parties agreed to join the ties of about €800 million, plus interest and additional un- proceedings with another arbitration proceeding brought specified damages. The proceeding is under way. by SES against Endesa Chile before the International Chamber of Commerce in Paris. The arbitration proceeding is under way and in December 2013 the parties filed their first briefs. Bocamina power plant - Chile A number of environmental issues have arisen with regard to the Bocamina power plant. In August 2013, the Superin- tendencia de Medio Ambiente (SMA) notified Endesa Chile that it had initiated proceedings against it for alleged vio- lations of environmental rules. In December 2013, Endesa Chile submitted its defense and is awaiting a decision by the SMA. In addition, various opponents of the plant (e.g. fisher- men) have submitted three “Recursos de Protección” against the operation of the plant. During the second of those ap- peals, in December 2013, the Supreme Court, in reversing LaGeo arbitration In October 2008, Enel Produzione (which Enel Green Power succeeded as a result of the spin-off of 2008) undertook arbitration action before the International Chamber of Commerce in Paris, against Comisión Ejecutiva Hidroeléc- trica del Río Lempa (“CEL”), wholly owned by the Republic of El Salvador, and Inversiones Energéticas SA de Cv (“INE”), wholly owned by CEL, for breach of a number of provisions of the shareholders’ agreement between Enel Produzione and INE of June 4, 2002, regarding the management of La- Geo. More specifically, the shareholders’ agreement gave Enel Produzione the right to finance the investments of LaGeo to build geothermal plants in El Salvador, treating those payments as capital increases. The agreement also required LaGeo to distribute all its net income. After complying with the agreement during the initial phase, LaGeo stopped complying with the shareholders’ agree- the earlier decision of the Court of Appeal, granted the ment, no longer allowing Enel Produzione (and then Enel precautionary measures requested by the plaintiffs, order- Green Power) to finance the investments approved and, con- ing the shutdown of unit II of the Bocamina plant, which is sequently, to subscribe any further capital increases. therefore currently halted pending a decision on the appeal. Enel Produzione therefore asked the arbitration board to Electrica arbitration - Romania order INE and CEL (i) to perform the specific obligations provided for under the shareholders’ agreement and to pay damages of $30 million plus interest, duties and legal costs or, alternatively, (ii) pay total damages of $264.2 million plus interest, duties and legal costs. INE joined the proceedings, asking that CEL be excluded and June 11, 2007, Enel SpA entered into a Privatization Agree- requesting damages for alleged losses caused by the poor ment with SC Electrica SA for the privatization of Electrica execution of the works by Enel Green Power. Muntenia Sud (EMS). The accord provided for the sale to The arbitration board then ruled on the dispute, issuing Enel of 67.5% of the Romanian company. In accordance its decision in July 2011, granting all of Enel Green Power’s with the unbundling rules, in September 2008 the distri- claims and denying those submitted by INE, recognizing: bution and electricity sales operations were transferred to > Enel Green Power’s right to participate in a capital increase two new companies, Enel Distributie Muntenia (formerly of the company, subscribing about 9 million shares with a EMS) and Enel Energie Muntenia (EEM). In December 2009, value of about $127 million; 243 > LaGeo’s duty to distribute profits earned in 2008 and 2009. Following the arbitration ruling, two civil court cases began: The Paris Court of Appeal (on January 8, 2013) upheld the > the first appeal was lodged by MADE with the Tribunal arbitration ruling. The ruling on the appeal of INE before Judicial de Primera Instancia asking for the arbitration rul- the Court of Cassation is still pending. ing to be voided. The case is still pending with the court In July 2013, the Salvadoran parliament passed a law ap- of first instance following referral by the Court of Appeal proving the withdrawal of El Salvador from the Washing- (subsequently confirmed by the Supreme Court of Appeal ton Convention of 1965, which allowed foreign investors on September 26, 2013), which granted Enel Green Power to bring claims against a state before the International España’s appeal of the admission of briefs; Center for Settlement of Investment Disputes (ICSID). Be- > the second appeal was lodged by Energia XXI on May 9, fore that law took effect, Enel Green Power had initiated a 2006, with the Civil Court of Lisbon, with which Energia proceeding before the ICSID to preserve its rights against XXI asked for Enel Green Power España to be ordered to the interference of the Salvadoran government in Enel pay the amount determined in the 2000 arbitration rul- Green Power’s relations with CEL. ing (the losses for which Energia XXI now puts at €546 In November 2013, the attorney general of El Salvador filed million). Enel Green Power España considers the claim to the findings of an investigation into the events that led to the be unfounded. Acting on a petition by Enel Green Power acquisition of LaGeo by the Enel Group in 2002. Once the en- España, the court has so far suspended the case pending quiry was closed, the attorney general summoned Enel Green resolution of the first suit. Power El Salvador as a liable party to a hearing of charges of corruption against numerous public officials, two former em- ployees of Enel Green Power and the lawyer who handled the formation and the sale of interests in the LaGeo. Tax litigation in Brazil The reconstruction of the events advanced by the attorney > In 1998, Ampla Energia e Serviços SA financed the acqui- general’s office is essentially the same as that presented by sition of Coelce with the issue of bonds in the amount INE during arbitration, where it was ruled unfounded. of $350 million (“Fixed Rate Notes” - FRN) subscribed by The judge in the first phase of the proceedings did not find any its Panamanian subsidiary, which had been established certain or grave violations and therefore rejected the attorney to raise funds abroad. Under the special rules then in general’s request for precautionary measures. force, subject to maintaining the bond until 2008, the Dispute between Energia XXI Energias Renováveis e Consultoria Limitada and Enel Green Power España interest paid by Ampla to its subsidiary was not subject to withholding tax in Brazil. However, the financial crisis of 1998 forced the Panamanian company to refinance itself with its Brazilian parent, which for that purpose obtained loans from local banks. The tax authorities considered this financing to be the equivalent of the early extinguishment of the bond, with the consequent loss of entitlement to the exemption from withhold- ing tax. In December 2005, Ampla Energía e Serviços In 1999 Energia XXI filed for arbitration against MADE (now SA carried out a spin-off in favor of Ampla Investimen- Enel Green Power España) for alleged losses incurred due tos e Serviços SA that involved the transfer of the resid- to the early termination of an agency contract for the sale ual FRN debt and the associated rights and obligations. of wind generators and wind farms of Enel Green Power Es- On November 6, 2012, the Camara Superior de Recursos paña in Portugal and Brazil. With its ruling of November 21, Fiscales (the highest level of administrative courts) issued 2000, the arbitration board found that the termination of a ruling against Ampla, for which the company promptly the contract by MADE was illegitimate and ordered it to pay: asked that body for clarifications. On October 15, 2013, (i) legal costs; (ii) the fixed portion of the monthly fee for the Ampla was notified of the denial of the request for clari- period from July 21, 1999 (date of termination of contract) fication (“Embargo de Declaración”), thereby upholding to October 9, 2000 (expiration date of the contract), equal the previous adverse decision. The company provided to about €50,000; (iii) as well as lost profits to be deter- security for the debt and intends to continue litigation mined in respect of contracts for at least 15 MW of capacity. before the ordinary courts (“Tribunal Superior de Justiça”). 244 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts The amount involved in the dispute at December 31, 2013 de demora”). Ampla appealed the measure (the high- was about €260 million. est level of the administrative courts), arguing that the > In 2002, the State of Rio de Janeiro changed the dead- penalties imposed were not due owing to the applica- lines for payment of the ICMS (Imposto sobre Circulação tion of a number of amnesties granted between 2004 de Mercadorias e Serviços) by withholding agents (to and 2006. In the event of an adverse ruling, the com- the 10th, 20th and 30th of each month - Ley Benedicta). pany will continue litigation before the ordinary courts. Owing to liquidity problems, between September 2002 While the outcome of the final administrative pro- and February 2005, Ampla Energia e Serviços SA con- ceedings is not yet known, following the registration tinued to pay the lCMS in compliance with the previous of the claim in the Public Registry of the state of Rio system (the 5th day of the subsequent month). Despite de Janeiro, Ampla was required to provide security. an informal agreement, the Brazilian tax authorities is- The amount involved in the dispute at December 31, 2013 sued an assessment for late payment of the ICMS (“multa was about €71 million. 40. Subsequent events Issue of hybrid financial instruments spread of 408.9 basis points and interest rate step-ups of 25 basis points from September 15, 2026 and an additional 75 basis points from September 15, 2041. On January 8, 2014, Enel launched a multi-tranche issue The offering was led by a syndicate of banks comprising, of non-convertible bonds for institutional investors on the for the euro tranche: Banca Imi, Banco Bilbao Vizcaya Ar- international market in the form of subordinated hybrid gentaria SA, BNP Paribas, Crédit Agricole-CIB, Deutsche instruments with an average maturity of about 61 years, Bank, ING, JP Morgan, Mediobanca, Natixis, Société Gé- denominated in euros and pounds sterling, in the total nérale Corporate & Investment Banking, and UniCredit amount of about €1.6 billion. The issue was carried out Bank, and, for the sterling tranche: Barclays, BNP Paribas, in execution of the resolution of the Board of Directors of Deutsche Bank, HSBC, JP Morgan, The Royal Bank of Scot- Enel of May 7, 2013. land, Santander Global Banking & Markets and UBS Invest- The issue forms part of the measures to strengthen the ment Bank. financial structure of the Enel Group set out in the busi- ness plan presented to the financial community on March 13, 2013. The transaction is structured in the following two tranches: > €1,000 million maturing on January 15, 2075, issued at a price of 99.368 with an annual fixed coupon of 5% until the first early redemption date set for January 15, 2020. As from that date and until maturity, the rate will be equal to the 5-year euro swap rate plus a spread Agreement for development of geothermal power and smart grids in Mexico of 364.8 basis points and interest step-ups of 25 ba- On January 13, 2014, Enel and the Instituto de Investiga- sis points from January 15, 2025 and a further 75 basis ciones Eléctricas, the Mexican electricity research body, points from January 15, 2040; signed an agreement for cooperation in geothermal gener- > £500 million maturing on September 15, 2076, issued ation and smart grids. With the agreement, the two parties at a price of 99.317 with an annual fixed coupon of will cooperate to exchange information and experience in 6.625% (swapped into euros at a rate of about 5.60%) smart grids and geothermal generation by means of pilot until the first early redemption date set for Septem- projects, training programmes and technology transfers in ber 15, 2021. As from that date and until maturity, the the respective areas of interest. rate will be equal to the 5-year GBP swap rate plus a The Mexican government is seeking to implement smart 245 grid projects in the country to improve efficiency and ser- quired 15.13% of Coelce on Brazil’s Bovespa exchange, for vice quality. Another goal is diversification in power gen- about $242 million (€176 million). For ordinary shares, in eration, a key strengthening the security of supply by in- accordance with Brazilian law, the offer will remain open creasing the contribution of renewables to the country’s for a further 90 days in order to give shareholders who did energy mix. not take up the offer in the previous 33 days the time they need to decide Acquisition of an additional 15.13% of Coelce Price adjustment in disposal of Artic Russia On January 15, 2014, Eni announced the sale of its 60% As part of the reorganization of equity investments in Latin stake in Artic Russia, held through Eni International, to the America following the Enersis capital increase in 2013, on Russian company Yamal Development. Considering the January 14, 2014, Enersis, the Chilean subsidiary of the agreements signed by Itera and the Enel Group prior to the Enel Group, launched a friendly tender offer for about 42% completion of the sale of Enel’s 40% stake in Artic Russia, of Companhia Energética do Ceará (Coelce), which oper- the Group asked Itera to adjust the price of Artic Russia by ates in the electricity distribution sector in Brazil, of which around $112 million. it already indirectly holds about 58%. After the conclusion of the offering period, on February 17, 2014, Enersis ac- 246 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEnts41. Stock incentive plans Between 2000 and 2008, Enel implemented stock incen- tive plans (stock option plans and restricted share units Exercise conditions plans) each year in order to give the Enel Group – in line The right to subscribe the shares was subordinate to the with international business practice and the leading Ital- condition that the executives concerned remain employed ian listed companies – a means for fostering management within the Group, with a few exceptions (such as, for exam- motivation and loyalty, strengthening a sense of corpo- ple, termination of employment because of retirement or rate team spirit in our key personnel, and ensuring their permanent invalidity, exit from the Group of the company enduring and constant effort to create value, thus creat- at which the executive is employed, and succession mortis ing a convergence of interests between shareholders and causa) specifically governed by the Regulations. management. The vesting of the options is subject to achievement of two The remainder of this section describes the features of the operational objectives, both calculated on a consolidated, stock incentive plans adopted by Enel and still in place in 2013. three-year basis: (i) earnings per share (EPS, equal to Group 2008 stock option plan The 2008 plan provides for the grant of personal, non- transferable inter vivos options to subscribe a corresponding number of newly issued ordinary Enel shares to senior man- agers selected by the Board of Directors. The main features of the 2008 plan are discussed below. Beneficiaries The beneficiaries of the plan – who include the CEO of Enel is his capacity as General Manager – comprise the small number of managers who represent the first re- porting line of top management. The head of the Infra- structure and Networks Division does not participate but has received other incentives linked to specific objectives regarding the Division’s business area. The exclusion was motivated by the obligation for Enel – connected with the full liberalization of the electricity sector as from July 1, 2007 – to implement administrative and accounting un- bundling so as to separate the activities included in the Infrastructure and Networks Division from those of the Group’s other business areas. The beneficiaries have been divided into two brackets (the first includes only the CEO of Enel in his capacity as General Manager) and the basic number of options granted to each has been determined on the basis of their gross annual compensation and the strategic importance of their positions, as well as the price of Enel shares at the start of the period covered by the plan (January 2, 2008). net income divided by the number of Enel shares in circula- tion) for the 2008-2010 period, determined on the basis of the amounts specified in the budgets for those years and (ii) the return on average capital employed (ROACE, equal to the ratio between operating income and average net capi- tal employed) for the 2008-2010 period, also determined on the basis of the amounts specified in the budgets for those years. Depending on the degree to which the objectives are achieved, the number of options that can actually be exer- cised by each beneficiary is determined on the basis of a per- formance scale established by the Enel Board of Directors and may vary up or down with respect to the basic option grant by a percentage amount of between 0% and 120%. Exercise procedures Once achievement of the operational objectives has been verified, the options can be exercised as from the third year after the grant year and up to the sixth year as from the grant year. The options can be exercised at any time, with the ex- ception of two blocking periods lasting about one month be- fore the approval of the draft annual financial statements of Enel SpA and the half-year report by the Board of Directors. Strike price The strike price was originally set at €8.075, equal to the reference price for Enel shares observed on the electronic stock exchange of Borsa Italiana on January 2, 2008. The strike price was modified by the Board of Directors on July 9, 2009 – which set it at €7.118 – in order to take account of the capital increase completed by Enel that month and the impact that it had on the market price of Enel shares. 