Enel S.p.A.
Annual Report 2015

Plain-text annual report

5 1 0 2 t r o p e R l a u n n A ANNUAL REPORT 2015 enel.com Annual Report 2015 Contents Report on operations Reports Report of the Board of Auditors to the Shareholders’ Meeting of Enel SpA | 378 Report of the independent audit firm on the 2015 financial state- ments of Enel SpA | 386 Report of the independent audit firm on the 2015 consolidated financial statements of the Enel Group | 390 Summary of the resolutions of the Ordinary and Extraordinary Shareholders’ Meeting | 394 Attachments Subsidiaries, associates and other significant equity investments of the Enel Group at December 31, 2015 | 398 Report on Corporate Governance and Ownership Structure | 438 Enel organizational model | 8 Corporate boards | 9 Letter to shareholders and other stakeholders | 11 Summary of results | 14 Overview of the Group’s operations, performance and financial position | 23 Results by business area | 35 Performance and financial position of Enel SpA | 73 Significant events in 2015 | 78 Reference scenario | 88 Main risks and uncertainties | 126 Outlook | 131 Other information | 132 Sustainability | 134 Related parties | 154 Reconciliation of shareholders’ equity and net income of Enel SpA and the corresponding consolidated figures | 155 Consolidated financial statements Financial statements | 158 Notes to the consolidated financial statements | 165 Declaration of the Chief Executive Officer and the officer responsible for the preparation of corporate financial reports | 304 Separate financial statements of Enel SpA Financial statements | 308 Notes to the separate financial statements | 315 Declaration of the Chief Executive Officer and the officer responsible for the preparation of the Company financial reports | 374 3 ENEL IS Open to the world, to technology and, internally, among our people. This is the strategic concept of Open Power. But in order to transfer to our customers and stakeholders the essence of a new innovative and open Enel, it is essential to instill this approach to openness within the Company. In order to create a shared culture among all of the Group’s parts, we have developed a “galaxy” composed of a Vision – for the first time in Enel – which represents our major long-term objective, a Mission 2025 expressed in five points, the values that represent Enel’s DNA and ten principles of conduct that must inspire everyone who works for the Company. Let’s discover the Open Power galaxy. Share information, being willing to collaborate and open to the contribution of others. Follow through with commitments, pursuing activities with determination and passion. Work for the integration of all, recognizing and leveraging individual diversity (culture, gender, age, disabilities, personality etc.). Change priorities swiftly in response to changes in the context. PRINCIPLES OF CONDUCT VISION OPEN POWER TO SOLVE THE GREATEST CHALLENGES FACING OUR WORLD VALUES TRUST INNOVATION RESPONSIBILITY PROACTIVITY PROATTIVIÀ Adopt and promote safe behavior and move pro-actively to improve conditions for health, safety and well-being. Make decisions in daily activities and take responsibility for them. Your work is focused on satisfying customers and/or co-workers, acting effectively and rapidly. Propose new solution and do not give up when faced with obstacles or failure. Recognize merit in your co-workers and give feedback that can improve their contribution. Get results by aiming for excellence. 4 MISSION 2025 OPEN ACCESS TO ELECTRICITY FOR MORE PEOPLE OPEN THE WORLD OF ENERGY TO NEW TECHNOLOGY OPEN UP TO NEW USES OF ENERGY OPEN UP TO NEW WAYS OF MANAGING ENERGY FOR PEOPLE OPEN UP TO NEW PARTNERSHIPS Annual Report 2015ENEL IS Open to the world, to technology and, internally, among our people. This is the strategic concept of Open Power. But in order to transfer to our customers and stakeholders the essence of a new innovative and open Enel, it is essential to instill this approach to openness within the Company. In order to create a shared culture among all of the Group’s parts, we have developed a “galaxy” composed of a Vision – for the first time in Enel – which represents our major long-term objective, a Mission 2025 expressed in five points, the values that represent Enel’s DNA and ten principles of conduct that must inspire everyone who works for the Company. Let’s discover the Open Power galaxy. Share information, being willing to collaborate and open to the contribution of others. Follow through with commitments, pursuing activities with determination and passion. Work for the integration of all, recognizing and leveraging individual diversity (culture, gender, age, disabilities, personality etc.). Change priorities swiftly in response to changes in the context. PRINCIPLES OF CONDUCT VISION OPEN POWER TO SOLVE THE GREATEST CHALLENGES FACING OUR WORLD VALUES TRUST INNOVATION RESPONSIBILITY PROACTIVITY PROATTIVIÀ Adopt and promote safe behavior and move pro-actively to improve conditions for health, safety and well-being. Make decisions in daily Your work is focused Propose new solution activities and take responsibility on satisfying customers and/or co-workers, acting effectively and rapidly. and do not give up when faced with obstacles or failure. for them. Recognize merit in your co-workers and give feedback Get results by aiming for excellence. that can improve their contribution. OPEN ACCESS TO ELECTRICITY FOR MORE PEOPLE OPEN THE WORLD OF ENERGY TO NEW TECHNOLOGY MISSION 2025 OPEN UP TO NEW USES OF ENERGY OPEN UP TO NEW WAYS OF MANAGING ENERGY FOR PEOPLE OPEN UP TO NEW PARTNERSHIPS 5 Annual Report 2015Report on operations 6 Annual Report 20157 Report on operationsAnnual Report 2015Enel organizational model On July 31, 2014, the Enel Group adopted a new organizational structure, based on a matrix of divisions and geographical areas, focused on the industrial objectives of the Group, with clear specification of roles and responsibilities in order to: > pursue and maintain technological leadership in the sectors in which the Group operates, ensuring operational excellence; > maximize the level of service offered to customers in local markets. GLOBAL DIVISIONS Global Infrastructure and Networks Global Generation Renewable Energy Global Trading Upstream Gas Italy Iberian Peninsula Latin America Eastern Europe S E I R T N U O C / S N O G E R I • Implementation of best practices • Efficiency in operating expenses and investments • Capital allocation • Gross operating margin • • • • • Customers Local stakeholders Revenue Cash flow Gross operating margin Thanks to this organization, the Group can benefit from reduced complexity in the execution of management actions and the analysis of key