247 Subscription of the shares is charged entirely to the beneficiar- ies, as the plan does not provide for any facilitated terms to be granted in this respect. Developments in the 2008 stock option plan Shares serving the plan The Board of Directors has determined that in the 2008- 2010 period both EPS and ROACE exceeded the levels In June 2008, the Extraordinary Shareholders’ Meeting granted set out in the budgets for those years, thereby enabling the Board of Directors a five-year authorization to carry out a the options to vest in an amount equal to 120% of those paid capital increase in the maximum amount of €9,623,735. originally granted to the beneficiaries, in application of The Board of Directors has not implemented the capital in- the performance scale established by the Enel Board of crease in the light of developments in the Enel stock price. Directors. The following table reports developments in the 2008 stock option plan: Total options granted 8,019,779 (1) Number of beneficiaries 16 Group executives Strike price Verification of plan conditions Options exercised at Dec. 31, 2012 Options lapsed at Dec. 31, 2012 Options lapsed in 2013 Options outstanding at Dec. 31, 2013 €8.075 (2) Rights vested None None None 9,623,735 (1) Following the review conducted by the Enel Board of Directors on the occasion of the approval of the Enel Group’s consolidated financial statements for 2010 to determine the degree to which the two operational targets (EPS and ROACE) had been achieved, a total of 9,623,735 options have vested. (2) The strike price was changed to €7.118 as from July 9, 2009 in order to take account of the impact of the capital increase completed by Enel that month on the market price of Enel shares. Payment of a bonus connected with the portion of the dividends attributable to asset disposals, to be made in conjunction with the exercise of stock options In March 2004, the Board of Directors voted to grant a special bonus, beginning in 2004, to the beneficiaries of the various stock option plans who exercise the options granted to them, establishing that the amount is to be determined each time by the Board itself when it adopts resolutions concerning the allocation of earnings and is based on the portion of the “disposal dividends” (as defined below) distributed after the granting of the options. The rationale underlying this initiative is that the portion of dividends attributable to extraordinary transactions regard- ing the disposal of property and/or financial assets (“disposal dividends”) should be considered a form of return to share- holders of part of the value of the Company, and as such ca- pable of affecting the performance of the shares. The beneficiaries of the bonus are thus the beneficiaries of the stock option plans who – either because they choose to do so or because of the restrictions imposed by the exercise conditions or the vesting periods – exercise their options after the ex-dividend date of the “disposal dividends” and there- fore could be penalized. The bonus is not paid, however, for the portion of other kinds of dividends, such as those gener- ated by ordinary business activities or reimbursements associ- ated with regulatory measures. Essentially, when beneficiaries of the stock option plans have exercised the options granted to them, as from 2004 they have been entitled to receive a sum equal to the “disposal dividends” distributed by Enel after the options have been granted but before they have been exercised. The bonus will be paid by the company of the Group that employs the ben- eficiary and is subject to ordinary taxation as income from employment. Under these rules, to date the Board of Directors has ap- proved: (i) a bonus amounting to €0.08 per option exercised, with regard to the dividend (for 2003) of €0.36 per share pay- able as from June 24, 2004; (ii) a bonus amounting to €0.33 248 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsper option exercised, with regard to the interim dividend (for It should be noted that the overall dilution of share capital 2004) of the same amount per share payable as from Novem- as at December 31, 2013 attributable to the exercise of the ber 25, 2004; (iii) a bonus amounting to €0.02 per option ex- stock options granted under the various plans amounts to ercised, with regard to the balance of the dividend (for 2004) 1.31% and that further developments in the plans could, in of €0.36 per share payable as from June 23, 2005; and (iv) a theory, increase the dilution up to a maximum of 1.41%. bonus amounting to €0.19 per option exercised, with regard to the interim dividend (for 2005) of the same amount per share payable as from November 24, 2005. The following table summarizes developments over the course of 2011, 2012 and 2013 in the Enel stock option plans, detail- ing the main assumptions used in calculating their fair value. Developments in stock option plans Number of options Options granted at December 31, 2011 Options exercised at December 31, 2011 Options lapsed at December 31, 2011 Options outstanding at December 31, 2011 Options lapsed in 2012 Options outstanding at December 31, 2012 Options lapsed in 2013 Options outstanding at December 31, 2013 Fair value at grant date (euro) Volatility Option expiry 2008 plan 9,623,735 (1) 9,623,735 (1) - 9,623,735 (1) - 9,623,735 (1) 0.17 21% December 2014 (1) Following the review conducted by the Enel SpA Board of Directors on the occasion of the approval of the Enel Group’s consolidated financial statements for 2010 to determine the degree to which the two operational targets (EPS and ROACE) set for the 2008 plan had been achieved, a total of 9,623,735 options have vested (120% of the 8,019,779 options originally granted). Restricted share units plan 2008 performance of Enel shares – differs from the stock option plans in that it does not involve the issue of new shares and therefore has no diluting effect on share capital. It grants the beneficiaries rights to receive the payment of a In June 2008 Enel’s Ordinary Shareholders’ Meeting ap- sum equal to the product of the number of units exercised proved an additional incentive mechanism, a restricted and the average value of Enel shares in the month preced- share units plan. The plan – which is also linked to the ing the exercise of the units. 249 Beneficiaries basis – for the period from January 1, 2008 to Decem- ber 31, 2010 – between the performance of ordinary The plan covers the management of the Enel Group (includ- Enel shares on the electronic stock exchange of Borsa ing the managers already participating in the 2008 stock Italiana SpA and the benchmark index calculated as option plan, which includes the Enel CEO in his capacity the average of the performance of the MIBTEL index as General Manager), with the exception of the managers (weight: 50%) – replaced in 2009 with the FTSE Italia of the Infrastructure and Networks Division for the reasons All Share index as indicated above – and the Bloomberg discussed with the 2008 stock option plan. The beneficiar- World Electric Index (weight: 50%). ies have been divided into brackets and the basic number The number that can be exercised may vary up or down of units granted to each has been determined on the basis with respect to the basic unit grant by a percentage of the average gross annual compensation of the bracket, amount of between 0% and 120% as determined on the as well as the price of Enel shares at the start of the period basis of a specific performance scale. covered by the plan (January 2, 2008). If the hurdle target is not achieved in the first two-year pe- Exercise conditions riod, the first tranche of 50% of the units granted may be recovered if the same hurdle target is achieved over the longer three-year period indicated above. It is also possi- Exercise of the units – and the consequent receipt of the ble to extend the validity of the performance level regis- payment – is subordinate to the condition that the execu- tered in the 2008-2010 period to the 2008-2009 period, tives concerned remain employed within the Group, with where performance was higher in the longer period, with a few exceptions (such as, for example, termination of em- the consequent recovery of units that did not actually vest ployment because of retirement or permanent invalidity, in the first two-year period because of the lower perfor- exit of the company at which the beneficiary is employed mance level and on the condition that the first 50% of the from the Group or succession mortis causa) specifically gov- basic unit grant has not yet been exercised. erned by the Regulations. As regards other exercise con- ditions, the plan first establishes a suspensory operational objective (a “hurdle target”): (i) for the first 50% of the ba- Exercise procedures sic number of units granted, Group EBITDA for 2008-2009, Once achievement of the hurdle target and the perfor- calculated on the basis of the amounts specified in the mance objectives has been verified, of the total number of budgets for those years; and (ii) for the remaining 50% of units granted, 50% may be exercised as from the second the basic number of units granted, Group EBITDA for 2008- year subsequent to the grant year and the remaining 50% 2010, calculated on the basis of the amounts specified in as from the third year subsequent to the grant year, with the the budgets for those years. deadline for exercising all the units being the sixth year sub- If the hurdle target is achieved, the actual number of units sequent to the grant year. In any event, each year the units that can be exercised by each beneficiary is determined on can only be exercised during four time windows of ten busi- the basis of a performance objective represented by: ness days each (to be announced by Enel over the course of > for the first 50% of the basic number of units granted, the plan) in the months of January, April, July and October. a comparison on a total shareholders’ return basis – for the period from January 1, 2008 to December 31, 2009 – between the performance of ordinary Enel shares on the electronic stock exchange of Borsa Italiana SpA and Developments in the 2008 restricted share units plan that of a specific benchmark index calculated as the av- erage of the performance of the MIBTEL index (weight: 50%) – replaced with the FTSE Italia All Share index af- ter an analogous substitution by Borsa Italiana in 2009 – and the Bloomberg World Electric Index (weight: 50%); and > for the remaining 50% of the basic number of units granted, a comparison on a total shareholders’ return The review conducted by the Board of Directors to verify satisfaction of the exercise conditions found the following. For the first 50% of the basic units granted, in 2008-2009 the hurdle target for Group EBITDA had been achieved and Enel shares had slightly outperformed the benchmark index, meaning that according to the performance scale 100% of the units originally granted had vested. For the remaining 50% of the basic grant awarded, in 2008-2010 250 EnEl AnnuAl REpoRt 2013 ConsolidAtEd finAnCiAl stAtEmEntsthe hurdle target for Group EBITDA had been achieved and Enel shares significantly outperformed the benchmark in- dex, meaning that according to the performance scale an amount equal to 120% of the units originally granted had vested. In view of the fact that the level of achievement of the performance targets over the 2008-2010 period was higher than that achieved in 2008-2009, it is therefore pos- sible to recover the units that did not vest in 2008-2009 as a result of the lower level of achievement of the perfor- mance targets for beneficiaries who had not yet exercised the first 50% of the basic units granted before achieve- ment of the targets for 2008-2010 had been ascertained. The following table reports developments in the 2008 re- stricted share units plan. Number of RSU RSU outstanding at December 31, 2011 of which vested at December 31, 2011 RSU lapsed in 2012 RSU exercised in 2012 RSU outstanding at December 31, 2012 of which vested at December 31, 2012 RSU lapsed in 2013 RSU exercised in 2013 RSU outstanding at December 31, 2013 of which vested at December 31, 2013 Fair value at the grant date (euro) Fair value at December 31, 2013 (euro) 2008 plan 357,746 357,746 - 103,432 254,314 254,314 - 24,540 229,774 229,774 3.16 3.72 Expiry of the restricted share units December 2014 251 Corporate governance Report on corporate governance and ownership structure The corporate governance structure of Enel SpA and of its adequacy of the organizational structure, the internal corporate group complies with the principles set forth in the control system and the administrative-accounting system edition of the Corporate Governance Code for listed compa- of the Company; (iii) the statutory auditing of the annual nies1, adopted by the Company. Furthermore, the aforemen- accounts and the consolidated accounts, as well as the in- tioned corporate governance structure is inspired by CON- dependence of the statutory audit firm; and (iv) the man- SOB’s recommendations on this matter and, more generally, ner in which the corporate governance rules set out in the international best practice. Corporate Governance Code are actually implemented; The corporate governance system adopted by Enel and the > a Shareholders’ Meeting, which is competent to take deci- Group is essentially aimed at creating value for the sharehol- sions concerning, among other issues – in ordinary or ex- ders over the medium-long term, taking into account the so- traordinary session: (i) the appointment and termination cial importance of the Group’s business operations and the of members of the Board of Directors and the Board of Au- consequent need, in conducting such operations, to adequa- ditors and their compensation and responsibilities; (ii) the tely consider all the interests involved. approval of the financial statements and allocation of net In compliance with the provision of Italian law governing income; (iii) the purchase and sale of treasury shares; (iv) companies with listed shares, the Company’s organization is stock-based compensation plans; (v) amendments of the characterized by: bylaws; and (vi) the issue of convertible bonds. > a Board of Directors charged with managing the Company; The statutory auditing of the accounts is performed by a spe- > a Board of Auditors charged with monitoring: (i) complian- cialized firm entered in the appropriate official register. It was ce with the law and the bylaws, and with the principles engaged by the Shareholders’ Meeting on the basis of a reaso- of sound administration in the performance of Company ned proposal of the Board of Auditors. business; (ii) the financial reporting process, as well as the (1) The various editions of the Code are available on the website of Borsa Italiana (http://www.borsaitaliana.it). Paolo A. Colombo (C 3) Fulvio Conti (CEO/GM) Alessandro Banchi (2,4) Lorenzo Codogno (1,3) Mauro Miccio (1,3) Fernando Napolitano (2,3) Pedro Solbes Mira (2,4) Angelo Taraborrelli (1,3) Gianfranco Tosi (1,4) Shareholders’ meeting Independent auditors Ernst & Young Board of Directors Board of Auditors Sergio Duca (C) Lidia D’Alessio Gennaro Mariconda Control & Risk Committee1 Compensation Committee2 Nomination & Corporate Governance Committee3 Related Parties Committee4 For more detailed information on the corporate governance system, please see the Report on Corporate Governance and Ow- nership Structure of Enel, which has been published on the Company’s website (www.enel.com, in the “Governance” section). 253 Declaration of the Chief Executive Officer and the officer responsible for the preparation of corporate financial reports of the Enel Group at December 31, 2012, pursuant to the provisions of Article 154-bis, paragraph 5, of Legislative Decree 58 of February 24, 1998 and Article 81-ter of CONSOB Regulation 11971 of May 14, 1999 254 EnEl AnnuAl REpoRt 2013DEclARAtion of thE chiEf ExEcutivE officER AnD thE officER REsponsiblE1. The undersigned Fulvio Conti and Luigi Ferraris, in their respective capacities as Chief Executive Officer and officer responsible for the preparation of the financial reports of Enel SpA, hereby certify, taking account of the provisions of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of February 24, 1998: a. the appropriateness with respect to the characteristics of the Enel Group and b. the effective adoption of the administrative and accounting procedures for the preparation of the consolidated financial statements of the Enel Group in the period between January 1, 2013 and December 31, 2013. 2. In this regard, we report that: a. the appropriateness of the administrative and accounting procedures used in the preparation of the consolidated financial statements of the Enel Group has been verified in an assessment of the internal control system for financial reporting. The assessment was carried out on the basis of the guidelines set out in the “Internal Controls - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO); b. the assessment of the internal control system for financial reporting did not identify any material issues. 3. In addition, we certify that consolidated financial statements of the Enel Group at December 31, 2013: a. have been prepared in compliance with the international accounting standards recognized in the European Union pursuant to Regulation 1606/2002/EC of the European Parliament and of the Council of July 19, 2002; b. correspond to the information in the books and other accounting records; c. provide a true and fair representation of the performance and financial position of the issuer and the companies included in the scope of consolidation. 4. Finally, we certify that the report on operations accompanying the financial statements of the Enel Group at December 31, 2013 contains a reliable analysis of operations and performance, as well as the situation of the issuer and the companies included in the scope of consolidation, together with a description of the main risks and uncertainties to which they are exposed. Rome, March 11, 2014 Fulvio Conti Luigi Ferraris Chief Executive Officer of Enel SpA Officer responsible for the preparation of the financial reports of Enel SpA 255 256 EnEl AnnuAl REpoRt 2013AttAchmEntsAttachments 257 Subsidiaries, associates and other significant equity investments of the Enel Group at December 31, 2013 In compliance with CONSOB Notice DEM/6064293 of July 28, 2006 and Article 126 of CONSOB Resolution 11971 of May 14, 1999, a list of subsidiaries and associates of Enel SpA at December 31, 2012, pursuant to Article 2359 of the Italian Civil Code, and of other significant equity investments is provided below. Enel has full title to all investments. The following information is included for each company: name, registered office, share capital, currency in which share capital is denominated, activity, method of consolidation, Group companies that have a stake in the company and their respective ownership share, and the Group’s ownership share. 258 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Parent Company Enel SpA Subsidiaries Rome Italy 9,403,357,795.00 EUR Holding company (Cataldo) Hydro Power Associates New York (New York) USA - USD Electricity generation from renewable resources 3SUN SRL Catania Italy 180,030,000.00 EUR Adams Solar PV Project Two (Pty) Limited Cape Town South Africa - ZAR Adria Link Srl Gorizia Italy 500,000.00 EUR Aes Distribuidores Salvadorenos Ltda de Cv Colonia Escalon El Salvador 200,000.00 SVC Aes Distribuidores Salvadorenos Y Compania S En C de Cv Colonia Escalon El Salvador 200,000.00 SVC Agassiz Beach LLC Minneapolis (Minnesota) USA - USD Agatos Green Power Trino Rome Italy 10,000.00 EUR Development, design, construction and operation of solar panel manufacturing plants Electricity generation from renewable resources Design, construction and operation of merchant lines Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Agrupación Acefhat AIE Barcelona Spain 793,340.00 EUR Design and services - Aguas Santiago Poniente SA Santiago Chile 6,601,120,747.00 CLP Water services Line-by-line Group % holding 100.00% Line-by-line Chi Black River Inc. 50.00% 68.29% Hydro Development Group Inc. Enel Green Power SpA 50.00% 33.33% 22.76% Proportionate Line-by-line Enel Green Power South Africa 100.00% 68.29% Proportionate Enel Produzione SpA 33.33% 33.33% Equity Equity Line-by-line Proportionate Enel Green Power El Salvador SA de CV Enel Green Power El Salvador SA de CV Chi Minnesota Wind LLC Enel Green Power & Sharp Solar Energy Srl Endesa Distribución Eléctrica SL Construcciones Y Proyectos los Maitenes SA 20.00% 13.66% 20.00% 13.66% 51.00% 34.83% 80.00% 27.32% 16.67% 15.35% 53.06% 30.70% Inmobiliaria Manso de Velasco Ltda 25.82% Line-by-line Enel Green Power España SL 51.00% 39.68% Line-by-line Enel Green Power Chile Ltda 100.00% 68.23% Line-by-line Enel Green Power España SL 100.00% 77.80% Electricity generation from renewable resources Electricity generation from renewable resources Management and maintenance of power plants Aguilon 20 SA Zaragoza Spain 2,682,000.00 EUR Almeyda Solar SpA Santiago Chile 1,736,965,000.00 CLP Almussafes Servicios Energéticos SL Valencia Spain 3,010.00 EUR Alpe Adria Energia SpA Udine Italy 450,000.00 EUR Altomonte Fv Srl Cosenza Italy 100,000.00 EUR Alvorada Energia SA Rio de Janeiro Brazil 17,117,415.92 BRL Ampla Energía e Serviços SA Rio de Janeiro Brazil 129,823.00 BRL Design, construction and operation of merchant lines Equity Proportionate Line-by-line Line-by-line Electricity generation from renewable resources Electricity generation and sale Electricity generation, transmission and distribution Andorra Desarrollo SA Teruel Spain 901,520.00 EUR Regional development Line-by-line Apamea 2000 SL Madrid Spain 3,010.00 EUR Services Line-by-line Endesa SA 100.00% 92.06% Apiacàs Energia SA Rio de Janeiro Brazil 21,216,846.33 BRL Electricity generation Line-by-line Aquenergy Systems Inc. Greenville (South USA 10,500.00 USD Carolina) Las Palmas de Gran Canaria Spain Teruel Spain Aquilae Solar SL Aragonesa de Actividades Energéticas SA Electricity generation from renewable resources Line-by-line 3,008.00 EUR Photovoltaic plants Proportionate 60,100.00 EUR Electricity generation Line-by-line Enel Produzione SpA 40.50% 40.50% Enel Green Power & Sharp Solar Energy Srl Enel Brasil Participações Ltda Chilectra Inversud SA Chilectra SA Endesa Brasil SA Enersis SA Endesa Generación SA 100.00% 34.14% 100.00% 68.29% 21.02% 51.14% 10.34% 46.89% 21.38% 100.00% 92.06% Enel Brasil Participações Ltda Consolidated Hydro Southeast Inc. Endesa Ingeniería SLU Endesa Generación SA 100.00% 68.29% 100.00% 68.29% 50.00% 46.03% 100.00% 92.06% 259 Company name Headquarters Country Share capital Currency Activity Asociación Nuclear Ascó- Vandellós II AIE Tarragona Spain 19,232,400.00 EUR Management and maintenance of power plants Consolidation method Proportionate Held by % holding Group % holding Endesa Generación SA 85.41% 78.63% Atacama Finance Co Cayman Islands Cayman 6,300,000.00 USD Holding company Proportionate Islands Atelgen - Produção de Energia ACE Barcelos Portugal - EUR Electricity generation Held for sale Inversiones Gasatacama Holding Ltda 99.90% 17.16% Gas Atacama SA 0.10% Tp - Sociedade Térmica Portuguesa SA 51.00% 39.68% Athonet Smartgrid Srl Bolzano Autumn Hills LLC Minneapolis (Minnesota) Italy USA 10,001.00 EUR - USD Research, development and design Electricity generation from renewable resources Proportionate Enel Servizi Srl 0.01% 0.01% Line-by-line Chi Minnesota Wind LLC 51.00% 34.83% Ayesa Advanced Technologies SA Seville Spain 663,520.00 EUR IT services Equity Endesa Servicios SL 22.00% 20.25% Aysén Energía SA Santiago Chile 4,900,100.00 CLP Electricity Proportionate Aysén Transmisión SA Santiago Chile 22,368,000.00 CLP Electricity generation and sale Proportionate Barnet Hydro Company Burlington (Vermont) USA - USD Electricity generation from renewable resources Line-by-line Beaver Falls Water Power Company Philadelphia (Pennsylvania) Beaver Valley Holdings Ltd Philadelphia (Pennsylvania) Beaver Valley Power Company Philadelphia (Pennsylvania) USA USA USA - USD 2.00 USD 30.00 USD Biowatt - Recursos Energéticos Lda Porto Portugal 5,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Line-by-line Marketing of projects for electricity generation from renewable resources Empresa Nacional de Electricidad SA Centrales Hidroeléctricas de Aysén SA Empresa Nacional de Electricidad SA Centrales Hidroeléctricas de Aysén SA Enel Green Power North America Inc. Sweetwater Hydroelectric Inc. Beaver Valley Holdings Ltd Hydro Development Group Inc Hydro Development Group Inc Finerge-Gestão de Projectos Energéticos SA 0.51% 17.07% 99.00% 0.51% 17.07% 99.00% 10.00% 68.29% 90.00% 67.50% 46.09% 100.00% 68.29% 100.00% 68.29% 51.00% 39.68% Black River Hydro Associates New York (New York) USA - USD Blue Line Valea Nucarilor Srl Bucharest Romania 400,000,600.00 RON Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line (Cataldo) Hydro Power Associates 75.00% 51.22% Line-by-line Enel Green Power Romania Srl 100.00% 68.29% Bosmat SA Oficina 1508 Uruguay 400,000.00 UYU Boiro Energia SA Boiro Bolonia Real Estate SL Madrid Boott Field LLC Wilmington (Delaware) Spain Spain USA Boott Hydropower Inc. Boston (Massachusetts) USA Boott Sheldon Holdings LLC Wilmington (Delaware) USA Bp Hydro Associates Boise (Idaho) USA Bp Hydro Finance Partnership Salt Lake City (Utah) USA Braila Power SA Buffalo Dunes Wind Project LLC Sat Chiscani, Comuna Chiscani Romania Topeka (Kansas) USA 260 601,010.00 EUR Electricity generation from renewable resources Proportionate Enel Green Power España SL 40.00% 31.12% 3,008.00 EUR Real estate Line-by-line Endesa SA 100.00% 92.06% Electricity generation from renewable resources Line-by-line Boott Hydropower Inc. 100.00% 68.29% Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Boott Sheldon Holdings LLC 100.00% 68.29% Line-by-line Line-by-line Hydro Finance Holding Company Inc. Enel Green Power Latin America Ltda 100.00% 68.29% 100.00% 68.23% Line-by-line Enel Green Power North America Inc. 32.00% 68.29% - USD - USD - USD - USD - USD Electricity generation from renewable resources Line-by-line 1,900,000.00 RON Electricity generation Proportionate - USD Electricity generation from renewable resources Equity Chi Idaho Inc. Bp Hydro Associates Fulcrum Inc. Enel Investment Holding BV EGPNA Development Holdings LLC 68.00% 75.92% 24.08% 29.93% 68.29% 29.93% 49.00% 33.46% EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Business Venture Investments 1468 (PTY) LTD Lombardy east South Africa 1,000.00 ZAR Bypass Ltd Boise (Idaho) USA - USD Bypass Power Company Los Angeles USA 1.00 USD (California) CalBatt Srl Rende (Cosenza) Italy 10,001.00 EUR Calizas Elycar SL Huesca Spain 1,803,000.00 EUR Camposgen - Energia Lda Oeiras Portugal 5,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Research, development and design Combined-cycle generation plants Electricity generation from renewable resources Canastota Wind Power LLC Wilmington (Delaware) USA Caney River Wind Project LLC Topeka (Kansas) USA - USD - USD Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Line-by-line Held by % holding Group % holding Enel Green Power South Africa 100.00% 68.29% Line-by-line Northwest Hydro Inc. 69.35% 68.29% Chi West Inc. 29.65% El Dorado Hydro 1.00% Line-by-line Chi West Inc. 100.00% 68.29% Proportionate Enel Servizi Srl 0.01% 0.01% Equity Enel Green Power España SL 25.00% 19.45% Line-by-line Pp - Co-Geração SA 20.00% 77.80% TP - Sociedade Térmica Portuguesa SA 80.00% Line-by-line Essex Company 100.00% 68.29% Line-by-line Rocky Caney Wind LLC 100.00% 68.29% Carboex SA Madrid Spain 24,040,480.00 EUR Fuel supply Line-by-line Carbopego - Abastecimientos e Combustiveis SA Carvemagere - Manutençao e Energias Renováveis Lda Castle Rock Ridge Ltd Partnership Abrantes Portugal 50,000.00 EUR Fuel supply Proportionate Barcelos Portugal 84,700.00 EUR Calgary (Alberta) Canada - CAD Cogeneration of electricity and heat Held for sale Electricity generation from renewable resources Line-by-line Cefeidas Desarrollo Solar SL Centrais Elétricas Cachoeira Dourada SA Puerto del Rosario Goiania Spain Brazil 3,008.00 EUR Photovoltaic plants Proportionate 289,340,000.00 BRL Endesa Generación SA Endesa Generación Portugal SA 100.00% 92.06% 0.01% 46.03% Endesa Generación SA 49.99% Finerge-Gestão de Projectos Energéticos SA Enel Alberta Wind Inc. Chi Hydroelectric Company Inc. Endesa Ingeniería SLU 65.00% 50.57% 0.10% 68.29% 99.90% 50.00% 46.03% Central Dock Sud SA Buenos Aires Argentina 35,595,178,229.00 ARS Central Eólica Canela SA Santiago Chile 12,284,740,000.00 CLP Central Geradora Termelétrica Fortaleza SA Central Hidráulica Güejar-Sierra SL Central Térmica de Anllares AIE Central Vuelta de Obligado SA Caucaia Brazil 151,940,000.00 BRL Seville Spain 364,210.00 EUR Madrid Spain 595,000.00 EUR Buenos Aires Argentina 500,000.00 ARS Line-by-line Endesa Brasil SA 99.75% 46.50% Line-by-line Line-by-line Inversora Dock Sud SA (formerly Sociedad Inversora Dock Sud SA) Compañía Eléctrica Tarapacá SA 69.99% 22.32% 75.00% 25.74% Line-by-line Endesa Brasil SA 100.00% 46.62% Electricity generation and sale Electricity generation, transmission and distribution Electricity generation from renewable resources Thermal generation plants Operation of hydro- electric plants Equity Management of thermal plants Equity Electrical facilities construction Proportionate Enel Green Power España SL Endesa Generación SA Hidroeléctrica El Chocón SA Central Dock Sud SA Endesa Costanera SA Empresa Nacional de Electricidad SA 33.30% 25.91% 33.33% 30.68% 33.20% 9.02% 6.40% 1.30% 51.00% 17.07% Santiago Chile 158,975,665,182.00 CLP Design Proportionate Centrales Hidroeléctricas de Aysén SA Centrales Nucleares Almaraz-Trillo AIE Madrid Spain - EUR Management of nuclear plants Equity Nuclenor SA 0.69% 22.02% Centrum Pre Vedu a Vyskum Sro Kalná nad Hronom Mochovce 6 Slovakia 6,639.00 EUR Milan Italy 8,550,000.00 EUR CESI - Centro Elettrotecnico Sperimentale Italiano Giacinto Motta SpA Endesa Generación SA 23.57% Line-by-line Slovenskè Elektrárne AS 100.00% 66.00% Equity Enel SpA 42.70% 42.70% Research and development on natural sciences and engineering Research and testing services Chepei Desarollo Solar L Las Palmas de Spain 3,008.00 EUR Photovoltaic plants Proportionate Gran Canaria Endesa Ingeniería SLU 50.00% 46.03% 261 Company name Headquarters Country Share capital Currency Activity Chi Black River Inc. Wilmington (Delaware) USA 100.00 USD Chi Hydroelectric Company Inc. St. John (Newfoundland) Canada 223,727,429.00 CAD Chi Idaho Inc. Wilmington (Delaware) USA 100.00 USD Chi Minnesota Wind LLC Wilmington USA - USD Chi Operations Inc. Chi Power Inc. (Delaware) Wilmington (Delaware) Wilmington (Delaware) USA USA 100.00 USD 100.00 USD Chi Power Marketing Inc. Wilmington USA 100.00 USD Chi S F LP (Delaware) Montreal (Quebec) Canada - CAD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Line-by-line Held by % holding Group % holding Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power Canada Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Alberta Wind Inc. Enel Green Power Canada Inc. Enel Green Power North America Inc. 1.00% 68.29% 99.00% 100.00% 68.29% Chi West Inc. Wilmington (Delaware) Chilectra Inversud SA Santiago Chilectra SA Santiago USA Chile Chile 100.00 USD Electricity generation from renewable resources Line-by-line 569,020,000.00 USD Holding company Line-by-line Chilectra SA 100.00% 55.30% 36,792,868,194.00 CLP Holding company. Electricity distribution Line-by-line Enersis SA 99.08% 55.30% Chinango SAC Lima Peru 294,249,298.00 PEN Chisholm View Wind Project LLC Oklahoma City - Oklahoma USA - USD Electricity generation, sale and transmission Electricity generation from renewable resources Inmobiliaria Manso de Velasco Ltda 0.01% Line-by-line Edegel SA 80.00% 16.73% Line-by-line Enel Kansas LLC 75.00% 51.22% Chladiace Veze Bohunice Spol Sro Bohunice Slovakia 16,598.00 EUR Engineering and construction Equity Slovenskè elektrárne AS 35.00% 23.10% Codensa SA ESP Bogotá DC Colombia 13,209,330,000.00 COP Electricity distribution and sale Line-by-line Enersis SA 39.13% 27.01% Cogeneración El Salto SL (in liquidation) Zaragoza Spain 36,000.00 EUR Cogeneration of electricity and heat - Cogeneración Lipsa SL Barcelona Spain 720,000.00 EUR Rome Italy 19,622,000.00 EUR Fortaleza Brazil 442,950,000.00 BRL Chilectra SA 9.35% Enel Green Power España SL Enel Green Power España SL Enel Produzione SpA 20.00% 15.56% 20.00% 15.56% 25.00% 25.00% Line-by-line Endesa Brasil SA 58.87% 27.44% Equity Equity Cogeneration of electricity and heat Construction of port infrastructure Electricity generation, transmission and distribution Paços De BrandãoPortugal - EUR Electricity generation Equity Alcochete Portugal - EUR Electricity generation Held for sale Barreiro Portugal - EUR Electricity generation Line-by-line Riba De Ave Portugal - EUR Electricity generation - Tp - Sociedade Térmica Portuguesa SA Tp - Sociedade Térmica Portuguesa SA Tp - Sociedade Térmica Portuguesa SA Tp - Sociedade Térmica Portuguesa SA 30.00% 23.34% 60.00% 46.68% 95.00% 73.91% 95.00% 73.91% Compagnia Porto Di Civitavecchia SpA Companhia Energética do Ceará SA Companhia Térmica do Serrado ACE Companhia Térmica Hectare ACE Companhia Térmica Lusol ACE Companhia Térmica Oliveira Ferreira ACE (in liquidation) Companhia Térmica Ribeira Velha ACE São Paio de Oleiros Portugal - EUR Electricity generation Line-by-line Pp - Co-Geração SA 49.00% 77.80% Algés Portugal 5,000.00 EUR Electricity generation Held for sale TP - Sociedade Térmica Portuguesa SA Tp - Sociedade Térmica Portuguesa SA 51.00% 95.00% 73.91% Rio se Janeiro Brazil 285,050,000.00 BRL Buenos Aires Argentina 14,175,999.00 ARS Electricity generation, transmission and distribution Electricity generation, transmission and distribution Line-by-line Endesa Brasil SA 100.00% 46.62% Line-by-line Compañía de Interconexión Energética SA 100.00% 46.62% Companhia Térmica Tagol Lda Compañía de Interconexión Energética SA Compañía de Transmisión del Mercosur SA 262 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Santiago Chile 331,815,034,140.00 CLP Electricity generation, transmission and distribution Consolidation method Held by % holding Group % holding Line-by-line Enersis SA 3.78% 34.32% Empresa Nacional de Electricidad SA 96.21% Lima Peru 2,886,000.00 PEN Hydroelectric project Line-by-line Generalima SA 100.00% 55.81% Compañía Eléctrica Tarapacá SA Compañía Energética Veracruz SAC Compañía Eólica Tierras Altas SA Soria Compañía Transportista de Gas de Canarias SA Las Palmas de Gran Canaria Spain Spain 13,222,000.00 EUR Wind plants Equity 800,003.00 EUR Natural gas transport Equity Enel Green Power España SL Unión Eléctrica de Canarias Generación SAU 35.63% 27.72% 47.18% 43.43% Compostilla Re SA Luxembourg Luxembourg 12,000,000.00 EUR Reinsurance Line-by-line Enel Insurance NV 100.00% 96.03% Concert Srl Rome Italy 10,000.00 EUR Product, plant and equipment certification Line-by-line Enel Produzione SpA 51.00% 100.00% Coneross Power Corporation Inc. Greenville (South Carolina) USA 110,000.00 USD Consolidated Hydro New Hampshire Inc. Wilmington (Delaware) Consolidated Hydro New York Inc. Wilmington (Delaware) Consolidated Hydro Southeast Inc. Wilmington (Delaware) USA USA USA Consolidated Pumped Storage Inc. Wilmington (Delaware) USA Consorcio Ara-Ingendesa Ltda Santiago Consorcio Eólico Marino Cabo de Trafalgar SL Cadiz Chile Spain 130.00 USD 200.00 USD 100.00 USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Enel Ingegneria e Ricerca SpA 49.00% Line-by-line Aquenergy Systems Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 95.00% 68.29% Gauley River Power Partners LP 5.00% 550,000.00 USD Electricity generation from renewable resources Line-by-line Enel Green Power North America Inc. 81.82% 55.87% 1,000,000.00 CLP Design and consulting services Proportionate 200,000.00 EUR Wind plants Equity Compañía Eléctrica Tarapacá SA Enel Green Power España SL Inmobiliaria Manso De Velasco Ltda Enel Green Power North America Inc. Hydro Development Group Inc. Enel Green Power España SL 50.00% 17.16% 50.00% 38.90% 55.00% 30.69% 50.00% 68.29% 50.00% 25.00% 19.45% Construcciones Y Proyectos Los Maitenes SA Santiago Chile 41,742,265,201.00 CLP Engineering and construction Line-by-line Copenhagen Associates New York (New USA York) - USD Electricity generation from renewable resources Line-by-line Equity Corporación Eólica de Zaragoza SL Zaragoza Spain 1,021,600.00 EUR Courtenay Wind Farm LLC Bismarck (North Dakota) USA - USD Cte - Central Termica do Estuário Lda Porto Portugal 563,910.00 EUR De Rock’l Srl Bucharest Romania 5,629,000.00 RON Depuracion Destilacion Reciclaje SL Boiro Spain 600,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Cogeneration of electricity and heat Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Kansas LLC 100.00% 68.29% Held for sale Line-by-line Finerge-Gestao de Projectos Energéticos SA Enel Green Power Romania 100.00% 77.80% 100.00% 68.29% Proportionate Enel Green Power España SL 40.00% 31.12% Desarollo Photosolar SL Desarrollo de Fuerzas Renovables Srl de Cv Las Palmas de Gran Canaria Spain Mexico DF Mexico 3,008.00 EUR Photovoltaic plants Proportionate 3,000.00 MXN Electricity generation from renewable resources Line-by-line Dioflash (Pty) Ltd Houghton South Africa 1,000.00 ZAR Line-by-line Electricity generation from renewable resources Endesa Ingeniería SLU Enel Green Power México Srl de Cv Energia Nueva Energia Limpia Mexico Srl e Cv Enel Green Power South Africa 50.00% 46.03% 99.99% 68.29% 0.01% 100.00% 68.29% Valencia Spain 578,000.00 EUR Photovoltaic plants - Endesa Servicios SL 14.39% 13.25% Diseño de Sistemas en silicio SA (in liquidation Amministrazione in Concordato) 263 Company name Headquarters Country Share capital Currency Activity Distribuidora de Energía Eléctrica del Bages SA Distribuidora Eléctrica de Cundinamarca SA ESP Distribuidora Eléctrica del Puerto de La Cruz SA Barcelona Spain 108,240.00 EUR Bogotá DC Colombia 1,000,000.00 COP Tenerife Spain 12,621,210.00 EUR Electricity distribution and sale Electricity distribution and sale Electricity purchase, transmission and distribution Consolidation method Held by % holding Group % holding Line-by-line Endesa Red SA 55.00% 92.06% Hidroeléctrica de Catalunya SL 45.00% Proportionate Codensa SA ESP 49.00% 13.23% Line-by-line