factors in value creation. More specifically, the new Enel Group structure is organized into: > Divisions (Global Generation, Global Infrastructure and Networks, Renewable Energy, Global Trading, Upstream Gas), which are responsible for managing and developing assets, optimizing their performance and the return on capital em- ployed in the various geographical areas in which the Group operates. The Divisions are also tasked with improving the efficiency of the processes they manage and sharing best practices at the global level. The Group can benefit from a centralized industrial vision of projects in the various business areas. Each project will be assessed not only on the basis of its financial return, but also on the basis of the best technologies available at the Group level; > Regions and Countries (Italy, Iberian Peninsula, Latin America, Eastern Europe), which are responsible for managing rela- tionships with institutional bodies and regulatory authorities, as well as selling electricity and gas, in each of the countries in which the Group is present, while also providing staff and other service support to the Divisions. This matrix is sustained by general business support functions: > Global service functions (Procurement and ICT), which are responsible for managing information and communication technology activities and procurement at the Group level; > Holding company functions (Administration, Finance and Control, Human Resources and Organization, Communication, Legal and Corporate Affairs, Audit, European Affairs, and Innovation and Sustainability), which are responsible for mana- ging governance processes at the Group level. 8 Annual Report 2015Corporate boards Board of Directors Chairman Chief Executive Directors Secretary Patrizia Grieco Manager Officer and General Francesco Starace Claudio Sartorelli Alfredo Antoniozzi Alessandro Banchi Alberto Bianchi Paola Girdinio Alberto Pera Anna Chiara Svelto Angelo Taraborrelli 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 9 Report on operationsAnnual Report 2015Powers Board of Directors The Board is vested by the bylaws with the broadest powers for the ordinary and extraordinary management 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 23, 2014, 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 23, 2014 with all powers for manag- ing the Company, with the exception of those that are otherwise assigned by law or the bylaws or that the aforesaid resolution reserves for the Board of Directors. 10 Annual Report 2015Letter to shareholders and other stakeholders Dear shareholders and stakeholders, The year 2015 was marked by great changes and the achievement of significant results. The strategic decisions we have taken have in fact enabled us to gain strength and resilience in a changing economic environment, while laying the foundation for equally solid growth in the near future. Strategy and outlook for 2016 In March, the new management presented its first strategic plan to the market. After the significant progress achieved during the year, and following the decision to shift the presentation of the plan from March to November each year, for 2015 only an update was subsequently presented. The new plan is focused closely on long-term industrial growth, especially in renewables and networks. It sets out an ambitious program for enhancing efficiency through the reduc- tion of maintenance and operating costs in all the global business lines in which our operations are now structured following the reorganization undertaken in 2014. The plan also envisages the simplification of the Enel Group’s corporate structure, which began in 2014 with the sepa- ration of the two subsidiaries Endesa and Enersis. It also seeks to manage the Enel portfolio actively with a view to creating value through the strategic repositioning of the Group. Finally, it provides for focusing growing attention on shareholder remuneration, thanks to a gradual increase in dividends distributed through 2019 in order to align the Enel Group more closely with the sector average. The Enel strategic plan, which is updated each year, is a synthesis of the long-term vision of the Company. It is the fruit of cooperation and exchange between management and the Board of Directors. The Board, after a process of sharing information and analysis with management, is responsible for final approval of the strategic direction being pursued and periodic monitoring of its implementation. We sought to summarize the essence of this new strategic direction with the term “Open Power”, which represents a new approach involving all of the Group’s industrial processes and commercial initiatives, guiding investments and the relationship with stakeholders. It is in fact based on the concept of openness in terms of sustainability and, hence, innovation and technological innovation at a time when the Enel Group is opening its infrastructure to a variety of other uses: openness with stakeholders, through dialogue with the communities in which the Group operates; openness within the Group, which means leveraging the talents and diversity among our people; and finally, openness as the capacity to listen to the world around us and to seize the opportunities and meet the needs we find. Consistent with this innovative approach, on January 26, 2016, in Madrid, Enel presented the new Group logo, a global brand that represents openness to change, listening and innovation. The macroeconomic environment The global economic environment in 2015 was characterized by strong turbulence, marked by increased volatility in the major financial markets and uncertainty about the outlook for the global economic recovery. Preliminary forecasts of growth in global gross domestic product are below the average of the last 15 years. In the euro area, the combined effects of the expansionary monetary policy instituted by the European Central Bank, together with the fall in com- modity prices and the depreciation of the euro, point to faster expected growth than last year, although the outlook is impacted by the weakness of the global economy and developments in the foreign exchange market. 