Endesa Red SA 100.00% 92.06% Distrilec Inversora SA Buenos Aires Argentina 497,610,000.00 ARS Holding company Line-by-line Enersis SA 27.19% 28.42% Dominica Energía Limpia, Srl de CV Colonia Guadalupe Inn Mexico 13,252,205.00 MXN Electricity generation from renewable resources Line-by-line Edegel SA Lima Peru 2,064,301,735.00 PEN Electricity generation, distribution and sale Line-by-line Eed - Empreendimentos Eólicos do Douro SA Porto Portugal 50,000.00 EUR Eevm - Empreendimentos Eólicos do Vale do Minho SA Porto Portugal 200,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Equity 1,000.00 USD Holding company Line-by-line Line-by-line Chilectra SA 23.42% Empresa Nacional de Electricidad SA Enel Green Power México Srl de Cv Enel Green Power Guatemala SA Generandes Perú SA 0.89% 99.99% 68.29% 0.01% 54.20% 20.91% Empresa Nacional de Electricidad SA 29.40% Finerge-Gestao de Projectos Energéticos SA Eol Verde Energia Eólica SA Enel Green Power North America Inc. Padoma Wind Power LLC 100.00% 77.80% 50.00% 29.17% 100.00% 68.29% 100.00% 68.29% EGP Geronimo Holding Company Inc. Wilmington (Delaware) EGP Jewel Valley LLC EGP Solar 1 LLC Wilmington (Delaware) Wilmington (Delaware) USA USA USA EGP Stillwater Solar LLC Wilmington USA (Delaware) EGP Timber Hills Project LLC Los Angeles (California) EGPNA Development Holdings LLC Wilmington (Delaware) El Dorado Hydro Los Angeles (California) USA USA USA - USD - USD - USD - USD - USD - USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Padoma Wind Power LLC 100.00% 68.29% Line-by-line Line-by-line Enel Green Power North America Development LLC Northwest Hydro Inc. 100.00% 68.29% 17.50% 68.29% Chi West Inc. 82.50% Elcogas SA Puertollano Spain 20,242.26 EUR Electricity generation Equity Enel SpA 4.32% 42.06% Elcomex Eol Srl Cernavoda Romania 1,000,000.00 RON Elcomex Solar Energy Srl Constanta Romania 4,590,000.00 RON Elecgas SA Santarem (Pego) Portugal 50,000.00 EUR Electra Capital (Pty) Ltd Cape Town South Africa 755,000.00 ZAR Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Combined-cycle generation Electricity generation from renewable resources Line-by-line Proportionate Line-by-line Endesa Generación SA 40.99% Enel Green Power International BV Enel Green Power Romania Srl Enel Green Power Romania Srl 0.10% 68.29% 99.90% 100.00% 68.29% Endesa Generación Portugal SA Enel Green Power South Africa 50.00% 45.99% 100.00% 68.29% Lima Peru 46,508,170.00 PEN Holding company Line-by-line Enersis SA 80.00% 55.81% Eléctrica de Jafre SA Girona Spain 165,880.00 EUR Electricity distribution and sale Equity Generalima SA Hidroeléctrica de Catalunya SL 20.00% 47.46% 43.69% Eléctrica de Lijar SL Cadiz Electricidad de Puerto Real SA Cadiz Spain Spain 1,081,820.00 EUR Electricity transmission and distribution Proportionate Endesa Red SA 50.00% 46.03% 6,611,130.00 EUR Electricity distribution and supply Equity Endesa Distribución Eléctrica SL 50.00% 46.03% 264 Electrica Cabo Blanco SA (formerly Empresa Electrica Cabo Blanco SA) EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Electrogas SA Santiago Chile 61,832,327.00 USD Holding company Equity Empresa Nacional de Electricidad SA 42.50% 14.23% Emgesa Panama SA Paciudad de Panana Panama 10,000.00 USD Electricity trading Line-by-line Emgesa SA ESP 100.00% 21.05% Emgesa SA ESP Bogotá DC Colombia 655,222,310,000.00 COP Electricity generation and sale Line-by-line Enersis SA 21.61% 21.05% Empresa Nacional de Electricidad SA 26.87% Emittente Titoli SpA Milan Italy 5,200,000.00 EUR - - Enel SpA 10.00% 10.00% Empreendimento Eólico de Rego Lda Porto Portugal 5,000.00 EUR Empreendimentos Eólicos da Serra do Sicó SA Porto Portugal 50,000.00 EUR Empreendimentos Eólicos de Viade Lda Porto Portugal 5,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Finerge-Gestão de Projectos Energéticos SA Tp - Sociedade Térmica Portuguesa SA Finerge-Gestão de Projectos Energéticos SA 51.00% 39.68% 52.38% 40.75% 80.00% 62.24% Empresa Carbonífera del Sur SA Empresa de Distribución Eléctrica de Lima Norte SAA Empresa de Energía Cundinamarca SA ESP Madrid Spain 18,030,000.00 EUR Mining Line-by-line Endesa Generación SA 100.00% 92.06% Lima Peru 638,560,000.00 PEN Electricity distribution and sale Line-by-line Enersis SA 24.00% 42.16% Bogotá DC Colombia 39,699,630,000.00 COP Electricity distribution and sale Proportionate 51.68% 82.34% 10.90% Inversiones Distrilima SA Distribuidora Eléctrica de Cundinamarca SA ESP Empresa Distribuidora Sur SA Buenos Aires Argentina 898,590,000.00 ARS Electricity distribution and sale Line-by-line Enersis SA 22.24% 39.96% Santiago Chile 82,222,000.00 CLP Electricity generation, transmission and distribution Line-by-line Chilectra SA 100.00% 55.30% Chilectra SA 20.85% Distrilec Inversora SA 56.36% Lima Peru 73,982,594.00 PEN Electricity generation Line-by-line Empresa Eléctrica de Colina Ltda Empresa Eléctrica de Piura SA Empresa Eléctrica Panguipulli SA Santiago Chile 21,919,629,030.00 CLP Electricity generation from renewable resources Line-by-line Empresa Eléctrica Pehuenche SA Empresa Eléctrica Puyehue SA Empresa Nacional de Electricidad SA Empresa Nacional de Geotermia SA Empresa Propietaria de La Red SA En-Brasil Comercio e Serviços SA Santiago Chile 200,319,020.73 CLP Santiago Chile 14,395,879,488.00 CLP Electricity generation, transmission and distribution Electricity generation from renewable resources Line-by-line Line-by-line Santiago Chile 1,331,714,090,000.00 CLP Santiago Chile 12,647,752,517.00 CLP Electricity generation, transmission and distribution Electricity generation from renewable resources Line-by-line Panama Panama 58,500,000.00 USD Electricity transmission and distribution - Rio de Janeiro Brazil 1,000,000.00 BRL Electricity Line-by-line Electrica Cabo Blanco SA (formerly Empresa Electrica Cabo Blanco SA) Generalima SA Enel Green Power Chile Ltda Enel Green Power Latin America Ltda Empresa Nacional de Electricidad SA Enel Green Power Chile Ltda 60.00% 53.85% 36.50% 99.99% 68.23% 0.01% 92.65% 31.01% 99.90% 68.17% Enel Green Power Chile Ltda Endesa Latinoamerica SA Central Geradora Termelétrica Fortaleza SA 51.00% 34.80% 11.11% 10.23% 0.01% 46.62% Endesa Brasil SA 99.99% 265 Enel Green Power Latin America Ltda 0.01% Line-by-line Enersis SA 59.98% 33.47% Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Endesa Argentina SA Buenos Aires Argentina 514,530,000.00 ARS Holding company Line-by-line Endesa Brasil SA Rio de Janeiro Brazil 1,028,760,000.00 BRL Holding company Line-by-line Endesa Capital Finance LLC Wilmington (Delaware) USA 100.00 USD Finance company Line-by-line Compañía Eléctrica Tarapacá SA 0.34% 33.48% Empresa Nacional de Electricidad SA Chilectra Inversud SA Chilectra SA Edegel SA Empresa Nacional de Electricidad SA 99.66% 5.94% 46.62% 5.33% 4.00% 34.64% Enersis SA 50.09% International Endesa BV 100.00% 92.06% Endesa Capital SA Madrid Spain 60,200.00 EUR Finance company Line-by-line Endesa SA 100.00% 92.06% Endesa Cemsa SA Buenos Aires Argentina 14,010,014.00 ARS Energy trading Line-by-line Enersis SA 55.00% 45.76% Endesa Comercializaçao de Energia SA Porto Portugal 250,000.00 EUR Endesa Costanera SA Buenos Aires Argentina 701,988,378.00 ARS Electricity generation and sale Electricity generation and sale Endesa Argentina SA 45.00% Line-by-line Endesa Energía SA 100.00% 92.06% Line-by-line Southern Cone Power Argentina SA 1.15% 25.33% Empresa Nacional de Electricidad SA 24.85% Endesa Argentina SA 49.68% Endesa Distribución Eléctrica SL Barcelona Spain 1,204,540,060.00 EUR Electricity distribution Line-by-line Endesa Red SA 100.00% 92.06% Endesa Energía SA Madrid Spain 12,981,860.00 EUR Endesa Energía XXI SL Madrid Spain 2,000,000.00 EUR Marketing of energy products Marketing and energy- related services Line-by-line Endesa SA 100.00% 92.06% Line-by-line Endesa Energía SA 100.00% 92.06% Endesa Financiación Filiales SA Madrid Spain 462,100,301,000.00 EUR Finance company Line-by-line Endesa SA 100.00% 92.06% Endesa Gas SAU Zaragoza Spain 45,261,350.00 EUR Gas production, transmission and distribution Line-by-line Endesa Red SA 100.00% 92.06% Endesa Generación II SA Seville Seville Endesa Generacion Nuclear Endesa Generación Portugal SA Spain Spain 63,107.00 EUR Electricity generation Line-by-line Endesa SA 100.00% 92.06% 60,000.00 EUR Subholding company in the nuclear sector Line-by-line Endesa Generación SA 100.00% 92.06% Paço De Arcos Portugal 50,000.00 EUR Electricity generation Line-by-line Finerge-Gestão de Projectos Energéticos SA 0.20% 91.97% Endesa Energía SA 0.20% Endesa Generación SA 99.20% Enel Green Power España SL 0.20% Energías de Aragón II SL 0.20% Endesa Generación SA Seville Spain 1,945,329,830.00 EUR Endesa Ingeniería SLU Seville Spain 1,000,000.00 EUR Electricity generation and sale Consulting and engineering services Line-by-line Endesa SA 100.00% 92.06% Line-by-line Endesa Red SA 100.00% 92.06% Endesa Latinoamerica SA Madrid Endesa Operaciones y Servicios Comerciales SL Barcelona Endesa Power Trading Ltd London Endesa Red SA Barcelona Endesa SA Madrid Spain Spain United Kingdom Spain Spain 796,683,058.00 EUR Holding company Line-by-line Endesa SA 100.00% 92.06% 10,138,580.00 EUR Services Line-by-line Endesa Energía SA 100.00% 92.06% 2.00 GBP Trading Line-by-line Endesa SA 100.00% 92.06% 714,985,850.00 EUR Electricity distribution Line-by-line Endesa SA 100.00% 92.06% 1,270,502,540.40 EUR Holding company Line-by-line Enel Energy Europe SL 92.06% 92.06% Endesa Servicios SL Madrid Spain 89,999,790.00 EUR Services Line-by-line Endesa SA 100.00% 92.06% 266 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Enel Albania Shpk (in liquidation) Tirana Albania 73,230,000.00 ALL Enel Alberta Wind Inc. Calgary (Alberta) Canada 16,251,021.00 CAD - Plant construction, operation and maintenance. Electricity generation and trading Enel Investment Holding BV 100.00% 100.00% Electricity generation from renewable resources Line-by-line Enel Green Power Canada Inc. 100.00% 68.29% Enel Atlantic Canada LP St. John (Newfoundland) Canada - CAD Wind Line-by-line Newind Group Inc. 0.10% 68.29% Enel Brasil Participações Ltda Rio de Janeiro Brazil 1,008,224,172.92 BRL Holding company Line-by-line Enel Cove Fort II LLC Enel Cove Fort LLC Wilmington (Delaware) Wilmington (Delaware) USA USA - USD - USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Enel Distributie Banat SA Timisoara Romania 382,158,580.00 RON Electricity distribution Line-by-line Enel Distributie Dobrogea SA Costanza Romania 280,285,560.00 RON Electricity distribution Line-by-line Enel Distributie Muntenia SA (formerly Electrica Muntenia Sud SA) Bucharest Enel Distribuzione SpA Rome Enel Energia SpA Rome Romania 271,635,250.00 RON Electricity distribution Line-by-line Italy Italy 2,600,000,000.00 EUR Electricity distribution Line-by-line 302,039.00 EUR Electricity and gas sales Line-by-line Bucharest Romania 37,004,350.00 RON Electricity sales Line-by-line Enel Energie Muntenia SA (formerly Electrica Furnizare Muntenia Sud SA) Enel Energie SA Bucharest Romania 140,000,000.00 RON Electricity sales Line-by-line Chi Hydroelectric Company Inc. Enel Green Power Canada Inc. Enel Green Power International BV Enel Green Power Latin America Ltda Enel Geothermal LLC EGPNA Development Holdings LLC Enel Investment Holding BV Enel Investment Holding BV Enel Investment Holding BV Enel SpA Enel SpA Enel Investment Holding BV 82.05% 17.85% 99.99% 68.29% 0.01% 100.00% 68.29% 100.00% 68.29% 51.00% 51.00% 51.00% 51.00% 64.43% 64.43% 100.00% 100.00% 100.00% 100.00% 64.43% 64.43% Enel Investment Holding BV 51.00% 51.00% Enel Energy Europe SL Madrid Spain 500,000,000.00 EUR Holding company Line-by-line Enel SpA 100.00% 100.00% Enel Esn Energo LLC St. Petersburg Enel Esn Management BVAmsterdam Enel Finance International NV Amsterdam Russian Federation The Netherlands The Netherlands 2,700,000.00 RUB Operation and maintenance of electricity generation plants Line-by-line Enel Esn Management BV 100.00% 75.00% 18,000.00 EUR Holding company Line-by-line Enel Produzione SpA 75.00% 75.00% 1,478,810,370.00 EUR Holding company Line-by-line Enel SpA 100.00% 100.00% Enel Fortuna SA Panama Panama 100,000,000.00 USD Electricity generation from renewable resources Line-by-line Enel Green Power Panama SA 50.06% 34.18% Enel France Sas Parigi France 34,937,000.00 EUR Holding company Line-by-line Enel Gas Rus LLC Mosca Enel Geothermal LLC Wilmington (Delaware) Russian Federation USA 350,000.00 RUB Energy services Line-by-line - USD Enel Green Power & Sharp Solar Energy Srl Enel Green Power Bulgaria EAD Enel Green Power Cabeça de Boi SA Enel Green Power CAI Agroenergy Srl Enel Green Power Calabria Srl Rome Italy 10,000.00 EUR Sofia Bulgaria 35,231,000.00 BGN Rio de Janeiro Brazil 19,017,956.00 BRL Rome Italy 100,000.00 EUR Rome Italy 10,000.00 EUR Enel Green Power Canada Inc. Montreal (Quebec) Canada 85,681,857.00 CAD Enel Green Power Canaro Srl Rome Italy 10,400.00 EUR Enel Investment Holding BV Enel Investment Holding BV 100.00% 100.00% 100.00% 100.00% Electricity generation from renewable resources Design, construction and maintenance of photovoltaic plants (holding company) Plant construction, operation and maintenance Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Essex Company 100.00% 68.29% Proportionate Enel Green Power SpA 50.00% 34.14% Line-by-line Line-by-line Line-by-line Line-by-line Enel Green Power International BV Enel Brasil Participações Ltda Enel Green Power SpA Enel Green Power SpA 100.00% 68.29% 100.00% 68.29% 51.00% 34.83% 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power SpA 100.00% 68.29% 267 Company name Headquarters Country Share capital Currency Activity Enel Green Power Chile Ltda Santiago Chile 15,649,360,000.00 CLP Enel Green Power Colombia Enel Green Power Costa Rica Enel Green Power Cristal Eolica SA Bogotá DC Colombia 10,000.00 COP San José Costa Rica 27,500,000.00 USD Rio de Janeiro Brazil 100,000,000.00 BRL Enel Green Power Cutro srl Enel Green Power Damascena Eólica SA Enel Green Power Desenvolvimento Ltda Enel Green Power Dois Riachos Eólica SA Enel Green Power El Salvador SA de C.V. Enel Green Power Emiliana Eólica SA Cutro Italy 10,000.00 EUR Rio de Janeiro Brazil 1,000,000.00 BRL Rio de Janeiro Brazil 13,900,297.00 BRL Rio de Janeiro Brazil 1,000.00 BRL San Salvador El Salvador 3,448,800.00 SVC Rio de Janeiro Brazil 13,509,360.00 BRL Enel Green Power España SL Madrid Spain 11,152.74 EUR Enel Green Power Esperança Eólica SA Rio de Janeiro Brazil 1,000,000.00 BRL Consolidation method Line-by-line Held by % holding Group % holding Hydromac Energy BV 0.01% 68.23% Enel Green Power Latin America Ltda 99.99% Line-by-line Enel Green Power International BV 100.00% 68.29% Line-by-line Enel Green Power International BV 100.00% 68.29% Line-by-line Line-by-line Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Enel Green Power SpA 1.00% 68.29% 99.00% 100.00% 68.29% Line-by-line Parque Eólico Serra Azul Ltda 1.00% 68.29% Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sales from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Line-by-line Enel Brasil Participações Ltda Enel Brasil Participações Ltda 99.00% 99.99% 68.29% Enel Green Power Latin America Ltda 0.01% Enel Green Power Partecipazioni Speciali Srl Enel Green Power International BV Parque Eólico Curva dos Ventos Ltda Enel Brasil Participações Ltda Enel Green Power International BV 100.00% 68.29% 100.00% 68.29% 1.00% 68.29% 99.00% 60.00% 77.80% Endesa Generación SA 40.00% Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Brasil Participações Ltda 1.00% 68.29% 99.00% 100.00% 68.29% Rio de Janeiro Brazil 12,834,623.00 BRL Rome Italy 10,000,000.00 EUR Lyon France 98,200,000.00 EUR Tenerife Spain 3,012.00 EUR Guatemala Guatemala 5,000.00 GTQ Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power SpA 70.00% 47.80% Line-by-line Enel Green Power International BV 100.00% 68.29% Line-by-line Enel Green Power España SL 65.00% 50.57% Line-by-line Enel Green Power International BV 98.00% 68.29% Maroussi Greece 7,687,850.00 EUR Holding company, Energy services Line-by-line Amsterdam The Netherlands 244,532,298.00 EUR Holding company Line-by-line Istanbul Turkey 50,000.00 TRY Electricity generation from renewable resources Line-by-line Enel Green Power Latin America Ltda 2.00% Enel Green Power International BV Enel Green Power SpA Enel Green Power International BV 100.00% 68.29% 100.00% 68.29% 98.99% 67.60% Enel Green Power Fazenda SA Enel Green Power Finale Emilia Srl Enel Green Power France Sas Enel Green Power Granadilla S.L. Enel Green Power Guatemala SA Enel Green Power Hellas SA Enel Green Power International BV Enel Green Power Jeotermal Enerji Yatirimlari A? 268 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Enel Green Power Joana Eólica SA Rio de Janeiro Brazil 13,067,280.00 BRL Electricity generation from renewable resources Consolidation method Line-by-line Enel Green Power Latin America Ltda Santiago Chile 1,000,000.00 CLP Holding company Line-by-line Held by % holding Group % holding Parque Eólico Curva dos Ventos Ltda Enel Brasil Participações Ltda Enel Green Power International BV 1.00% 68.29% 99.00% 0.01% 68.23% Hydromac Energy BV 99.90% Enel Green Power Maniçoba Eólica SA Rio de Janeiro Brazil 1,000,000.00 BRL Electricity generation from renewable resources Line-by-line Parque Eólico Serra Azul Ltda 1.00% 68.29% Mexico City Mexico 308,628,665.00 MXN Holding company Line-by-line Enel Brasil Participações Ltda Enel Green Power International BV 99.00% 99.99% 68.29% Enel Green Power Latin America Ltda 0.01% Enel Green Power México Srl de Cv Enel Green Power Modelo I Eólica SA Enel Green Power Modelo II Eólica SA Rio de Janeiro Brazil 5,125,000.00 BRL Rio de Janeiro Brazil 5,125,000.00 BRL Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Endesa Brasil SA 1.00% 68.07% Enel Brasil Participações Ltda 99.00% Line-by-line Endesa Brasil SA 1.00% 68.07% Line-by-line Enel Brasil Participações Ltda Enel Green Power International BV 99.00% 100.00% 68.29% Line-by-line Enel Green Power International BV 100.00% 68.29% Enel Green Power North America Development, LLC Wilmington (Delaware) Enel Green Power North America Inc. Wilmington (Delaware) USA USA - USD 50.00 USD Enel Green Power Panama SA Panama Panama 3,000.00 USD Holding company Line-by-line Enel Green Power Partecipazioni Speciali Srl Rome Italy 10,000.00 EUR Enel Green Power Pau Ferro Eólica SA Enel Green Power Pedra do Gerônimo Eólica SA Enel Green Power Perù SA Enel Green Power Primavera Eolica SA Rio De Janeiro Brazil 14,520,000.00 BRL Rio de Janeiro Brazil 13,998,000.00 BRL Lima Peru 1,000.00 PEN Rio de Janeiro Brazil 100,000,000.00 BRL Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation and sales from renewable resources Line-by-line Enel Green Power International BV Enel Green Power SpA Parque Eólico Fontes dos Ventos Ltda Enel Brasil Participações Ltda Parque Eólico Fontes dos Ventos Ltda Enel Brasil Participações Ltda Enel Green Power International BV Enel Green Power Latin America Ltda Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Green Power SpA 100.00% 68.29% 100.00% 68.29% 1.00% 68.28% 99.00% 1.00% 68.28% 99.00% 99.90% 68.23% 0.01% 1.00% 68.29% 99.00% 100.00% 68.29% Enel Green Power Puglia Srl Rome Italy 1,000,000.00 EUR Enel Green Power Romania Srl Sat Rusu de Sus Nuseni Romania 890,000,500.00 RON Enel Green Power RSA (Pty) Ltd Johannesburg South Africa 1,000.00 ZAR Enel Green Power Salto Apiacás SA São Domingos - Niterói - RJ Brazil 14,412,120.00 BRL Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Enel Green Power International BV 100.00% 68.29% Line-by-line Enel Green Power South Africa 100.00% 68.29% Line-by-line Parque Eólico Serra Azul Ltda 1.00% 68.29% Enel Green Power San Gillio Srl Rome Italy 10,000.00 EUR Electricity generation from renewable resources Line-by-line Enel Brasil Participações Ltda Enel Green Power SpA 99.00% 80.00% 54.63% 269 Company name Headquarters Country Share capital Currency Activity Enel Green Power SAO Judas Eolica SA Rio de Janeiro Brazil 100,000,000.00 BRL Enel Green Power South Africa Amsterdam The Netherlands 18,000.00 EUR Enel Green Power SpA Rome Italy 1,000,000,000.00 EUR Enel Green Power Strambino Solar Srl Enel Green Power Tacaicó Eólica SA Torino Italy 250,000.00 EUR Rio De Janeiro Brazil 8,972,400.00 BRL Enel Green Power TSS Srl Rome Italy 1,000,000.00 EUR Enel Green Power Villoresi Srl Rome Italy 200,000.00 EUR Enel Ingegneria e Ricerca SpA Rome Italy 30,000,000.00 EUR Electricity generation and sales from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Analysis, design, construction and maintenance of engineering works Consolidation method Line-by-line Line-by-line Held by % holding Group % holding Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Green Power International BV 1.00% 68.29% 99.00% 100.00% 68.29% Line-by-line Enel SpA 68.29% 68.29% Line-by-line Enel Green Power SpA 60.00% 40.97% Line-by-line Line-by-line Parque Eólico Fontes dos Ventos Ltda Enel Brasil Participações Ltda Enel Green Power Puglia Srl 1.00% 68.28% 99.00% 100.00% 68.29% Proportionate Enel Green Power SpA 51.00% 34.83% Line-by-line Enel SpA 100.00% 100.00% Enel Insurance NV Amsterdam The Netherlands 60,000.00 EUR Holding company Line-by-line Endesa SA 50.00% 96.03% 1,593,050,000.00 EUR Holding company Line-by-line Enel SpA 100.00% 100.00% Enel Investment Holding BV 50.00% Enel Investment Holding BV Amsterdam The Netherlands Enel Kansas LLC Wilmington (Delaware) USA - USD Enel Lease Eurl (formerly Société du Parc Eolien Grandes Terres Est Eurl) Enel Longanesi Developments Srl Lyon France 500,000.00 EUR Rome Italy 10,000,000.00 EUR Enel M@P Srl Rome Italy 100,000.00 EUR Enel Nevkan Inc. Wilmington (Delaware) USA - USD Electricity generation from renewable resources Electricity generation from renewable resources Prospecting and development of hydrocarbon fields Metering, remote control and connectivity services via power line communication Electricity generation from renewable resources Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel France Sas 100.00% 100.00% Line-by-line Enel Trade SpA 100.00% 100.00% Line-by-line Enel Distribuzione SpA 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Enel OGK-5 OJSC (formerly OGK-5 OJSC) Ekaterinburg Russian Federation 35,371,898,370.00 RUB Electricity generation Line-by-line Enel Productie Srl (formerly Global Power Investment Srl) Bucharest Romania 20,210,200.00 RON Electricity generation Line-by-line Enel Investment Holding BV Enel Investment Holding BV 56.43% 56.43% 100.00% 100.00% Enel Produzione SpA Rome Italy 1,800,000,000.00 EUR Electricity generation Line-by-line Enel SpA 100.00% 100.00% Enel Romania Srl (formerly Enel Servicii Srl) Enel Salt Wells LLC Judetul Ilfov Romania 200,000.00 RON Business services Line-by-line Wilmington (Delaware) USA - USD Electricity generation from renewable resources Line-by-line Enel Servicii Comune SA Bucharest Romania 33,000,000.00 RON Energy services Line-by-line Enel Investment Holding BV Enel Geothermal LLC Enel Distributie Banat SA Enel Distributie Dobrogea SA 100.00% 100.00% 100.00% 68.29% 50.00% 51.00% 50.00% Enel Servizi Srl Rome Italy 50,000,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Personnel administration activities, information technology and business services Enel Servizio Elettrico SpA Rome Enel Sole Srl Rome Italy Italy 10,000,000.00 EUR Electricity sales Line-by-line Enel SpA 100.00% 100.00% 4,600,000.00 EUR Public lighting systems Line-by-line Enel SpA 100.00% 100.00% 270 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Enel Soluções Energéticas Ltda São Domingos - Niterói - RJ Brazil 1,000,000.00 BRL Electricity generation from renewable resources Consolidation method Line-by-line Enel Stillwater LLC Wilmington (Delaware) USA - USD Electricity generation from renewable resources Line-by-line Enel Stoccaggi Srl Rome Italy 3,030,000.00 EUR Line-by-line Construction and operation of storage fields. Storage of natural gas Held by % holding Group % holding Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Geothermal LLC 0.01% 68.29% 99.99% 100.00% 68.29% Enel Trade SpA 100.00% 100.00% Enel Surprise Valley LLC Wilmington USA (Delaware) Enel Texkan Inc. Wilmington (Delaware) USA - USD - USD Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Geothermal LLC 100.00% 68.29% Line-by-line Chi Power Inc. 100.00% 68.29% Enel Trade d.o.o. Zagabria Croatia 2,240,000.00 HRK Electricity trading Line-by-line Enel Trade SpA 100.00% 100.00% Enel Trade Romania Srl Bucharest Romania 21,250,000.00 RON Electricity sourcing and trading Line-by-line Enel Trade SpA 100.00% 100.00% Enel Trade Serbia d.o.o. Belgrado Enel Trade SpA Rome Enel.Factor SpA Enel.Newhydro Srl Enel.si Srl Rome Rome Rome Serbia Italy Italy Italy Italy Enelco SA Athens Greece 60,108.80 EUR Riyadh Saudi Arabia 5,000,000.00 SAR Enelpower Contractor and Development Saudi Arabia Ltd Enelpower do Brasil Ltda 300,000.00 EUR Electricity trading Line-by-line Enel Trade SpA 100.00% 100.00% 90,885,000.00 EUR Fuel trading and logistics - Electricity sales Line-by-line Enel SpA 100.00% 100.00% 12,500,000.00 EUR Factoring 1,000,000.00 EUR 5,000,000.00 EUR Line-by-line Line-by-line Enel SpA Enel SpA 100.00% 100.00% 100.00% 100.00% Line-by-line Enel Energia SpA 100.00% 100.00% Line-by-line Enel Investment Holding BV 75.00% 75.00% Line-by-line Enelpower SpA 51.00% 51.00% Engineering and water systems Plant engineering and energy services Plant construction, operation and maintenance Plant construction, operation and maintenance Rio de Janeiro Brazil 1,242,000.00 BRL Electrical engineering Line-by-line Enel Brasil Participações Ltda 99.99% 68.29% Enel Green Power Latin America Ltda 0.01% Line-by-line Enel SpA 100.00% 100.00% Enelpower Spa Milan Italy 2,000,000.00 EUR ENEOP-Eólicas de Portugal SA Paço de Arcos Portugal 50,000.00 EUR Engineering and construction Electricity generation from renewable resources Equity Enercampo - Produçao de Energia Lda Enercor - Produção de Energia ACE Porto Portugal 249,400.00 EUR Cogeneration of electricity and heat Line-by-line Montijo Portugal - EUR Electricity generation Line-by-line Pp - Co-Geração SA 30.00% 77.80% Energética de Rosselló AIE Barcelona Spain 3,606,060.00 EUR Cogeneration of electricity and heat Equity Energex Co Cayman Islands Cayman 10,000.00 USD Holding company Proportionate Energía de La Loma SA Jean Islands Spain 4,450,000.00 EUR Bio-mass Equity Energia Eolica Srl Rome Italy 4,840,000.00 EUR Energia Global de Mexico (Enermex) SA de Cv Energia Global Operaciones SA Energia Nueva de Iggu Srl de Cv Mexico City Mexico 50,000.00 MXN San José Costa Rica 10,000.00 CRC Mexico City Mexico 10,003,000.00 MXN Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Finerge - Gestão de Projectos Energéticos SA TP - Sociedade Térmica Portuguesa SA Finerge-Gestão de Projectos Energéticos SA 17.98% 27.98% 17.98% 100.00% 77.80% TP - Sociedade Térmica Portuguesa SA Enel Green Power España SL Gas Atacama Chile SA Enel Green Power España SL Enel Green Power SpA 70.00% 27.00% 21.01% 100.00% 17.16% 40.00% 31.12% 51.00% 34.83% Line-by-line Enel Green Power International BV 99.00% 67.61% Line-by-line Enel Green Power Costa Rica 100.00% 68.29% Line-by-line Enel Green Power México Srl de Cv 99.90% 68.23% Energía Nueva Energía Limpia México Srl de Cv 0.01% 271 Company name Headquarters Country Share capital Currency Activity Energia Nueva Energia Limpia Mexico Srl de Cv Mexico City Mexico 5,339,650.00 MXN Electricity generation from renewable resources Consolidation method Line-by-line Energías Alternativas del Sur SL Las Palmas de Gran Canaria Spain 601,000.00 EUR Electricity generation from renewable resources Proportionate Held by % holding Group % holding Enel Green Power International BV Enel Green Power Guatemala SA Enel Green Power España SL 99.96% 68.29% 0.04% 50.00% 38.90% Energías de Aragón I SL Zaragoza Spain 3,200,000.00 EUR Electricity transmission, distribution and sale Line-by-line Endesa Generación SA 100.00% 92.06% Energías de Aragón II SL Zaragoza Spain 18,500,000.00 EUR Electricity generation Line-by-line Energías de Graus SL Barcelona Spain 1,298,160.00 EUR Hydroelectric plants Line-by-line Energías de La Mancha SA Villarta de San Juan (Ciudad Real) Spain 279,500.00 EUR Bio-mass Line-by-line Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL 100.00% 77.80% 66.67% 51.87% 68.42% 53.23% La Coruña Spain 270,450.00 EUR Madrid Spain 963,300.00 EUR Madrid Spain 1,722,600.00 EUR Torre del Bierzo Spain 1,635,000.00 EUR Mexico DF Mexico 656,615,400.00 MXN Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power España SL 77.00% 59.90% Line-by-line Enel Green Power España SL 80.00% 62.24% Line-by-line Enel Green Power España SL 100.00% 77.80% Proportionate Enel Green Power España SL 50.00% 38.90% Line-by-line Energias Especiales de Careon SA Energias Especiales de Pena Armada SA Energias Especiales del Alto Ulla SA Energias Especiales del Bierzo SA Energias Renovables La Mata SAPI de Cv Energie Electrique de Tahaddart SA Energosluzby AS (in liquidation) Tangeri Morocco 750,400,000.00 MAD Combined-cycle generation plants Proportionate Trnava Slovakia 33,194.00 EUR Business services - Energía Nueva de Iggu Srl de Cv Enel Green Power México Srl de Cv Endesa Generación SA Slovenskè elektrárne AS Slovenskè elektrárne AS Enel Produzione SpA Enel Green Power España SL 0.01% 68.29% 99.99% 32.00% 29.46% 100.00% 66.00% 20.00% 13.20% 51.00% 51.00% 45.00% 35.01% Operation of optical fiber network Electricity purchases and sales Equity Line-by-line Electricity generation from renewable resources - Electricity generation from renewable resources Combined-cycle generation plants Electricity generation and distribution Electricity generation from renewable resources Water treatment and distribution Electricity generation from renewable resources Electricity generation from renewable resources Wind plant development Line-by-line Maicor Wind Srl 100.00% 40.97% Held for sale Finerge-Gestão de Projectos Energéticos SA Tp - Sociedade Térmica Portuguesa SA 50.00% 77.80% 50.00% Line-by-line Endesa SA 20.30% 55.81% Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Endesa Latinoamerica SA Enel Green Power Hellas SA Finerge-Gestão de Projectos Energéticos SA Finerge-Gestão de Projectos Energéticos SA Finerge-Gestão de Projectos Energéticos SA Enel Green Power España SL Enel Green Power España SL 40.32% 88.80% 60.64% 75.00% 58.35% 51.00% 39.68% 51.00% 39.68% 51.00% 39.68% 40.00% 31.12% Energotel AS Bratislava Slovakia 2,191,200.00 EUR ENergy Hydro Piave Srl Soverzene Italy 800,000.00 EUR Enerlasa SA (in liquidation) Madrid Spain 1,021,700.58 EUR Enerlive Srl Rome Italy 6,520,000.00 EUR Enerlousado Lda Porto Portugal 5,000.00 EUR Enersis SA Santiago Chile 5,669,280.72 CLP Enexon Hellas SA Maroussi Greece 18,771,500.00 EUR Eol Verde Energia Eólica SA Porto Portugal 50,000.00 EUR Eolcinf - Produçao de Energia Eólica Lda Eolflor - Produçao de Energia Eólica Lda Porto Portugal 5,000.00 EUR Porto Portugal 5,000.00 EUR Eólica del Noroeste SL La Coruña Spain 36,100.00 EUR Eólica del Principado SAU Eólica Fazenda Nova - Generaçao e Comercializaçao de Energia SA 272 Oviedo Spain 90,000.00 EUR Electricity generation from renewable resources Equity Rio Grande do Norte Brazil 1,839,000.00 BRL Wind plants Line-by-line Endesa Brasil SA 99.95% 46.59% EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Eólica Valle del Ebro SA Zaragoza Spain 5,559,340.00 EUR Eólica Zopiloapan SAPI de CV Mexico DF Mexico 1,877,201,538.00 MXN Eólicas de Agaete SL Las Palmas de Gran Canaria Spain Eólicas de Fuencaliente SA Las Palmas de Gran Canaria Spain Eólicas de Fuerteventura AIE Fuerteventura - Las Palmas Spain 240,400.00 EUR 216,360.00 EUR - EUR Eólicas de La Patagonia SA Buenos Aires Argentina 480,930.00 ARS Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Line-by-line Line-by-line Line-by-line Held by % holding Group % holding Enel Green Power España SL Enel Green Power Partecipazioni Speciali Srl Enel Green Power México Srl de Cv Enel Green Power España SL 50.50% 39.29% 39.50% 65.88% 56.98% 80.00% 62.24% Line-by-line Enel Green Power España SL 55.00% 42.79% Equity Enel Green Power España SL 40.00% 31.12% Proportionate Enel Green Power España SL 50.00% 38.90% Eólicas de Lanzarote SL Eólicas de Tenerife AIE Las Palmas de Gran Canaria Santa Cruz de Tenerife Spain Spain Eólicas de Tirajana AIE Las Palmas de Gran Canaria Spain 1,758,000.00 EUR Electricity generation and distribution Equity Proportionate Enel Green Power España SL Enel Green Power España SL 40.00% 31.12% 50.00% 38.90% 420,708.40 EUR - EUR Erecosalz SL (in liquidation) Zaragoza Spain 18,000.00 EUR Erfei AIE (n liquidation) Tarragona Spain 720,000.00 EUR Essex Company Boston (Massachusetts) USA 100.00 USD Zaragoza Spain 3,505,000.00 EUR Teruel Spain 3,230,000.00 EUR Zaragoza Spain 5,488,500.00 EUR Zaragoza Spain 8,046,800.00 EUR Zaragoza Spain 4,200,000.00 EUR Explotaciones Eólicas de Escucha SA Explotaciones Eólicas El Puerto SA Explotaciones Eólicas Saso Plano SA Explotaciones Eólicas Sierra Costera SA Explotaciones Eólicas Sierra La Virgen SA Fábrica do Arco - Recursos Energéticos SA Feneralt - Produção de Energia ACE Electricity generation from renewable resources Electricity generation from renewable resources Cogeneration of electricity and heat Cogeneration of electricity and heat Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Green Power España SL 60.00% 46.68% - - Line-by-line Enel Green Power España SL Enel Green Power España SL Enel Green Power North America Inc. 33.00% 25.67% 42.00% 32.67% 100.00% 68.29% Line-by-line Enel Green Power España SL 70.00% 54.46% Line-by-line Enel Green Power España SL 73.60% 57.26% Line-by-line Enel Green Power España SL 65.00% 50.57% Line-by-line Enel Green Power España SL 90.00% 70.02% Line-by-line Enel Green Power España SL 90.00% 70.02% Finerge-Gestão De Projectos Energéticos SA Tp - Sociedade Térmica Portuguesa SA Enel Green Power España SL 50.00% 38.90% 25.00% 19.45% 100.00% 77.80% Santo Tirso Portugal 500,000.00 EUR Electricity generation Proportionate Barcelos Portugal - EUR Electricity generation Equity Finerge-Gestão de Projectos Energéticos SA Porto Portugal 750,000.00 EUR Line-by-line Cogeneration of electricity and heat and generation from renewable resources Florence Hills LLC Minneapolis (Minnesota) USA Fotovoltaica Insular SL Las Palmas de Gran Canaria Spain Fulcrum Inc. Boise (Idaho) USA 1,002.50 USD Futuresolar Srl Bucharest Romania 30,100,000.00 RON Electricity generation from renewable resources Electricity generation from renewable resources - USD Electricity generation from renewable resources Line-by-line Chi Minnesota Wind LLC 51.00% 34.83% 3,008.00 EUR Photovoltaic plants Proportionate Line-by-line Endesa Ingeniería SLU Enel Green Power North America Inc. 50.00% 46.03% 100.00% 68.29% Line-by-line Enel Green Power Romania Srl 100.00% 68.29% Gas Atacama Chile SA Santiago Chile 185,025,186.00 USD Electricity generation Proportionate Gas Atacama SA 99.90% 17.16% Compañía Eléctrica Tarapacá SA 0.05% 273 Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Gas Atacama SA Santiago Chile 291,484,088.00 USD Holding company Proportionate Gas y Electricidad Generación SAU Palma De Mallorca Gasificadora Regional Canaria SA Las Palmas de Gran Canaria Spain Spain 213,775,700.00 EUR Electricity generation Line-by-line 240,000.00 EUR Gas distribution Line-by-line Inversiones Gasatacama Holding Ltda Endesa Generación SA Endesa Generación Portugal SA Endesa Gas SAU 100.00% 17.16% 100.00% 92.06% 28.00% 92.04% 72.00% Santiago Chile 208,173,124.00 USD Natural gas transport Proportionate Energex Co 42.71% 17.16% Gasoducto Atacama Argentina SA Gasoducto Atacama Argentina SA Sucursal Argentina Buenos Aires Argentina - ARS Natural gas transport Proportionate Gasoducto Taltal SA Santiago Chile 18,638.52 CLP Natural gas transport Proportionate Gauley Hydro LLC Gauley River Management Corporation Wilmington (Delaware) Willison (Vermont) Gauley River Power Partners LP Willison (Vermont) USA USA USA - USD 1.00 USD - USD Generadora de Occidente Ltda Guatemala Guatemala 16,261,697.33 GTQ Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Generadora Montecristo SA Guatemala Guatemala 3,820,000.00 GTQ Electricity generation from renewable resources Line-by-line Geotermica del Norte SA Santiago Chile 64,779,811,451.00 CLP Geotermica Nicaraguense SA Managua Nicaragua 63,161,750.00 NIO Geronimo Huron Wind Farm LLC Michigan USA Geronimo Wind Energy LLC Minneapolis (Minnesota) USA - USD - USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Gnl Chile SA Santiago Chile 3,026,160.00 USD Design and LNG supply Equity Gnl Norte SA Santiago Chile 1,000,000.00 CLP Electricity generation Proportionate Gnl Quintero SA Santiago Chile 114,057,353.00 USD Design and LNG supply Equity Compañía Eléctrica Tarapacá SA 0.03% Gas Atacama SA 57.23% Gasoducto Atacama Argentina SA Gasoducto Atacama Argentina SA 100.00% 17.16% 0.12% 17.16% Gas Atacama Chile SA 99.88% Line-by-line Essex Company 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Gauley River Management Corporation Enel Green Power International BV Enel Green Power Guatemala SA Enel Green Power International BV 100.00% 68.29% 99.00% 68.29% 1.00% 99.99% 68.29% Enel Green Power Guatemala SA 0.01% Line-by-line Empresa Nacional De Electricidad SA Enel Green Power Chile Ltda 61.00% 20.42% 51.00% 34.80% Line-by-line Enel Green Power SpA 60.00% 40.97% Line-by-line Enel Kansas LLC 100.00% 68.29% Egp Geronimo Holding Company Inc. Empresa Nacional de Electricidad SA Gasoducto Taltal SA Gas Atacama Chile SA Empresa Nacional de Electricidad SA 49.20% 33.60% 33.33% 11.16% 50.00% 17.16% 50.00% 20.00% 6.69% Generalima SA Generandes Perú SA Lima Lima Peru Peru 146,534,335.00 PEN Holding company Line-by-line Enersis SA 100.00% 55.81% 853,429,020.00 