11 Report on operationsAnnual Report 2015The emerging economies are slowing, with a contraction in domestic demand, high inflation and the depreciation of local currencies. Tensions on the financial market in China, combined with the prospects of a slowdown in the real economy, have had an adverse impact on trade and, owing to a decline in expected use of commodities in industry and construction, have contributed to the sharp decline in commodity prices, particularly oil. Despite the slide in oil prices, investments in renewable energy around the world continued the positive trend of re- cent years, reaching record levels in 2015. This trend will also continue in the coming years, irrespective of the volatility in commodity prices that, in all probability, will also characterize the immediate future. Performance In spite of the complex macroeconomic environment, 2015 was a good year for Enel, as demonstrated by the excel- lent performance we achieved: revenue of about €75.7 billion, essentially in line with 2014; ordinary EBITDA of €15.0 billion, a slight decrease compared with the €15.5 billion posted in 2014, but perfectly in line with the targets already announced to the market; and ordinary net income of €2.9 billion. The decrease in EBITDA is essentially due to the adverse evolution of exchange rates, the formalization of a number of agreements on early retirement incentives in Italy and Spain – intended to achieve significant generational turnover – and the lower margin on the generation of electricity from conventional resources. These factors were partly offset by efficiency gains and the positive impact of regulatory and legislative changes in the countries in which we operate. At the end of 2015, net financial debt stood at €37.5 billion, essentially in line with the figure reported at December 31, 2014. The cash flows generated by ordinary operations allowed us to finance almost all our investments in the period and the payment of dividends, which were compounded by the negative effects of exchange rate changes. Main events The performance described above synthesizes the commitment of a year of hard work, one marked by a series of major events. In February 2015, the Ministry for the Economy and Finance carried out the fifth tranche of Enel’s privatization, an operation that reduced the majority shareholder’s interest to 25.5%, down from the 31.2% held previously. As regards industrial growth, 2015 saw the completion of construction and the entry into service of power plants with a total capacity of 2,063 MW, of which 94% powered by renewable resources (including large hydroelectric facilities), strengthening Enel’s leadership position in this important sector. We also initiated sustainable growth in new countries (India, Kenya and Germany), pursuing our medium/ long-term strategy. In 2015 we connected about 530,000 new users to our networks, expanding the number of customers served around the world to 61.5 million, once again reinforcing Enel’s pre-eminent global position. In Italy, we reached the significant threshold of 10 million customers served on the free markets for electricity and gas. Within the program for the active management of our asset portfolio, in 2015 we made disposals totaling about €1.6 billion, including a number of hydroelectric assets in Italy, minority stakes in renewables in the United States and renewables assets in Portugal. We also reached an agreement for the sale of our stake in Slovenské elektrárne, to be implemented in two tranches: the first in 2016 and the second upon completion of the construction of the new 3 and 4 units at the Mochovce nuclear power plant. With regard to Italy in particular, 2015 saw the launch of Futur-E, a project for the redevelopment of generation plants that have reached or are approaching the end their life cycle. Specifically, the project involves 23 thermal plants (with a total of 13 GW of capacity) for which Enel intends to develop, together with all other stakeholders, sustainable solu- tions to preserve jobs and, where possible, the productive and industrial vocation of the sites. In other developments in Italy, we launched a number of initiatives that will have significant implications for the indus- 12 Annual Report 2015trial growth of the country. The first is the plan to replace, over the next few years, some 32 million smart meters. The project will enable the roll-out of innovative services with significant benefits for both customers and the entire national electricity system. In addition, with the launch of a project that recently led to the establishment of the new company Enel Open Fiber, we have laid the foundations for major infrastructure development (which could also be replicated in other countries in the future): a national ultra-broadband network. The initiative is open to all interested stakeholders and will contribute to digitizing the entire country by 2020, in line with national objectives. Another important event was Expo 2015, an initiative in which Enel participated as an Official Global Partner, creating the first greenfield smart city in the world and a showroom to showcase Enel’s most innovative technologies to the some 800,000 visitors. In order to simplify the Group’s corporate structure, we launched a restructuring program in Latin America. This represents a key decision for the development of our business in that area: it provides for the separation of genera- tion and distribution activities in Chile from those in other Latin American countries (Argentina, Brazil, Colombia and Peru). It will allow us to eliminate existing duplication and overlap, improve the visibility of the various businesses and countries, accelerate and streamline decision-making and maximize value creation. In another step, at the end of 2015 we began the process of integrating Enel Green Power into Enel: this operation enable us to increase the economic impact of the Group’s most important drive of growth in the coming years and accelerate the development of the global renewables market. At the same time, it will improve synergies with the rest the Group and add flexibility to the structure of the program for the structural rotation of assets. Also in 2015, Enel was recognized – unique among utilities – by Fortune in the Change the World list as one of the five companies capable of changing the world and was appointed to the Board of the Global Compact of the United Nations. And as regards the new Sustainable Development Goals adopted by the United Nations, we wanted to make an effective contribution to their achievement through the implementation of projects aimed at: i) ensuring universal access to clean energy; ii) countering climate change and its effects; iii) supporting access to education; and iv) contributing to the inclusive and sustainable economic growth of the communities in the countries in which we operate. Enel, in a demonstration of its commitment to sustainable development, from the very outset integrated those objectives into its strategy and in its sustainability reporting. In 2016 Enel will complete the integration of Enel Green Power, the reorganization in Latin America, the start of installation of smart meters, and the development of the business plan of Enel Open Fiber. These are solid projects