PEN Holding company Line-by-line Goodwell Wind Project, LLC Wilmington (Delaware) USA - USD Electricity generation from renewable resources Line-by-line Enel Kansas LLC 100.00% 68.29% Gorona del Viento El Hierro SA Valverde de El Hierro Spain 23,936,710.00 EUR Madrid Spain 1,717,049.55 EUR Development and maintenance of El Hierro generation plant Equity Electricity generation from renewable resources - Unión Eléctrica de Canarias Generación SAU Enel Green Power España SL 30.00% 27.62% 24.24% 18.86% Mentana (Rome) Italy 14,001.00 EUR Design and research Proportionate Enel Servizi Srl 0.01% 0.01% Green Fuel Corporacion, SA (in liquidation) GreenLab Engineering Srl Guadarranque Solar 4 SL Unipersonal Seville Spain 3,006.00 EUR Electricity generation from renewable resources Line-by-line Endesa Generación II SA 100.00% 92.06% 274 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity GV Energie Rigenerabili ITAL-RO Srl Bucharest Romania 675,400.00 RON Hadley Ridge LLC Minneapolis (Minnesota) USA - USD Hidroeléctrica de Catalunya SL Barcelona Spain 126,210.00 EUR Hidroeléctrica de Ourol SL Lugo Spain 1,608,200.00 EUR Hidroeléctrica El Chocón SA Buenos Aires Argentina 298,584,050.00 ARS Electricity generation from renewable resources Electricity generation from renewable resources Electricity transmission and distribution Electricity generation from renewable resources Electricity generation and sale Consolidation method Line-by-line Held by % holding Group % holding Enel Green Power Romania Srl 100.00% 68.29% Line-by-line Chi Minnesota Wind LLC 51.00% 34.83% Line-by-line Endesa Red SA 100.00% 92.06% Equity Enel Green Power España SL 30.00% 23.34% Line-by-line Empresa Nacional de Electricidad SA 2.48% 21.88% Endesa Argentina SA 6.19% Hidroinvest SA Enel Green Power México Srl de Cv Hidroeléctrica De Catalunya SL Empresa Nacional de Electricidad SA Endesa Argentina SA Endesa Generación Portugal SA Endesa Generación SA Enel Green Power North America Inc. 59.00% 99.99% 68.28% 75.00% 69.05% 41.94% 32.17% 54.15% 10.00% 92.05% 90.00% 100.00% 68.29% Hidroelectricidad del Pacifico Srl de Cv Mexico DF Mexico 30,891,536.00 MXN Hidroflamicell SL Barcelona Spain 78,120.00 EUR Electricity generation from renewable resources Electricity distribution and sale Line-by-line Line-by-line Hidroinvest SA Buenos Aires Argentina 55,312,093.00 ARS Holding company Line-by-line Hidromondego - Hidroelectrica do Mondego Lda Lisbon Portugal 3,000.00 EUR Hydroelectric power Line-by-line Highfalls Hydro Company Inc. Wilmington (Delaware) USA - USD Line-by-line Colonia Escalon El Salvador 404,930.00 SVC Hipotecaria de Santa Ana Ltda de Cv Hispano Generación de Energía Solar SL Hope Creek LLC Jerez de los Caballeros (Badajoz) Minneapolis (Minnesota) Hydro Development Group Inc. Albany (New York) Hydro Dolomiti Enel Srl Trento Hydro Energies Corporation Willison (Vermont) Hydro Finance Holding Company Inc. Wilmington (Delaware) Hydrogen Park-Marghera per l’idrogeno Scrl Venice Spain 3,500.00 EUR USA USA Italy USA USA Italy - USD 12.25 USD 3,000,000.00 EUR 5,000.00 USD 100.00 USD 245,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation, purchases and sales Electricity generation from renewable resources Electricity generation from renewable resources Equity Enel Green Power El Salvador SA de CV 20.00% 13.66% Line-by-line Enel Green Power España SL 51.00% 39.68% Line-by-line Chi Minnesota Wind LLC 51.00% 34.83% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Proportionate Line-by-line Enel Produzione SpA Enel Green Power North America Inc. 49.00% 49.00% 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Development of studies and projects for the use of hydrogen Line-by-line Enel Produzione SpA 60.00% 60.00% Enel Green Power International BV 100.00% 68.29% 1.00% 0.01% 0.01% 1.10% 68.29% 98.90% 99.00% 34.31% Enel Green Power International BV Enel Green Power Romania Srl Compañía Eléctrica Tarapacá SA Hydromac Energy BV Amsterdam The Netherlands 18,000.00 EUR Holding company Line-by-line Ict Servicios Informáticos Ltda Santiago Chile 500,000,000.00 CLP ICT services Line-by-line Enersis SA 99.00% 55.80% I-EM Srl Turin Italy 10,001.00 EUR IMA Engineering Solutions. Srl Prahova Romania 90,000.00 RON Design and development Electricity generation from renewable resources Line-by-line Chilectra SA Proportionate Enel Servizi Srl Ingendesa do Brasil Ltda Rio de Janeiro Brazil 500,000.00 BRL Design, engineering and consulting Line-by-line Inkolan Informacion y Coordinacion de Obras AIE Inmobiliaria Manso de Velasco Ltda Bilbao Spain 84,140.00 EUR Information on infrastructure of Inkolan associates Equity Endesa Distribución Eléctrica SL 14.29% 13.16% Santiago Chile 25,916,800,510.00 CLP Engineering and construction Line-by-line Enersis SA 100.00% 55.81% Empresa Nacional De Electricidad SA 1.00% 275 Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding International Endesa BV Amsterdam The Netherlands 15,428,520.00 EUR Holding company Line-by-line Endesa SA 100.00% 92.06% International Eolian of Grammatiko SA International Eolian of Korinthia SA International Eolian of Peloponnisos 1 SA International Eolian of Peloponnisos 2 SA International Eolian of Peloponnisos 3 SA International Eolian of Peloponnisos 4 SA International Eolian of Peloponnisos 5 SA International Eolian of Peloponnisos 6 SA International Eolian of Peloponnisos 7 SA International Eolian of Peloponnisos 8 SA International Eolian of Skopelos SA Maroussi Greece 436,000.00 EUR Maroussi Greece 6,471,798.00 EUR Maroussi Greece 418,000.00 EUR Maroussi Greece 514,000.00 EUR Maroussi Greece 423,000.00 EUR Maroussi Greece 465,000.00 EUR Maroussi Greece 509,500.00 EUR Maroussi Greece 447,000.00 EUR Maroussi Greece 418,000.00 EUR Maroussi Greece 418,000.00 EUR Maroussi Greece 224,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Enel Green Power Hellas SA 30.00% 20.49% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Equity Equity Equity Equity Equity Equity Equity Equity Equity Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% International Multimedia University Srl Rome Italy 24,000.00 EUR Long-distance learning - Enel Servizi Srl 13.04% 13.04% International Wind Parks of Achaia SA Maroussi Greece 10,346,310.00 EUR Electricity generation from renewable resources Line-by-line Enel Green Power Hellas SA 100.00% 68.29% Inversiones Distrilima SA Lima Peru 287,837,245.00 PEN Holding company Line-by-line Enersis SA 69.85% 55.65% Inversiones Gasatacama Holding Ltda Santiago Chile 333,520,000.00 USD Natural gas transport Proportionate Chilectra SA Compañía Eléctrica Tarapacá SA 30.15% 50.00% 17.16% Inversora Codensa Sas Bogotá DC Colombia 5,000,000.00 COP Electricity transmission and distribution Line-by-line Codensa SA ESP 100.00% 27.01% Inversora Dock Sud SA (formerly Sociedad Inversora Dock Sud SA) Buenos Aires Argentina 241,490,000.00 ARS Holding company Line-by-line Enersis SA 57.14% 31.89% Isamu Ikeda Energia SA Rio de Janeiro Brazil 61,474,475.77 BRL Italgest Energy (Pty) Ltd Lombardy east South Africa 1,000.00 ZAR Jack River LLC Jessica Mills LLC Julia Hills LLC Minneapolis (Minnesota) Minneapolis (Minnesota) Minneapolis (Minnesota) USA USA USA - USD - USD - USD Kalenta Ltd Maroussi Greece 2,367,000.00 EUR Electricity generation and sale Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Line-by-line Line-by-line Enel Brasil Participações Ltda Enel Green Power South Africa 100.00% 68.29% 100.00% 68.29% Chi Minnesota Wind LLC Chi Minnesota Wind LLC Chi Minnesota Wind LLC 51.00% 34.83% 51.00% 34.83% 51.00% 34.83% Proportionate Line-by-line Enel Green Power & Sharp Solar Energy Srl Enel Green Power North America Inc. 100.00% 34.14% 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Equity Equity Line-by-line Endesa Gas SAU 27.93% 25.71% Endesa Generación SA Enel Green Power North America Inc. 33.33% 30.68% 100.00% 68.29% 100.00 USD 100.00 USD 657,000.00 EUR Services 224,286.00 EUR Services 100.00 USD Electricity generation from renewable resources Kings River Hydro Company Inc. Wilmington (Delaware) Kinneytown Hydro Company Inc. Wilmington (Delaware) Kromschroeder SA Barcelona La Pereda Co2 AIE Oviedo LaChute Hydro Company Inc. Wilmington (Delaware) USA USA Spain Spain USA 276 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity LaGeo SA de Cv Ahuachapan El Salvador 2,562,826,700.00 SVC Lawrence Hydroelectric Associates LP Boston (Massachusetts) USA - USD Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Equity Held by % holding Group % holding Enel Green Power SpA 36.20% 24.72% Line-by-line Enel Green Power North America Inc. 7.50% 68.29% Essex Company 92.50% Lipetskenergosbyt LLC Lipetskaya Oblast Russian 7,500.00 RUB Electricity sales Proportionate RusEnergosbyt C LLC 75.00% 18.93% Federation Little Elk Wind Project LLC Oklahoma City - Oklahoma USA Littleville Power Company Inc Boston (Massachusetts) USA Lower Saranac Corporation New York (New York) USA Lower Saranac Hydro Partners LP Wilmington (Delaware) USA - USD 1.00 USD 1.00 USD - USD Luz Andes Ltda Santiago Chile 1,224,348.00 CLP Maicor Wind Srl Rome Italy 20,850,000.00 EUR Management Buildings Company Srl Podari Romania 14,000.00 RON Marcinelle Energie SA Charleroi Belgium 110,061,500.00 EUR Marko PV Energy SA Maroussi Greece 420,000.00 EUR Mascoma Hydro Corporation Concord (New Hampshire) USA Mason Mountain Wind Project LLC Wilmington (Delaware) USA 1.00 USD - USD Matrigenix (Pty) Ltd Houghton South Africa 120.00 ZAR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity and fuel transport, distribution and sale Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation, transport, sale and trading Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Kansas LLC 100.00% 68.29% Line-by-line Line-by-line Line-by-line Hydro Development Group Inc. Twin Saranac Holdings LLC Twin Saranac Holdings LLC Lower Saranac Corporation 100.00% 68.29% 100.00% 68.29% 99.00% 68.29% 1.00% Line-by-line Enersis SA 0.10% 55.30% Line-by-line Line-by-line Held for sale Proportionate Line-by-line Chilectra SA Enel Green Power SpA 99.90% 60.00% 40.97% Enel Green Power International BV Enel Green Power Romania Srl Enel Investment Holding BV Enel Green Power & Sharp Solar Energy Srl Enel Green Power North America Inc. 0.71% 68.29% 99.29% 100.00% 100.00% 100.00% 34.14% 100.00% 68.29% Line-by-line Padoma Wind Power LLC 100.00% 68.29% Line-by-line Enel Green Power South Africa 100.00% 68.29% Medidas Ambientales SL Medina de Pomar Spain 60,100.00 EUR Environmental studies Proportionate Nuclenor SA 50.00% 23.02% Metro Wind LLC Mexicana de Hidroelectricidad Mexhidro Srl De Cv Midway Farms Wind Project LLC (Burgos) Minneapolis (Minnesota) USA - USD Mexico City Mexico 181,728,601.00 MXN Dallas (Texas) USA - USD Mill Shoals Hydro Company Inc. Wilmington (Delaware) USA 100.00 USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Chi Minnesota Wind LLC 51.00% 34.83% Line-by-line Line-by-line Enel Green Power México S de RL de Cv Trade Wind Energy LLC 99.99% 68.28% 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Minas de Estercuel SA Madrid Minas Gargallo SL Madrid Spain Spain 93,160.00 EUR Mineral deposits Line-by-line Minas Gargallo SL 99.65% 91.66% 150,000.00 EUR Mineral deposits Line-by-line Minicentrales del Canal de Las Bárdenas AIE Minicentrales del Canal Imperial-Gallur SL Zaragoza Spain 1,202,000.00 EUR Hydroelectric plants - Zaragoza Spain 1,820,000.00 EUR Hydroelectric plants Equity Missisquoi Associates GP Los Angeles USA (California) - USD Electricity generation from renewable resources Line-by-line Molinos de Viento del Arenal SA San Josè Costa Rica 9,709,200.00 USD Electricity generation from renewable resources Line-by-line Endesa Generación SA Enel Green Power España SL Enel Green Power España SL Sheldon Springs Hydro Associates LP Sheldon Vermont Hydro Company Inc. Enel Green Power Costa Rica 99.91% 91.98% 15.00% 11.67% 36.50% 28.40% 99.00% 68.29% 1.00% 49.00% 33.46% 277 Company name Headquarters Country Share capital Currency Activity Mustang Run Wind Project LLC Oklahoma City - Oklahoma USA - USD Myrini Energiaki SA Maroussi Greece 420,000.00 EUR Nevkan Renewables LLC Wilmington USA (Delaware) Newbury Hydro Company Burlington (Vermont) USA - USD - USD Newind Group Inc. St. John (Newfoundland) Canada 578,192.00 CAD Northwest Hydro Inc. Wilmington (Delaware) Notch Butte Hydro Company Inc. Wilmington (Delaware) USA USA 100.00 USD 100.00 USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Held by % holding Group % holding Line-by-line Enel Kansas LLC 100.00% 68.29% Proportionate Enel Green Power & Sharp Solar Energy Srl 100.00% 34.14% Line-by-line Enel Nevkan Inc. 100.00% 68.29% Line-by-line Line-by-line Enel Green Power North America Inc. Sweetwater Hydroelectric Inc. Enel Green Power Canada Inc. 99.00% 68.29% 1.00% 100.00% 68.29% Line-by-line Chi West Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Nuclenor SA Burgos Spain 102,000,000.00 EUR Nuclear plant Proportionate Endesa Generación SA 50.00% 46.03% Madrid Spain 3,010.00 EUR Electricity generation Line-by-line Endesa SA 100.00% 92.06% Madrid Spain 3,200.00 EUR Real estate Line-by-line Endesa SA 60.00% 55.24% Nueva Compañía de Distribución Eléctrica 4 SL Nueva Marina Real Estate SL (Amministrazione in Concordato) Nuove Energie Srl Porto Empedocle Italy 54,410,000.00 EUR Line-by-line Enel Trade SpA 100.00% 100.00% Construction and management of LNG regasification infrastructure Ochrana A Bezpecnost Se AS Odell Wind Farm LLC Oficina de Cambios de Suministrador SA Mochovce Slovakia 33,193.92 EUR Security services Line-by-line Slovenskè Elektrárne AS 100.00% 66.00% Minneapolis (Minnesota) USA - USD Electricity generation from renewable resources Line-by-line Enel Kansas LLC 100.00% 68.29% Madrid Spain 70,000.00 EUR Services associated with the marketing of energy products - Endesa Distribución Eléctrica SL 5.19% 18.41% OGK-5 Finance LLC Moscow Russian Federation 10,000,000.00 RUB Finance Line-by-line Operacion y Mantenimiento Tierras Morenas SA San José Costa Rica 30,000.00 CRC Origin Wind Energy LLC Wilmington USA - USD (Delaware) Ottauquechee Hydro Company Inc. Wilmington (Delaware) USA 100.00 USD Oxagesa AIE Teruel Spain 6,010.00 EUR Padoma Wind Power LLC Los Angeles USA - USD (California) Paravento SL Lugo Spain 3,006.00 EUR Parc Eolic Els Aligars SL Barcelona Spain 1,313,100.00 EUR Parc Eolic La Tossa-La Mola D’en Pascual SL Barcelona Spain 1,183,100.00 EUR Parc Eolien de Bouville Sasu Lyon Parc Eolien de Coulours SARL Lyon France France 88,800.00 EUR 1,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Cogeneration of electricity and heat Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources 278 Line-by-line Line-by-line Line-by-line Equity Line-by-line Line-by-line Equity Equity Endesa Energía SA 11.50% Endesa Energía XXI SL 2.96% Endesa Gas SAU 0.35% Enel OGK-5 OJSC (Formerly OGK-5 OJSC) Enel Green Power Costa Rica Enel Green Power North America Inc. Enel Green Power North America Inc. Enel Green Power España SL Enel Green Power North America Inc. Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL 100.00% 56.43% 85.00% 58.05% 100.00% 68.29% 100.00% 68.29% 33.33% 25.93% 100.00% 68.29% 90.00% 70.02% 30.00% 23.34% 30.00% 23.34% Line-by-line Enel Green Power France Sas 100.00% 68.29% Line-by-line Enel Green Power France Sas 100.00% 68.29% EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Parc Eolien de La Grande Epine Sasu Lyon Parc Eolien des Ramiers Sasu Lyon France France Parque Eólico a Capelada AIE Santiago de Compostela Spain Parque Eólico Carretera de Arinaga SA Las Palmas de Gran Canaria Spain 37,000.00 EUR 88,800.00 EUR 5,857,586.40 EUR 1,603,000.00 EUR Parque Eólico Curva dos Ventos Ltda Bahia Brazil 420,000.00 BRL Parque Eólico de Aragón AIE Parque Eólico de Barbanza SA Parque eolico de Belmonte SA Parque Eólico de Gevancas SA Parque Eólico de San Andrés SA Zaragoza Spain 601,000.00 EUR La Coruña Spain 3,606,000.00 EUR Madrid Spain 120,400.00 EUR Porto Portugal 50,000.00 EUR La Coruña Spain 552,920.00 EUR Parque Eólico de Santa Lucía SA Las Palmas de Gran Canaria Spain 901,500.00 EUR Parque Eólico do Alto da Vaca Lda Parque Eólico do Vale do Abade Lda Parque Eólico Engenho Geradora de Energia Ltda Porto Portugal 125,000.00 EUR Porto Portugal 5,000.00 EUR Fortaleza Brazil 685,423.00 BRL Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Line-by-line Held by % holding Group % holding Enel Green Power France Sas 100.00% 68.29% Line-by-line Enel Green Power France Sas 100.00% 68.29% Line-by-line Enel Green Power España SL 100.00% 77.80% Line-by-line Enel Green Power España SL 80.00% 62.24% Line-by-line Line-by-line Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Green Power España SL 1.00% 68.29% 99.00% 80.00% 62.24% Line-by-line Enel Green Power España SL 75.00% 58.35% Line-by-line Enel Green Power España SL 50.16% 39.02% Line-by-line Line-by-line Finerge-Gestão de Projectos Energéticos SA Enel Green Power España SL 100.00% 77.80% 82.00% 63.79% Line-by-line Enel Green Power España SL 65.67% 51.09% Line-by-line Line-by-line Line-by-line Parque Eólico Finca de Mogán SA Las Palmas de Gran Canaria Spain 3,810,340.00 EUR Construction and operation of wind plants Line-by-line Parque Eólico Fontes dos Ventos Ltda Parque Eólico Montes de Las Navas SA Parque Eólico Ouroventos Ltda Parque Eólico Punta de Teno SA Parque Eólico Serra Azul Ltda Recife Brazil 5,091,945.30 BRL Madrid Spain 6,540,000.00 EUR Bahia Brazil 566,347.00 BRL Tenerife Spain 528,880.00 EUR Bahia Brazil 940,567.00 BRL Electricity generation from renewable resources Line-by-line Construction and operation of wind plants Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Parque Eólico Serra da Capucha SA Porto Portugal 50,000.00 EUR Electricity generation from renewable resources Line-by-line Finerge-Gestão de Projectos Energéticos SA Finerge-Gestão de Projectos Energéticos SA Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Green Power España SL Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Green Power España SL Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Green Power España SL Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Finerge - Gestão de Projectos Energéticos SA TP - Sociedade Térmica Portuguesa SA 75.00% 58.35% 51.00% 39.68% 1.00% 68.29% 99.00% 90.00% 70.02% 0.04% 67.63% 99.00% 75.50% 58.74% 1.00% 68.29% 99.00% 52.00% 40.45% 1.00% 68.29% 99.00% 50.00% 77.80% 50.00% 279 Company name Headquarters Country Share capital Currency Activity Parque Eólico Sierra del Madero SA Soria Spain 7,193,970.00 EUR Parque Eólico Taltal SA Santiago Chile 20,878,010,000.00 CLP Electricity generation from renewable resources Electricity generation from renewable resources Consolidation method Line-by-line Line-by-line Parque Eólico Valle de los Vientos SA Santiago Chile 566,096,564.00 CLP Fortaleza Brazil 440,267.00 BRL Santiago Chile 66,092,165,171.00 CLP Parque Eólico Ventania Geradora de Energia Ltda Parque Talinay Oriente SA Pegop - Energia Eléctrica SA Abrantes Portugal 50,000.00 EUR Electricity generation Proportionate Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Electricity generation from renewable resources Line-by-line Pelzer Hydro Company Inc. Wilmington (Delaware) USA 100.00 USD Pereda Power SL PH Chucas SA La Pereda (Mieres) San José Spain 5,000.00 EUR Costa Rica 100,000.00 CRC Electricity generation from renewable resources Development of generation activities Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Held by % holding Group % holding Enel Green Power España SL Enel Green Power Chile Ltda Enel Green Power Latin America Ltda Enel Green Power Chile Ltda Enel Green Power Latin America Ltda Enel Green Power Desenvolvimento Ltda Enel Brasil Participações Ltda Enel Green Power SpA 58.00% 45.12% 99.99% 68.23% 0.01% 99.99% 68.23% 0.01% 1.00% 68.29% 99.00% 34.57% 65.17% Enel Green Power Chile Ltda Endesa Generación Portugal SA 60.92% 0.02% 46.03% Endesa Generación SA 49.98% Consolidated Hydro Southeast Inc. Endesa Generación II SA Enel Green Power Costa Rica Enel Green Power SpA Enel Green Power Costa Rica 100.00% 68.29% 70.00% 64.44% 40.31% 42.67% 22.17% 33.44% 22.84% PH Don Pedro SA San José Costa Rica 100,001.00 CRC PH Guacimo SA San José Costa Rica 50,000.00 CRC PH Rio Volcan SA San José Costa Rica 100,001.00 CRC Planta Eólica Europea SA Seville Spain 1,198,530.00 EUR Powercer - Sociedade de Cogeraçao de Vialonga SA Loures Portugal 50,000.00 EUR Powercrop Srl Bologna Italy 4,000,000.00 EUR Pp - Co-Geração SA São Paio de Oleiros Portugal 50,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Cogeneration of electricity and heat Electricity generation from renewable resources Cogeneration of electricity and heat Pragma Energy SA (in liquidation) Lugano Switzerland 4,000,000.00 CHF Coal trading - Prairie Rose Transmission, LLC Minneapolis (Minnesota) USA Prairie Rose Wind Project LLC New York (New York) USA - USD - USD Primavera Energia SA Rio de Janeiro Brazil 36,965,444.64 BRL Valladolid Spain 88,398.00 EUR Valladolid Spain 710,500.00 EUR Productor Regional de Energía Renovable III SA Productor Regional de Energia Renovable SA Productora de Energías SA Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation and sale Development and construction of wind plants Development and construction of wind plants Barcelona Spain 30,050.00 EUR Hydroelectric plants Equity Prof-Energo LLC Sredneuralsk Russian Federation 10,000.00 RUB Energy services Line-by-line 280 Line-by-line Line-by-line Enel Green Power Costa Rica 65.00% 44.39% Line-by-line Enel Green Power Costa Rica 34.32% 23.44% Line-by-line Enel Green Power España SL 56.12% 43.66% Equity Proportionate Line-by-line Line-by-line Finerge-Gestão de Projectos Energéticos SA Enel Green Power SpA Tp - Sociedade Térmica Portuguesa SA Enel Investment Holding BV Prairie Rose Wind Project LLC 30.00% 23.34% 50.00% 34.14% 100.00% 77.80% 100.00% 100.00% 100.00% 51.22% Line-by-line Enel Kansas LLC 75.00% 51.22% Line-by-line Line-by-line Enel Brasil Participações Ltda Enel Green Power España SL 100.00% 68.29% 82.89% 64.49% Line-by-line Enel Green Power España SL 85.00% 66.13% Enel Green Power España SL Sanatorium- Preventorium Energetik LLC 30.00% 23.34% 100.00% 56.43% EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Progas SA Santiago Chile 1,526,000.00 CLP Gas distribution Proportionate Gas Atacama SA 0.10% 17.16% Gas Atacama Chile SA Enel Green Power España SL Bolonia Real Estate SL 99.90% 100.00% 77.80% 45.00% 41.43% Promociones Energeticas del Bierzo SL Ponferrada Spain 12,020.00 EUR Electricity generation from renewable resources Line-by-line Madrid Spain 6,000.00 EUR Real estate Equity Promociones y Desarrollo Sector Levante SL Proveedora de Electricidad de Occidente Srl de Cv Proyecto Almería Mediterraneo SA Proyectos Universitarios de Energias Renovables SL PT Bayan Resources Tbk Puignerel AIE (in liquidation) Pulida Energy (Pty) Ltd Mexico City Mexico 89,708,335.00 MXN Madrid Spain 601,000.00 EUR Alicante Spain 180,000.00 EUR Electricity generation from renewable resources Desalinization and water supply Electricity generation from renewable resources Line-by-line Enel Green Power México Srl de Cv 99.99% 68.28% Equity Endesa SA 45.00% 41.43% Proportionate Enel Green Power España SL 33.33% 25.93% Jakarta Indonesia 333,333,350,000.00 IDR Energy Barcelona Spain 11,299,000.00 EUR Houghton South Africa 1,000.00 ZAR Pyrites Associates GP New York (New York) USA - USD - - Line-by-line Enel Investment Holding BV Enel Green Power España SL Enel Green Power South Africa 10.00% 10.00% 25.00% 19.45% 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 50.00% 68.29% Cogeneration of electricity and heat Electricity generation from renewable resources Electricity generation from renewable resources Quatiara Energia SA Rio de Janeiro Brazil 16,566,510.61 BRL Electricity generation Line-by-line Reaktortest Sro Trnava Slovakia 66,389.00 EUR Nuclear power research Equity Red Centroamericana de Telecomunicaciones SA Panama Panama 9.00 USD Telecommunications - Hydro Development Group Inc. Enel Brasil Participações Ltda Slovenskè Elektrárne AS Endesa Latinoamerica SA 50.00% 100.00% 68.29% 49.00% 32.34% 11.11% 10.23% Rattlesnake Creek Wind Project LLC Lincoln (Nebraska) USA - USD Renovables de Guatemala SA Guatemala Guatemala 1,924,465,600.00 GTQ Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Enel Kansas LLC 100.00% 68.29% Line-by-line Enel Green Power International BV 42.83% 64.08% Enel Green Power Guatemala SA 0.01% Enel Green Power SpA Enel Investment Holding BV Northwest Hydro Inc. 51.00% 49.50% 49.50% 17.50% 68.29% 18,000.00 EUR Holding company Proportionate Electricity generation from renewable resources Line-by-line - USD - USD - USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Chi West Inc. 82.50% Line-by-line Enel Kansas LLC 100.00% 68.29% Line-by-line Rocky Caney Wind LLC 100.00% 68.29% Held for sale Pp - Co-Geração SA 10.00% 77.80% TP - Sociedade Térmica Portuguesa SA 90.00% 5,100.00 RUB Electricity sales Proportionate RusEnergosbyt LLC 51.00% 25.25% 2,760,000.00 RUB Electricity trading Proportionate Res Holdings BV 100.00% 49.50% 4,600,000.00 RUB Electricity sales Proportionate RusEnergosbyt LLC 50.00% 24.75% 100,000.00 RUB Electricity sales Proportionate RusEnergosbyt LLC 50.00% 24.75% Ronfegen- Recursos Energeticos, Lda Oeiras Portugal 5,000.00 EUR Res Holdings BV Amsterdam Rock Creek Limited Partnership Los Angeles (California) The Netherlands USA Rocky Caney Wind LLC New York (New USA York) Rocky Ridge Wind Project LLC Oklahoma City - Oklahoma USA RusEnergosbyt C LLC Khanty- Mansiyskiy RusEnergosbyt LLC Moskow RusEnergosbyt Siberia LLC Krasnoyarskiy Kray RusEnergosbyt Yaroslavl Yaroslavl Ruthton Ridge LLC Minneapolis (Minnesota) Russian Federation Russian Federation Russian Federation Russian Federation USA Sacme SA Buenos Aires Argentina 12,000.00 ARS Monitoring of electricity system Proportionate - USD Electricity generation from renewable resources Line-by-line Chi Minnesota Wind LLC Empresa Distribuidora Sur SA 51.00% 34.83% 50.00% 19.98% 281 Company name Headquarters Country Share capital Currency Activity Consolidation method Held by % holding Group % holding Salto de San Rafael SL Seville Spain 461,410.00 EUR Hydroelectric plants Proportionate San Juan Mesa Wind Project II LLC Wilmington (Delaware) USA Sanatorium- Preventorium Energetik LLC Nevinnomyssk Russian Federation - USD Electricity generation from renewable resources. Line-by-line 10,571,300.00 RUB Energy services Line-by-line OGK-5 Finance LLC 0.01% 56.43% Enel Green Power España SL Padoma Wind Power LLC 50.00% 38.90% 100.00% 68.29% Enel OGK-5 OJSC (formerly OGK-5 OJSC) Enel Green Power España SL Bypass Power Company Chi West Inc. Enel Produzione SpA Slovenskè elektrárne AS Finerge-Gestão de Projectos Energéticos SA Enel Green Power España SL Enel Green Power México Srl de Cv Energía Nueva Energía Limpia México Srl de Cv Enel Produzione SpA Sheldon Vermont Hydro Company Inc. Boott Sheldon Holdings LLC 99.99% 45.00% 35.01% 1.00% 68.29% 99.00% 40.00% 40.00% 100.00% 66.00% 100.00% 77.80% 100.00% 77.80% 99.99% 68.29% 0.01% 33.33% 33.33% 100.00% 68.29% 100.00% 68.29% Santo Rostro Cogeneración SA (in liquidation) Se Hazelton A LP Seville Spain 207,000.00 EUR Cogeneration of electricity and heat - Los Angeles (California) USA - USD Electricity generation from renewable resources Line-by-line Se Hydropower Srl Bolzano Italy 30,000,000.00 EUR Generation, purchase and sale of hydroelectric power Line-by-line Se Predaj Sro Bratislava Slovakia 4,505,000.00 EUR Electricity supply Line-by-line Sealve - Sociedade Eléctrica De Alvaiázere SA Serra do Moncoso Cambas SL Servicio de Operación y Mantenimiento para Energías Renovables, Srl de Cv Porto Portugal 50,000.00 EUR La Coruña Spain 3,125.00 EUR Mexico DF Mexico 3,000.00 MXN Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line SF Energy Srl Rovereto Italy 7,500,000.00 EUR Electricity generation Proportionate Sheldon Springs Hydro Associates LP Wilmington (Delaware) Sheldon Vermont Hydro Company Inc. Wilmington (Delaware) USA USA - USD - USD Line-by-line Line-by-line SIET - Società Informazioni Esperienze Termoidrauliche SpA Sisconer - Exploraçao de Sistemas de Conversao de Energia Lda Sistema de Gestión Energética en la Nube SL Sistema Eléctrico de Conexión Montes Orientales SL Sistema Eléctrico de Conexión Valcaire SL Sistemas Energeticos Mañón Ortigueira SA Piacenza Italy 697,820.00 EUR Porto Portugal 5,000.00 EUR Madrid Spain 3,461.00 EUR Equity Enel.Newhydro Srl 41.55% 41.55% Line-by-line Finerge-Gestão de Projectos Energéticos SA 55.00% 42.79% Proportionate Enel Servizi Srl 0.03% 0.03% Granada Spain 44,900.00 EUR Electricity generation Equity Madrid Spain 175,200.00 EUR Electricity generation Equity La Coruña Spain 2,007,750.00 EUR Line-by-line Enel Green Power España SL Enel Green Power España SL Enel Green Power España SL 16.70% 12.99% 28.13% 21.88% 96.00% 74.69% Slate Creek Hydro Associates LP Los Angeles (California) Slate Creek Hydro Company Inc. Wilmington (Delaware) USA USA - USD 100.00 USD Line-by-line Slate Creek Hydro Company Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Slovenskè Elektrárne AS Bratislava Slovakia 1,269,295,724.66 EUR Electricity generation Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Analysis, design and research in thermal technology Electricity generation from renewable resources Research, design and development Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources 18,200.00 EUR Finance Line-by-line 2,184,000.00 EUR Services - Enel Produzione SpA Slovenskè elektrárne AS Enel Servizio Elettrico SpA 66.00% 66.00% 100.00% 66.00% 10.00% 10.00% 10,201.00 EUR - USD - USD Research, design and development Electricity generation from renewable resources Electricity generation from renewable resources Proportionate Enel Servizi Srl 0.01% 0.01% Line-by-line Texkan Wind LLC 100.00% 68.29% Line-by-line Nevkan Renewables LLC 100.00% 68.29% Slovenské Elektrárne Finance BV Rotterdam The Netherlands Smart P@Per SPA Potenza SMART-I Srl Rome Italy Italy Smoky Hills Wind Farm LLC Topeka (Kansas) USA Smoky Hills Wind Project II LLC Topeka (Kansas) USA 282 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Snyder Wind Farm LLC Dallas (Texas) USA - USD Socibe Energia SA Rio de Janeiro Brazil 19,969,032.25 BRL Electricity generation from renewable resources Electricity generation and sale Line-by-line Sociedad Agrícola de Cameros Ltda Sociedad Concesionaria Túnel El Melón SA Santiago Chile 5,738,046,495.00 CLP Financial investment Line-by-line Santiago Chile 19,028,480,104.00 CLP Engineering Line-by-line Sociedad Eólica de Andalucía SA Sociedad Eólica El Puntal SL Seville Seville Spain Spain 4,507,590.78 EUR Electricity generation Line-by-line 1,643,000.00 EUR Proportionate Consolidation method Held by % holding Group % holding Line-by-line Texkan Wind LLC 100.00% 68.29% Enel Brasil Participações Ltda Inmobiliaria Manso de Velasco Ltda Compañía Eléctrica Tarapacá SA Empresa Nacional de Electricidad SA Enel Green Power España SL Enel Green Power España SL 100.00% 68.29% 57.50% 32.09% 0.01% 33.47% 99.99% 64.74% 50.37% 50.00% 38.90% Electricity generation from renewable resources Electricity generation from renewable resources Construction and management of port infrastructure Electricity generation from renewable resources Line-by-line Enel Green Power España SL 60.00% 46.68% Line-by-line Inversora Codensa Sas 4.90% 21.31% Emgesa SA ESP 94.95% Proportionate Agatos Green Power Trino 100.00% 27.32% Sociedad Eólica Los Lances SA Sociedad Portuaria Central Cartagena SA Cadiz Spain 2,404,040.00 EUR Bogotá DC Colombia 5,800,000.00 COP Società Agricola Trino Milan Italy 50,000.00 EUR Milan Società di sviluppo, realizzazione e gestione del gasdotto Algeria-Italia via Sardegna SpA” in breve Galsi SpA” Italy 37,419,179.00 EUR Engineering in energy and infrastructure sector - Enel Produzione SpA 15.62% 15.62% Société du Parc Eolien Grandes Terres Ouest Eurl Lyon France 21,000.00 EUR Electricity generation from renewable resources Line-by-line Enel France Sas 100.00% 100.00% Sol de Media Noche Fotovoltaica SL Las Palmas de Gran Canaria Spain 3,008.00 EUR Photovoltaic plants Proportionate Solar Morea Energiaki SA Maroussi Greece 4,000,890.00 EUR Soliloquoy Ridge LLC Minneapolis (Minnesota) Somersworth Hydro Company Inc. Wilmington (Delaware) USA USA Sotavento Galicia SA Santiago de Compostela Spain - USD 100.00 USD 601,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Endesa Ingeniería SLU Enel Green Power Hellas SA 50.00% 46.03% 100.00% 68.29% Line-by-line Chi Minnesota Wind LLC 51.00% 34.83% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Equity Enel Green Power España SL 36.00% 28.01% Soternix - Produção de Energia ACE Southern Cone Power Argentina SA Barcelos Portugal - EUR Electricity generation Held for sale Buenos Aires Argentina 19,874,798.00 ARS Holding company Line-by-line Tp - Sociedade Térmica Portuguesa SA Compañía Eléctrica Tarapacá SA 51.00% 39.68% 1.97% 33.49% Empresa Nacional de Electricidad SA 98.03% Line-by-line Enel Kansas LLC 100.00% 68.29% South Fork Wind LLC Minneapolis (Minnesota) Southwest Transmission LLC Minneapolis (Minnesota) Spartan Hills LLC Stipa Nayaá SA de Cv Minneapolis (Minnesota) Colonia Cuauhtémoc USA USA USA - USD - USD - USD Mexico 1,811,016,348.00 MXN Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Line-by-line Line-by-line Sublunary Trading (RF) Proprietary Ltd Johannesburg South Africa 10,000.00 ZAR Suministradora Eléctrica de Cádiz SA Cadiz Spain 12,020,240.00 EUR Electricity generation from renewable resources Proportionate Electricity distribution and sale Equity Suministro de Luz Y Fuerza SL Torroella de Montgri (Girona) Spain 2,800,000.00 EUR Electricity distribution Line-by-line Chi Minnesota Wind LLC Chi Minnesota Wind LLC Enel Green Power Partecipazioni Speciali Srl Enel Green Power México Srl de Cv Enel Green Power & Sharp Solar Energy Srl Endesa Distribución Eléctrica SL Hidroeléctrica de Catalunya SL 51.00% 34.83% 51.00% 34.83% 40.16% 65.13% 55.21% 57.00% 19.46% 33.50% 30.84% 60.00% 55.24% 283 Consolidation method Line-by-line Held by % holding Group % holding Enel Green Power North America Inc. 75.00% 51.22% Line-by-line Chi Minnesota Wind LLC 51.00% 34.83% Line-by-line Enel Ingegneria e Ricerca SpA 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power SpA 51.00% 34.83% Line-by-line Enel Green Power International BV Enel Green Power Romania Srl Endesa Generación SA Enel Green Power International BV 0.10% 68.29% 99.90% 45.00% 41.43% 75.00% 51.22% Proportionate Endesa Generación SA 38.89% 35.80% Company name Headquarters Country Share capital Currency Activity Summit Energy Storage Inc. Wilmington (Delaware) Sun River LLC Minneapolis (Minnesota) USA USA 2,050,000.00 USD - USD Sviluppo Nucleare Italia Srl Rome Italy 200,000.00 EUR Sweetwater Hydroelectric Inc. Concord (New Hampshire) USA 250.00 USD Taranto Solar Srl Rome Italy 100,000.00 EUR Targusor Wind Farm Srl Cernavoda Romania 90,000.00 RON Electricity generation from renewable resources Electricity generation from renewable resources Development, construction and operation of EPRs Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Tecnatom SA Madrid Spain 4,025,700.00 EUR Electricity generation e Services Equity Tecnoguat SA Guatemala Guatemala 30,948,000.00 GTQ Tejo Energía Produçao e Distribuçao de Energia Electrica SA Paço de Arcos Portugal 5,025,000.00 EUR Electricity generation from renewable resources Electricity generation, transmission and distribution Line-by-line Termoeléctrica José de San Martín SA Buenos Aires Argentina 500,000.00 ARS Construction and management of a combined-cycle plant Equity Termoeléctrica Manuel Belgrano SA Buenos Aires Argentina 500,000.00 ARS Construction and management of a combined-cycle plant Equity Teploprogress OJSC Sredneuralsk Russian Federation 128,000,000.00 RUB Electricity sales Line-by-line OGK-5 Finance LLC 60.00% 33.86% Hidroeléctrica El Chocón SA Central Dock Sud SA Endesa Costanera SA Hidroeléctrica El Chocón SA Central Dock Sud SA Endesa Costanera SA Enel Green Power España SL Enel Green Power SpA 18.85% 6.71% 5.32% 5.51% 18.85% 6.71% 5.32% 5.51% 45.00% 35.01% 20.00% 13.66% Termotec Energía AIE (in liquidation) TERRAE Iniziative per lo sviluppo agroindustriale SpA Texkan Wind LLC Tirme SA Tko Power Inc. Valencia Spain 481,000.00 EUR Cogeneration of electricity and heat - Rome Italy 19,060,811.37 EUR Agro-industrial activities Equity Wilmington (Delaware) USA Palma de Mallorca Los Angeles (California) Spain USA - USD 7,662,750.00 EUR 1.00 USD Line-by-line Enel Texkan Inc. 100.00% 68.29% Equity Enel Green Power España SL 40.00% 31.12% Line-by-line Chi West Inc. 100.00% 68.29% Electricity generation from renewable resources Waste treatment and disposal Electricity generation from renewable resources Electricity generation from renewable resources Tobivox (Pty) Ltd Houghton South Africa 120.00 ZAR Line-by-line Toledo Pv AEIE Madrid Spain 26,890.00 EUR Photovoltaic plants Equity Total Electric SA Buzau Romania 3,190,600.00 RON Tp - Sociedade Térmica Portuguesa SA Lisbon Portugal 3,750,000.00 EUR Trade Wind Energy LLC New York (New USA - USD York) Tradewind Energy Inc. Wilmington USA 200,000.00 USD (Delaware) Transmisora de Energia Renovable SA Guatemala Guatemala 5,000.00 GTQ Electricity generation from renewable resources Cogeneration of electricity and heat Line-by-line Line-by-line Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Equity Line-by-line Transmisora Eléctrica de Quillota Ltda Santiago Chile 440,644,600.00 CLP Electricity transmission and distribution Proportionate 284 Enel Green Power South Africa Enel Green Power España SL Enel Green Power Romania Srl Finerge-Gestão de Projectos Energéticos SA 100.00% 68.29% 33.33% 25.93% 100.00% 68.29% 100.00% 