that well represent the pillars of our 2016-2019 strategic plan: improving operational efficiency, industrial growth, simplifying the Group, active management of our asset portfolio and the remuneration of shareholders. These are the foundations on which we are building the Enel of the future. The Chairman of the Board of Directors The Chief Executive Officer Patrizia Grieco Francesco Starace 13 Report on operationsAnnual Report 2015Summary of results billions of m3 TWh Total net generation by resource TWh Gas sales 8.9 Electricity sales 260.1 Electricity transported 417.4 Total net generation 284.0 Abroad 4.8 Italy 4.1 Abroad 172.1 Abroad 190.8 Abroad 215.5 Renewables 31% Coal 30% Net generation by renewable resource TWh Nuclear Combined 14% cycle and gas 15% Oil and gas turbine 10% Italy 88.0 Italy 226.6 Italy 68.5 Capital expenditure by business area millions of euro Employees by business area 7,113 Wind 18% Geothermal 7% Biomass and solar 1% 284.0 89.3 Hydroelectric 74% 67,914 Eastern Europe Iberian Peninsula Latin America 229 985 1,819 Italy 1,562 Renewable Energy 2,466 Other, eliminations and adjustments 52 Performance for 2015 (compared with 2014) Eastern Europe Iberian Peninsula Latin America Italy Renewable Other, eliminations 10,200 10,001 12,211 28,774 Energy 4,309 and adjustments 2,419 millions of euro Revenue 75,658 -0.2% 1410 Gross operating margin Operating income 15,297 -2.9% 7,685 Net income 3,372 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 Annual Report 2015Summary of results billions of m3 TWh Total net generation by resource TWh Gas sales 8.9 Electricity sales 260.1 Electricity transported 417.4 Total net generation 284.0 284.0 Abroad 172.1 Abroad 190.8 Abroad 215.5 Renewables 31% Coal 30% Nuclear 14% Combined cycle and gas 15% Oil and gas turbine 10% Net generation by renewable resource TWh 89.3 Hydroelectric 74% Wind 18% Geothermal 7% Biomass and solar 1% Abroad 4.8 Italy 4.1 Italy 88.0 Italy 226.6 Italy 68.5 Capital expenditure by business area millions of euro Employees by business area 7,113 67,914 Eastern Europe Iberian Peninsula Latin America 229 985 1,819 Italy 1,562 Renewable Other, eliminations Energy 2,466 and adjustments 52 Eastern Europe Iberian Peninsula Latin America Italy 10,200 10,001 12,211 28,774 Performance for 2015 (compared with 2014) Renewable Energy 4,309 Other, eliminations and adjustments 2,419 millions of euro Revenue 75,658 -0.2% Gross operating margin 15,297 -2.9% Operating income 7,685 Net income 3,372 10 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 15 Report on operationsAnnual Report 2015Performance data Revenue Revenue in 2015 amounted to €75,658 million, a decrease of €133 million (-0.2%) compared with 2014. The slight con- traction is attributable to a decline in sales of electricity, part- millions of euro ly offset by greater revenue from the sale of fuels and gas. 2015 The increase in revenue in Italy, especially in distribution as a result of regulatory changes concerning electricity trans- 2014 75,658 75,791 -0.2% port (Resolutions 654/2015 and 655/2014 of the Authority for Electricity, Gas and the Water System), and in Latin America, especially owning to the effect of Resolución 32/2015 in Ar- gentina and the acquisition, as from April 2014, of control of Gas Atacama in Chile, partly offset the negative impact of changes in the exchange rates of other local currencies, no- tably in Brazil, Colombia and Russia, against the euro (equal to about €773 million). In addition, revenue in 2015 includes the gain of €141 million on the disposal of SE Hydropower and the negative goodwill and simultaneous remeasurement at fair value of the stake already held by the Group following the acquisition of 3Sun for a total of €116 million. During the same period of 2014, revenue included the gain on the disposal of LaGeo (€123 million), the adjustment to the sales price (€82 million) on the disposal of Artic Russia, which was carried out at the end of 2013, and the remeasurement at fair value (€50 million) of the net assets of SE Hydropower, a company over which the Group lost control at the start of 2014. Millions of euro Italy Iberian Peninsula Latin America Eastern Europe Renewable Energy Other, eliminations and adjustments Total 2015 39,644 20,105 10,627 4,831 3,011 (2,560) 75,658 2014 restated Change 38,389 20,952 9,648 5,299 2,921 (1,418) 75,791 1,255 (847) 979 (468) 90 (1,142) (133) 3.3% -4.0% 10.1% -8.8% 3.1% -80.5% -0.2% 16 Annual Report 2015 15,297 15,757 -2.9% Gross operating margin The gross operating margin amounted to €15,297 million millions of euro in 2015, down 2.9% compared with 2014. More specifically, in view of the fact that the effects of the extraordinary cor- porate transactions cited above were essentially neutral, the change reflected the adverse developments in exchange rates, the formalization of a number of agreements in the 4th Quarter of 2015 for the early retirement of personnel 2015 2014 in Italy and Spain, and a decrease in the margin on electric- ity from conventional generation. These effects were partly offset by efficiency gains, a number or regulatory changes with a positive impact on results and the new regulations introduced in July 2015 in Slovakia that made it possible to partially reverse the provision for charges for the disposal of depleted nuclear fuel. More specifically, fluctuations in the exchange rates of other currencies with respect to the euro produced a net exchange loss of about €107 million, the net balance of the deprecia- tion of certain currencies (including the ruble, the Colombian peso and the Brazilian real) and the appreciation of others (notable the Chilean peso, the US dollar and the Peruvian sol) against the euro. Millions of euro Italy Iberian Peninsula Latin America Eastern Europe Renewable Energy Other, eliminations and adjustments Total 2015 6,098 3,111 3,167 1,308 1,826 (213) 15,297 2014 restated Change 6,343 3,203 3,092 1,210 1,938 (29) 15,757 (245) (92) 75 98 (112) (184) (460) -3.9% -2.9% 2.4% 8.1% -5.8% - -2.9% 17 Report on operationsAnnual Report 2015 Operating income Operating income in 2015 amounted to €7,685 million, an millions of euro 2015 7,685 2014 3,087 increase of €4,598 million compared with 2014 (€3,087 mil- lion). In addition to a decline in depreciation and amortiza- tion, the changes reflected a reduction in impairment losses on property, plant and equipment and intangible assets. In particular, the change mainly reflected the following con- trasting factors: > impairment of non-current assets in 2014, mainly regard- ing generation in Italy, Slovakia and Russia and certain as- sets in Spain, renewables assets in Greece, the tolling agreement with Marcinelle Energie and the Aysén water use rights for a total of about €6,427 million; > impairment of non-current assets in 2015, mainly regard- ing Russian generation and Romanian renewables assets following changes in market and regulatory conditions, and on Slovakian assets in order to align their carrying amounts with their estimated realizable values, in addi- tion to the impairment of the net assets of the upstream gas area as a result of the difficulty in continuing projects and the change in the price scenario in the global fuel market, for a total of about €1,787 million. These effects were partly offset by the contraction in the gross operating margin. Millions of euro Italy Iberian Peninsula Latin America Eastern Europe Renewable Energy Other, eliminations and adjustments Total 2015 4,005 1,397 2,241 (499) 879 (338) 7,685 2014 restated Change 1,918 1,240 1,549 (2,676) 1,124 (68) 3,087 2,087 157 692 2,177 (245) (270) 4,598 - 12.7% 44.7% -81.4% -21.8% - - 18 Annual Report 2015 millions of euro Earnings per share €0.23 2015 2,196 1,176 3,372 Earnings per share €0.05 2014 517 255 772 Non-controlling interests Group Net income Net income attributable to shareholders of the Parent Company amounted to €2,196 million in 2015, compared with €517 million the previous year. More specifically, the increase in operating income was accompanied by a decline in net financial expense (mainly associated with a reduction in interest on debt and a number of non-recurring items), only partly offset by an increase in income taxes. The latter were affected by numerous non-recurring items, including: a) an increase in deferred tax assets recognized in 2014 by Enel Iberoamérica in the amount of €1,392 million following the reorganization of investments in Spain and Latin America; b) the tax benefits associated with the elimination at the end of 2014 of the IRES (corporate income tax) surtax (the so-called “Robin Hood Tax”); c) changes in the deductibility of personnel costs for IRAP (regional business tax) purposes; d) new tax regulations in Spain, Peru, Chile and Colombia that had an impact on deferred taxation; and e) the application of the new Italian Stability Act approved in December 2015, which reduces the IRES rate from 27.5% to 24% as from January 1, 2017. These factors were accompanied by the increase in the impact of non-controlling interests, mainly due to the disposal of 21.92% of Endesa in the 4th Quarter of 2014. Financial data Net capital employed Net capital employed, including net assets held for sale of €1,490 million (mainly Slovenské elektrárne), amounted to €89,296 million at December 31, 2015 and was financed by equity pertaining to shareholders of the Parent Company millions of euro Group equity per share €3.44 Group equity per share €3.35 2015 2014 +0.9% and non-controlling interests of €51,751 million and net 37,545 51,751 89,296 debt/equity ratio came to 0.73 (0.73 at December 31, 2014). financial debt of €37,545 million. At December 31, 2015, the 37,383 51,145 88,528 Net financial debt came to €37,545 million, an increase of Equity (including non- controlling interests) Net financial debt €162 million on December 31, 2014, reflecting the borrowing generated by investment in the period, the payment of dividends and developments in exchange rates. 19 Report on operationsAnnual Report 2015 Cash flows from operations millions of euro Cash flows from operations amounted to €9,572 million, down €486 million on the previous year. 2015 2014 9,572 10,058 Capital expenditure millions of euro Capital expenditure amounted to €7,113 million in 2015 (of which €6,353 million in respect of property, plant and equipment), an increase of €412 million on 2014. 2015 2014 7,113 6,701 -4.8% +6.1% Millions of euro Italy (1) Iberian Peninsula Latin America Eastern Europe (2) Renewable Energy Other, eliminations and adjustments Total 2015 1,562 985 1,819 229 2,466 52 7,113 2014 restated Change 1,460 993 1,609 936 1,658 45 6,701 102 (8) 210 (707) 808 7 412 7.0% -0.8% 13.1% -75.5% 48.7% 15.6% 6.1% (1) The figure does not include €1 million regarding units classified as “held for sale”. (2) The figure does not include €648 million regarding units classified as “held for sale”. Operations Italy Abroad Total Italy Abroad Total 2015 2014 Net electricity generated by Enel (TWh) 68.5 215.5 284.0 71.8 211.3 283.1 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) 226.6 88.0 4.1 190.8 172.1 4.8 417.4 260.1 8.9 223.0 87.6 3.5 188.1 173.4 4.3 411.1 261.0 7.8 33,040 34,874 67,914 33,405 35,556 68,961 (1) Excluding sales to resellers. (2) Includes 4,301 in units classified as “held for sale” at December 31, 2015 (4,486 at December 31, 2014). 20 Annual Report 2015 Net electricity generation by source (2015) Net electricity generated by Enel in 2015 increased by 0.9 TWh compared with 2014 (+0.3%). More specifically, 15% the rise attributable to greater generation abroad (+4.2 TWh) 14% 10% is largely accounted for by greater conventional thermal ou- 31% tput, only partly offset by a decline in renewables genera- tion, which in 2015 was affected by a decline in resource availability. Finally, 31% of the electricity generated by Enel in 2015 came from renewable sources (34% in 2014). 30% Electricity transported on the Enel distribution net- Renewables Coal Oil and gas turbine Nuclear Combined cycle and gas work in 2015 amounted to 417.4 TWh, up 6.3 TWh (+1.5%), mainly reflecting an increase in electricity demand in Spain and Latin America, with the exception of Brazil. Electricity sold by geographical area (2015) Electricity sold by Enel in 2015 amounted to 260.1 TWh, a decrease of 0.9 TWh (-0.3%) compared with 2014. 6% A decline in sales in the Iberian Peninsula, reflecting the 24% 34% 36% Italy Iberian Peninsula Latin America Other countries ongoing shift of customers to the free market, was only partly offset by the rise in amounts sold in Italy and in Latin America. At December 31, 2015, Enel Group employees numbered 67,914. The decrease of 1,047 on the end of 2014 is attri- butable to the net balance of new hires and terminations (-1,316), partly offset by the change in the scope of conso- lidation (+269). Employees (no.) Italy (1) Iberian Peninsula Latin America (2) Eastern Europe (3) Renewable Energy Other, eliminations and adjustments Total 2015 28,774 10,001 12,211 10,200 4,309 2,419 67,914 2014 restated 29,656 10,500 12,301 10,411 3,609 2,484 68,961 (1) Of which 41 in units classified as “held for sale” at December 31, 2014. (2) Of which 15 in units classified as “held for sale” at December 31, 2014. (3) Of which 4,301 in units classified as “held for sale” at December 31, 2015 (4,430 at December 31, 2014). 