77.80% Chi Power Inc. Enel Kansas LLC 1.00% 19.90% 13.59% Enel Green Power International BV Enel Green Power Guatemala SA Compañía Eléctrica Tarapacá SA 99.99% 68.29% 0.01% 50.00% 17.16% Line-by-line Enel Kansas LLC 99.00% 68.29% EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity Buenos Aires Argentina 55,512,000.00 ARS Electricity generation, transmission and distribution Girona Spain 72,120.00 EUR Electricity transmission Line-by-line Transportadora de Energía SA Transportes y Distribuciones Eléctricas SA Consolidation method Line-by-line Held by % holding Group % holding Compañía de Interconexión Energética SA Endesa Distribución Eléctrica SL 100.00% 46.62% 73.33% 67.51% Triton Power Company New York (New USA York) - USD Electricity generation from renewable resources Line-by-line Enel Green Power North America Inc. 2.00% 68.29% Tsar Nicholas LLC Minneapolis (Minnesota) Twin Falls Hydro Associates Seattle (Washington) Twin Falls Hydro Company Inc. Wilmington (Delaware) Twin Lake Hills LLC Minneapolis (Minnesota) Twin Saranac Holdings LLC Wilmington (Delaware) USA USA USA USA USA - USD - USD 10.00 USD - USD - USD Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Line-by-line Highfalls Hydro Company Inc. Chi Minnesota Wind LLC 98.00% 51.00% 34.83% Line-by-line Twin Falls Hydro Company Inc. 51.00% 34.83% Line-by-line Line-by-line Twin Saranac Holdings LLC Chi Minnesota Wind LLC 100.00% 68.29% 51.00% 34.83% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Ufefys SL (in liquidation) Aranjuez Spain 304,150.00 EUR Ukuqala Solar (Pty) Ltd Gauteng South Africa - ZAR Electricity generation from renewable resources - Electricity generation from renewable resources Line-by-line Unión Eléctrica de Canarias Generación SAU Las Palmas de Gran Canaria Spain 190,171,520.00 EUR Electricity generation Line-by-line Upington Solar (Pty) Ltd Lombardy east South Africa 1,000.00 ZAR Electricity generation from renewable resources Line-by-line Ustav Jaderného Výzkumu Rez AS Rez Varokub Green Energy Srl Prahova Czech Republic Romania 524,139,000.00 CZK Nuclear power research and development Equity 90,000.00 RON Electricity generation from renewable resources Line-by-line Vektör Enerji Üretim Anonim Şirketi Istanbul Turkey 500,000.00 TRY Western New York Wind Corporation Albany (New York) Willimantic Power Corporation Hartford (Connecticut) USA USA 300.00 USD 1,000.00 USD Wind Park Kouloukonas SA Maroussi Greece 2,700,018.00 EUR Wind Park of Koryfao SA Maroussi Greece 60,000.00 EUR Wind Park of West Ktenias SA Wind Parks of Anatoli- Prinia SA Maroussi Greece 70,000.00 EUR Maroussi Greece 1,110,400.00 EUR Wind Parks of Bolibas SA Maroussi Greece 551,500.00 EUR Wind Parks of Distomos SA Wind Parks of Drimonakia SA Maroussi Greece 556,500.00 EUR Maroussi Greece 736,500.00 EUR Wind Parks of Folia SA Maroussi Greece 424,000.00 EUR Wind Parks of Gagari SA Maroussi Greece 389,000.00 EUR Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Enel Green Power España SL Enel Green Power South Africa 40.00% 31.12% 100.00% 68.29% Endesa Generación SA Enel Green Power South Africa 100.00% 92.06% 100.00% 68.29% Slovenskè elektrárne AS Enel Green Power International BV Enel Green Power Romania Srl Enel Green Power International BV 27.77% 18.33% 0.10% 68.29% 99.90% 100.00% 68.29% Line-by-line Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Enel Green Power North America Inc. 100.00% 68.29% Line-by-line Line-by-line Line-by-line Line-by-line Equity Equity Equity Equity Equity Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA 100.00% 68.29% 100.00% 68.29% 100.00% 68.29% 80.00% 54.63% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% 285 Company name Headquarters Country Share capital Currency Activity Wind Parks of Goraki SA Maroussi Greece 551,500.00 EUR Wind Parks of Gourles SA Maroussi Greece 555,000.00 EUR Wind Parks of Kafoutsi SA Wind Parks of Kathara SA Wind Parks of Kerasia SA Wind Parks of Korinthia SA Wind Parks of Makrilakoma SA Maroussi Greece 551,500.00 EUR Maroussi Greece 296,500.00 EUR Maroussi Greece 252,000.00 EUR Maroussi Greece 3,504,500.00 EUR Maroussi Greece 614,000.00 EUR Wind Parks of Milia SA Maroussi Greece 399,000.00 EUR Wind Parks of Mirovigli SA Maroussi Greece 225,000.00 EUR Wind Parks of Mitika SA Maroussi Greece 255,500.00 EUR Wind Parks of Paliopirgos SA Maroussi Greece 200,000.00 EUR Wind Parks of Pelagia SA Maroussi Greece 653,500.00 EUR Wind Parks of Petalo SA Maroussi Greece 575,000.00 EUR Wind Parks of Platanos SA Maroussi Greece 179,000.00 EUR Wind Parks of Sagias SA Maroussi Greece 601,000.00 EUR Wind Parks of Skoubi SA Maroussi Greece 472,000.00 EUR Wind Parks of Spilia SA Maroussi Greece 496,100.00 EUR Wind Parks of Strouboulas SA Wind Parks of Trikorfo SA Maroussi Greece 576,500.00 EUR Maroussi Greece 260,000.00 EUR Wind Parks of Vitalio SA Maroussi Greece 361,000.00 EUR Wind Parks of Vourlas SA Maroussi Greece 554,000.00 EUR Winter’s Spawn LLC Minneapolis (Minnesota) USA - USD WP Bulgaria 1 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 10 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 11 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 12 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 13 EOOD Sofia Bulgaria 5,000.00 BGN Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Electricity generation from renewable resources Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Consolidation method Equity Equity Equity Held by % holding Group % holding Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA 30.00% 20.49% 30.00% 20.49% 30.00% 20.49% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Equity Enel Green Power Hellas SA 30.00% 20.49% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Equity Enel Green Power Hellas SA 30.00% 20.49% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Equity Equity Enel Green Power Hellas SA Enel Green Power Hellas SA 30.00% 20.49% 30.00% 20.49% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Equity Equity Enel Green Power Hellas SA Enel Green Power Hellas SA 30.00% 20.49% 30.00% 20.49% Line-by-line Enel Green Power Hellas SA 80.00% 54.63% Equity Equity Equity Equity Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA Enel Green Power Hellas SA 30.00% 20.49% 29.25% 19.97% 30.00% 20.49% 30.00% 20.49% Line-by-line Chi Minnesota Wind LLC 51.00% 34.83% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% 286 EnEl AnnuAl REpoRt 2013AttAchmEntsCompany name Headquarters Country Share capital Currency Activity WP Bulgaria 14 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 15 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 19 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 21 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 26 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 3 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 6 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 8 EOOD Sofia Bulgaria 5,000.00 BGN WP Bulgaria 9 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Plant construction, operation and maintenance Consolidation method Line-by-line Held by % holding Group % holding Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% Line-by-line Enel Green Power Bulgaria EAD 100.00% 68.29% WP France 3 SAS Lyon France 1,000.00 EUR Electricity generation from renewable resources Held for sale Enel Green Power France Sas 100.00% 68.29% Yacylec SA Buenos Aires Argentina 20,000,000.00 ARS Electricity transmission Equity Enersis SA 22.22% 12.40% Yedesa-Cogeneración SA (in liquidation) Almería Spain 234,000.00 EUR Zitsa Solar SA Maroussi Greece 252,000.00 EUR Cogeneration of electricity and heat - Electricity generation from renewable resources Proportionate Enel Green Power España SL Enel Green Power & Sharp Solar Energy Srl 40.00% 31.12% 100.00% 34.14% 287 Glossary The following glossary defines selected technical terms used in the consolidated financial statements. Unless otherwise speci- fied, the terms have the following meanings. Authority for Electricity The Authority for Electricity and Gas (the Authority) is a formally independent authority and Gas charged with fostering the development of competitive markets in the electricity and natural gas industries, primarily through the regulation of tariffs, access to networks and market operations, as well as safeguarding end users. Under the law establishing the Authority in 1995, its function is essentially that of “guaranteeing the promotion of competition and efficiency in the public utilities sector, ensuring the uniform availability and distribution of services throughout the country, establishing a transparent and reliable tariff system based on pre-defined criteria and promoting the interests of users and consumers”. In pursuing the objective of ensuring competitive markets, the Authority develops comments and recommendations for the Government and Parliament. It has regulatory powers, sets tariffs (and in particular the general system costs component), ensures the publicity and transparency of service terms and conditions, ensures equal access to energy networks, exercises quality control and monitoring powers over service providers and assesses complaints and reports submitted by users and consumers. In addition, the Authority was recently assigned functions concerning the quality, rates and costs of integrated water services, which had originally been assigned to the national water regulator and supervisor. Biomass Organic non-fossil material of biological origin, part of which can be used to produce energy. The various forms of energy produced from biomass are always renewable, but in different ways. They depend on daily or seasonal cycles, the amount of solar radiation, changes in climate, agricultural techniques, plant growth cycles and intensive exploitation. CIP Interministerial Price Committee. Combined cycle Technology used in power generation plants, comprising one or more gas turbine sets whose exhaust heats a boiler, which may also be heated with an additional fuel. The steam produced by the boiler is used to drive a steam turbine coupled with a generator (CCGT). Decommissioning The phase of deactivation, decontamination and dismantling of plant installations and site restoration, The ultimate goal is to achieve: (i) the complete demolition of a nuclear power plant; (ii) the removal of any restriction imposed by the presence of radioactive materials; (iii) the return of the site for other uses. Distribution The transport and transformation of electricity on medium and low-voltage grids for delivery to end users. Electricity consumption Electricity consumption for a given period is equal to the sum of electricity invoiced by utilities (Enel, municipal electric companies, other companies) and the amount consumed by self-generators. It is equal to electricity demand net of grid losses. 288 EnEl AnnuAl REpoRt 2013AttAchmEntsElectricity demand The quantity of electricity to make available on the grid. It is equal to the sum of user consumption and grid losses. EMO Energy Markets Operator, the company established by the ESO to operate the financial side of the electricity market on a transparent and objective basis, with a view to fostering competition among generators and ensuring the availability of adequate reserve capacity. Enhanced protection service The supply of electricity on the basis of prices and contractual terms set by the Authority for Electricity and Gas. The enhanced protection service serves residential customers and small companies (those with fewer than 50 employees and an annual turnover of less than €10 million with low-voltage supply) that have never changed supplier or who have requested to return to the service after having contracted for service on the free market with other suppliers (the enhanced protection service conditions also apply to residential customers and small companies that find themselves without an electricity supplier). ESO Energy Services Operator (formerly GRTN), established pursuant to Article 3 of the Bersani Decree, the company, wholly owned by the Ministry for the Economy and Finance, distributes incentives for the generation of electricity from renewable and equivalent resources. It also certifies plants and their output as renewable. European Pressurized Reactor (EPR) The European pressurized water reactor, more commonly referred to as an EPR (European Pressurized Reactor or Evolutionary Power Reactor), is a generation III+ nuclear fission reactor in which the core is cooled and the neutrons are moderated with ordinary water (sometimes called light water to distinguish it from heavy water). Generation The production of electricity, however generated. Gigawatt or GW Unit of measure equal to 1 billion watts (1,000 MW). Gigawatt-hour or GWh Unit of measure equal to 1 million Kilowatt-hours. Green certificates These are the certificates provided for under Article 5 of the Ministerial Decree of November 11, 1999, that certify the generation of electricity from renewable resources. Green certificates are issued by the ESO for the first fifteen years of operation of a plant and can be traded directly or on the market organized by the ESO. Demand is supported by the requirement for generation companies and importers to deliver a portion of their annual output in the form of power generated from renewable resources. Gross generation The total amount of electricity (including that generated subject to pumping) produced by all the generator units concerned (primary heat engine and one or more mechanically coupled electricity generators), as measured at the output terminals of the main generators. Kilowatt or kW A unit of measure equal to 1,000 watts. Kilowatt-hour or kWh A unit of measure that represents 1,000 watts of electricity supplied or demanded in an hour. Mass-market customers Residential and micro-business customers. Megawatt or MW Unit of measure equal to 1 million watts. 289 Megawatt-hour or MWh Unit of measure that represents 1,000,000 watts of electricity supplied or demanded in an hour. Micro-business customers Customers with a VAT registration number with annual electricity consumption of less than 50,000 kWh. Natural gas Gas mainly composed of methane (from 88% to 98%), with the remainder accounted for by other hydrocarbons such as ethane, propane, butane, etc. Net efficient power (in MW) The maximum amount of electric power that can be continuously produced over a sufficiently long given period of operation, assuming that all the parts of the plant are functioning, as measured at the point of delivery to the grid; that is, net of the power used by the plant itself and the power lost in the transformers required to raise the voltage to the grid level. Net generation Gross electricity production net of the electricity used by auxiliary generation services and losses in main transformers. NTN The Italian national electricity transmission network, composed of the transformer stations and high and very-high voltage power lines in Italy. Power Exchange The electricity market organized and operated by the ESO through an electronic platform. Participants include generation companies, wholesalers, the Single Buyer and certain end users. The market equilibrium prices is obtained through the matching of the electricity demand of and electricity supply from the participants. Rating Assessment of the quality of a company or its issues of debt securities on the basis of the financial soundness of the company and its outlook. The assessment is performed by specialized agencies. Remote meter operation A system of interconnected electronic meters (also called smart meters) used to implement an integrated system for meter reading, communication and management of electricity supply contracts remotely, using the low-voltage power grid as the data transmission infrastructure. Renewable resources The sun, wind, water, geothermal resources, tides, waves, biomass and organic waste. Residential customers Customers who consume electricity for home use, as defined by Article 2.2, letter A, of the Integrated Transport Regulations published by the Authority for Electricity and Gas. Single Buyer Acquirente Unico SpA (the Single Buyer) is a company established by the ESO pursuant to Article 4, paragraph 1 of the Bersani Decree. It is charged with ensuring the availability of sufficient electricity to meet the demand of all customers in the “enhanced protection” market, by purchasing the necessary power and selling it to distributors on non- discriminatory terms that enable the application of a single national rate for customers. For this purpose, the Single Buyer can purchase electricity on the Power Exchange or through bilateral contracts. Station An electricity transformation or switching facility. 290 EnEl AnnuAl REpoRt 2013AttAchmEntsStranded costs Costs generated by contractual commitments and investment decisions that electric companies undertook in response to government economic policy decisions in a non- competitive market that could have been recovered under a monopoly. Tax equity partnership An agreement governed by US tax law, which permits the assignment of the tax benefits granted in the United States to companies that generate electricity from renewable resources to a third-party entity (the so-called “tax equity investor”) under certain conditions and specific circumstances. Terawatt or TW Unit of measure equal to 1 billion kW. Terawatt-hour or TWh 1 billion kWh. Transmission The transport and transformation of electricity from generation plants or imported power over the interconnected high- and very-high-voltage grid to end users connected to that Watt Unit of measure of electric power. grid and to distributors. 291 Reports Report of the independent auditors on the 2013 consolidated financial statements of the Enel Group 294 EnEl AnnuAl REpoRt 2013REpoRts 295 296 EnEl AnnuAl REpoRt 2013REpoRtsConcept design Inarea - Rome Publishing service Newton 21 Roma Copy editing postScriptum - Rome Printing Primaprint - Viterbo 30 copies printed Printed in June 2014 INTERNAL PAGES Paper Splendorgel extra white Gram weight 115 g/m2 Number of pages 300 COVER Paper Splendorgel extra white Gram weight 300 g/m2 This publication is printed on FSC® certified 100% paper Publication not for sale Edited by Enel External Relations Department This Report issued in Italian has been translated into English solely for the convenience of international readers. This publication is an integral part of the annual financial report referred to in Article 154-ter, paragraph 1, of the Consolidated Law on Financial Intermediation (Legislative Decree 58 of February 24, 1998) Enel Società per azioni Registered Office 137 Viale Regina Margherita, Rome Share capital €9,403,357,795 fully paid-up Tax I.D. and Companies Register of Rome: no. 00811720580 R.E.A. of Rome no. 756032 VAT Code no. 00934061003

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