21 Report on operationsAnnual Report 2015Environmental, social and governance indicators ISO 14001-certified net efficient capacity (% of total) Average efficiency of thermal plants (%) (1) Total specific emissions of CO2 from net generation (gCO2/kWheq) (2) “Zero-emission” generation (% of total) Enel injury frequency rate (3) Enel injury severity rate (4) Serious and fatal injuries at Enel Serious and fatal injuries at contractors Verified violations of the Code of Ethics (5) 2015 97.6 38.1 409 45.5 1.27 0.05 7 33 32 2014 94.3 37.8 395 47.4 1.32 0.07 4 38 31 Change 3.3 0.3 14 (1.9) (0.05) (0.02) 3 (5) 1 3.5% 0.8% 3.5% -4.0% -3.8% -33.4% 75.0% -13.2% 3.2% (1) Percentages calculated using new method that does not consider oil and gas plants in Italy that are included in the 2015-2016 disposal program and heat. (2) Specific emissions are calculated as total emissions from simple thermal generation and co-generation of electricity and heat as a ratio of total renewables generation, nuclear generation, simple thermal generation and co-generation of electricity and heat (including the contribution of heat in MWh equivalent). (3) The indicator is calculated as the ratio between the total number of injuries and the number of hours worked, in millions (INAIL standard). (4) 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). (5) The analysis of reports received in 2014 was completed in 2015. For that reason, the number of verified violations for 2014 was restated from 27 to 31. Currently, more than 45% of Enel generation output comes last two years, going from 37.8% in 2014 to 38.1% in 2015. from zero-emission resources. In 2015 Enel Green Power The proportion of ISO 14001-certified net efficient capa- installed about 870 MW of new wind capacity, mainly in city was equal to 97.6%, an increase compared with 2014 the United States, Mexico, Brazil and our new country Uru- thanks to the new installed capacity of Enel Green Power guay, reaching a total installed capacity for renewable re- and the exit of marginal plants, mainly in Italy. sources of 37,033 MW. This confirms the Group’s commit- Injury frequency and severity rates for employees of the ment to the development of carbon-free generation, which Enel Group were equal to 1.27 (down about 4% compa- will continue in the coming years. red with 2014) and 0.05 (down about 33% on the previous With the additional increase in renewables generation envi- year), respectively. saged in the plan, Enel confirms its objective for achieving In 2015 there were 7 serious and fatal injuries involving carbon neutrality by 2050, with an intermediate target at Enel personnel (3 more than in 2014) and 33 serious and fa- 2020 of reducing emissions by 25% compared with 2007. tal injuries involving the employees of contractors working This goal has been recognized as a “Science Based Target” for Enel (5 fewer compared with 2014). as it is in line with global climate targets. This downward The management of reported violations of the Code of trend was interrupted by a temporary increase of 3.5% in Ethics was revised to ensure greater transparency and CO2 emissions as a result of greater use of thermal gene- ration assets in order to offset, together with greater wind traceability and to standardize assessment systems at the Group level while ensuring appropriate assessment times. generation, the reduction in expected hydroelectric genera- The new process also improved the preliminary analysis of tion owing to poor rainfall during the year. reports received, which numbered 124 in 2015, of which 32 The average yield of thermal plants was unchanged in the were classified as violations. 22 Annual Report 2015 Overview of the Group’s operations, performance and financial position Definition of performance indicators - “Long-term borrowings”; - “Employee benefits”; - “Provisions for risks and charges”; - “Deferred tax liabilities”. > Net current assets: calculated as the difference between In order to present the results of the Group and the Parent “Current assets” and “Current liabilities” with the excep- Company and analyze its financial structure, Enel has pre- tion of: pared separate reclassified schedules that differ from those - “Long-term financial receivables (short-term portion)”, envisaged under the IFRS-EU adopted by the Group and “Receivables for factoring advances”, “Securities”, “Fi- Enel SpA and presented in the consolidated and separate nancial receivables and cash collateral” and “Other fi- financial statements, respectively. These reclassified sche- nancial receivables”; dules contain different performance indicators from those - “Cash and cash equivalents”; obtained directly from the consolidated and separate fi- - “Short-term borrowings” and the “Current portion of nancial statements, which management feels are useful in long-term borrowings”. monitoring Group and Parent Company performance and representative of the financial performance of our business. > Net assets held for sale: calculated as the algebraic sum of In accordance with Recommendation CESR/05-178b publi- “Assets held for sale” and “Liabilities held for sale”. shed on November 3, 2005, the criteria used to calculate these indicators are described below. > Net capital employed: calculated as the algebraic sum of “Net non-current assets” and “Net current assets”, provi- > Gross operating margin: an operating performance indica- sions not previously considered, “Deferred tax liabilities” tor, calculated as “Operating income” plus “Depreciation, and “Deferred tax assets”, as well as “Net assets held for amortization and impairment losses”. sale”. > Group net ordinary income: this is Group net income produ- > Net financial debt: a financial structure indicator, determi- ced by ordinary operations. ned by “Long-term borrowings”, the current portion of such borrowings and “Short-term borrowings” less “Cash > Net non-current assets: calculated as the difference betwe- and cash equivalents”, “Current financial assets” and en “Non-current assets” and “Non-current liabilities” with “Non-current financial assets” not previously considered the exception of: - “Deferred tax assets”; in other balance sheet indicators. More generally, the net financial debt of the Enel Group is calculated in conformity - “Securities held to maturity”, “Financial investments in with paragraph 127 of Recommendation CESR/05-054b funds or portfolio management products at fair value implementing Regulation 2004/809/EC and in line with the through profit or loss”, “Securities available for sale” CONSOB instructions of July 26, 2007, net of financial re- and “Other financial receivables”; ceivables and long-term securities. 23 Report on operationsAnnual Report 2015Main changes in the scope of consolidation In the two periods under review, the scope of consolidation information, please see note 5 in the notes to the consolida- changed as a result of a number of transactions. For more ted financial statements. 2014 Change (133) 720 393 (460) (5,058) 4,598 692 18 674 87 5,359 2,759 2,600 - 2,600 1,679 921 -0.2% 1.2% - -2.9% -39.9% - 20.8% 0.3% 21.5% - - - - - - - - Group performance Millions of euro Total revenue Total costs Net income/(expense) from commodity contracts measured at fair value Gross operating margin Depreciation, amortization and impairment losses Operating income Financial income Financial expense 2015 75,658 60,529 168 15,297 7,612 7,685 4,018 6,474 75,791 59,809 (225) 15,757 12,670 3,087 3,326 6,456 Total financial income/(expense) (2,456) (3,130) Share of income/(losses) of 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 (Group and non-controlling interests) Net income attributable to shareholders of the Parent Company Net income attributable to non-controlling interests 52 5,281 1,909 3,372 - 3,372 2,196 1,176 (35) (78) (850) 772 - 772 517 255 24 Annual Report 2015 Revenue Millions of euro Revenue from the sale of electricity Revenue from the transport of electricity Fees from network operators Transfers from equalization funds, market operators and energy services operators Revenue from the sale of gas Revenue from the transport of gas Gains on disposal and negative goodwill on acquisitions of subsidiaries, associates, joint ventures, joint operations and non-current assets held for sale Remeasurement at fair value after changes in control Gains on the disposal of property, plant and equipment and intangible assets Other sales, services and revenue Total 2015 46,638 9,911 826 1,152 4,045 509 313 80 52 12,132 75,658 2014 48,062 9,142 783 1,857 3,628 459 292 82 32 11,454 75,791 Change (1,424) 769 43 (705) 417 50 21 (2) 20 678 (133) -3.0% 8.4% 5.5% -38.0% 11.5% 10.9% 7.2% -2.4% 62.5% 5.9% -0.2% In 2015 revenue from the sale of electricity amounted to Revenue from transfers from equalization funds, market €46,638 million, down €1,424 million on the previous year operators and energy services operators came to €1,152 (-3.0%). This decrease is mainly due to the following factors: million in 2015, down €705 million compared with the same > a reduction of €1,073 million in wholesale electricity period of the previous year. More specifically, the reduction sales, mainly due to a decline in revenue from sales in is mainly concentrated in the extra-peninsular area of Spain, Russia as a result of the depreciation of the ruble with where joint impact of higher sales and the drop in fuel prices respect to the euro and to a decrease in quantities sold more than offset the effects of certain prior-year items reco- on national electricity exchanges; gnized in 2014 following regulatory changes. > an increase of €61 million in revenue from electricity sa- les to end users, essentially attributable to higher reve- Revenue from the sale of gas in 2015 amounted to €4,045 nue from free markets in Spain and Latin America (parti- million, an increase of €417 million (+11.5%) on the previous cularly in Brazil and Chile as a result of the combination of year. The change essentially reflects the greater revenue ge- higher volumes sold and favorable developments in the nerated in the Iberian Peninsula and on the domestic market Chilean peso exchange rate), partially offset by a decrea- as a result of the sharp increase in volumes, despite the se in revenue in Italy. More specifically, revenue on free decline in average unit prices. markets rose by €368 million in 2015, only partly offset by a reduction of €307 million in revenue on regulated Revenue from the transport of gas amounted to €509 mil- markets; lion in 2015, an increase of €50 million (+10.9%), following a > a decrease of €412 million in revenue from electricity tra- similar pattern to that for sales of gas. ding, reflecting a decline in volumes handled. The item gains and negative goodwill in 2015 totaled €313 Revenue from the transport of electricity amounted to million, an increase of €21 million (+7.2%), mainly relating €9,911 million in 2015, an increase of €769 million. The rise to the disposal of SE Hydropower (€141 million), the dispo- mainly reflected developments in the Italian market as a sal of SF Energy (€15 million) and the negative goodwill in result of regulatory changes implemented with Resolution the acquisition of control of 3Sun (€76 million). In 2014, the 654/2015 of the Autority for Electricity, Gas and the Water item primarily regarded the price adjustment on the sale of System (the “Authority“), which eliminated the time lag, as Artic Russia (€82 million) following satisfaction of the condi- well as the positive impact of an increase in transmission tions provided for in the earn-out clause of the agreements rates as a result of Authority Resolution 655/2014, which with the buyer prior to completion of the sale and a number updated rates for electricity transmission, distribution and gains realized by Enel Green Power, mainly on the disposal metering rates for residential customers for 2015. of LaGeo (€123 million) and Enel Green Power France (€31 million). 25 Report on operationsAnnual Report 2015  Gains from remeasurement at fair value after changes in previous year) for an increase of €678 million (+5.9%). control in 2015 came to €80 million (€82 million in 2014). The rise is mainly attributable to: More specifically, the gains for 2015 refer to the adjustment > an increase of €1,452 million in revenue from fuel sales to their current value of assets and liabilities pertaining to for trading, including revenue for shipping services, es- the Group already held by Enel prior to the acquisition of sentially due to the increase in volumes sold in interna- full control of 3Sun (€40 million) and the ENEOP consortium tional markets; (€29 million). In 2014 this item referred to the adjustment > a decrease of €945 million resulting from a contraction in to their fair value of assets and liabilities pertaining to the revenue from the sale of environmental certificates and a Group (i) following the loss of control, as from January 1, decrease in the grants received for them; 2014, of SE Hydropower as a result of changes in governan- > the regulatory changes in Argentina introduced by Reso- ce arrangements (€50 million) and (ii) held by Enel prior to lución 32/2015 concerning the recognition of revenue on the acquisition of full control of Inversiones Gas Atacama the basis of a theoretical framework and the Mecanismo (€29 million) and Buffalo Dunes Wind Project (€3 million). de Monitoreo de Costos, which increased revenue by €247 million compared with 2014; Gains on the disposal of property, plant and equipment > €98 million in negative goodwill, of which €76 million on and intangible assets in 2015 amounted to €52 million (€32 the acquisition of 3Sun and €11 million from the definiti- million in 2014) and mainly regard ordinary disposals during ve allocation of the fair value of the assets acquired and the period. the liabilities and contingent liabilities assumed in South Revenue under other sales, services and revenue amounted to €12,132 million in 2015 (€11,454 million in the Africa. Costs Millions of euro Electricity purchases Consumption of fuel for electricity generation Fuel for trading and gas for sale to end users Materials Personnel Services, leases and rentals Other operating expenses Capitalized costs Total 2015 22,218 5,570 10,087 1,078 5,313 15,148 2,654 (1,539) 60,529 2014 23,317 5,944 7,909 2,275 4,864 14,662 2,362 (1,524) 59,809 Change (1,099) (374) 2,178 (1,197) 449 486 292 (15) 720 -4.7% -6.3% 27.5% -52.6% 9.2% 3.3% 12.4% -1.0% 1.2% Costs for electricity purchases in 2015 fell by €1,099 Costs for the purchase of fuel for trading and gas for sale million compared with 2014, representing a contraction of to end users came to €10,087 million in 2015, an increase 4.7%. This development mainly reflects the impact of the of €2,178 million on 2014. The change mainly reflects the decline in purchases through bilateral contracts on national trading on commodity markets mentioned above in the di- and international markets (€972 million in 2015) and a re- scussion of revenue, as well as the need to cover the incre- duction in costs for purchases of electricity on electricity ase in volumes for sale to end users. exchanges (€223 million). Costs for the consumption of fuel for electricity genera- decrease of €1,197 million on 2014. The decrease is mainly tion amounted to €5,570 million in 2015, down €374 million (-6.3%) on the previous year, reflecting the lower average attributable to the contraction in provisioning of CO2 allo- wances and green certificates in connection with the decre- Costs for materials in 2015 amounted to €1,078 million, a unit prices of fuels, which more than offset the increase in ase in those markets. consumption due to the rise in thermal generation. 26 Annual Report 2015 Personnel costs in 2015 totaled €5,313 million, an increase Other operating expenses in 2015 amounted to €2,654 of 9.2% on 2014. The change essentially refers to: million, an increase of €292 million compared with 2014. > the increase in costs for early retirement incentives under They essentially reflect: the new agreements for early termination signed in Italy > an increase in provisioned charges (€328 million) for in December 2015, in accordance with Article 4 of Law compensation to Italian retired employees for the uni- 92/2012 (€1,128 million, including the impact of those lateral revocation of the electricity discount as from De- agreements on other employee benefits), as well as the cember 31, 2015; increase in costs (€90 million) due to the introduction of > an increase in provisions by Spanish generators in re- early retirement incentives in the two years in Spain (Plan spect of the abandonment of the Hidromondego project de Salida); > the reversal (€902 million) of the provision for electricity (about €46 million) and greater charges for CO2 allowan- ces (€56 million) as a result of an increase in emissions discounts for former Italian employees as a result of the in 2015. The impact was only partly offset by a reduction unilateral revocation of the benefit in the 4th Quarter of in the price of EUAs during the year; 2015; > a decrease in expenses (€45 million) associated with the > an increase in costs in Latin America associated with lar- Bono social charged to the Spanish electricity compa- ger average workforces and the increase in average unit nies following the issue of Ministerial Order 350/2014; costs. The rise was particularly large in Argentina due to > the reversal of provisions for risks and charges (€136 mil- the renewal of the local collective bargaining agreement; lion) recognized at the end of 2014 in Slovakia; > a reduction in the average workforces in Italy and Spain, > the reversal of provisions for risks and charges (€63 mil- in part attributable to the early retirement incentives intro- lion), initially recognized in the first nine months of 2014, duced in previous years. following the settlement agreement between Enel Di- The Enel Group workforce at December 31, 2015 numbe- stribuzione, A2A and A2A Reti Elettriche; red 67,914, of whom 34,874 abroad. The Group workforce > an increase in charges for Enel Distribuzione (€207 mil- fell by 1,047 during 2015, reflecting the negative balance lion) in respect of energy efficiency certificates as a re- between new hires and terminations (-1,316 employees) sult of increased purchases to meet compliance require- and the change in the scope of consolidation (+269 emplo- ments and, above all, the regulatory change provided for yees), the latter mainly attributable to the acquisition of an in Authority Resolution 13/2014 introducing a new cost additional 66% of 3Sun (which gave the Group full control coverage mechanism; of the company and led to line-by-line consolidation) and > the reversal of the nuclear waste disposal provision the acquisition of a majority stake in the Indian company in Slovakia in the amount of €550 million following an BLP Energy, as well as the disposal of ENEOP and other analysis by independent experts, who took account of Portuguese renewables companies. the regulatory changes introduced in July 2015 by the The overall change compared with December 31, 2014 bre- Slovakian government, which approved a new strategy aks down as follows. for handling the “back end” of spent nuclear fuel. Balance at December 31, 2014 68,961 In 2015 capitalized costs amounted to €1,539 million, with 2,695 developments in line with the previous year. Hirings Terminations Change in scope of consolidation Balance at December 31, 2015 (4,011) 269 67,914 Costs for services, leases and rentals in 2015 amounted to €15,148 million, an increase of €486 million compared with 2014. The change during the period essentially reflects a rise in wheeling costs (€139 million), network access costs (€129 million in 2015) and other services connected with the electricity business (€83 million). Net income/(expense) from commodity contracts me- asured at fair value showed net income of €168 million in 2015 (net expense of €225 million in the previous year). More specifically, the net income for 2015 was essentially at- tributable to net realized income in the period totaling €472 million (€43 million in 2014) and net unrealized charges from the fair value measurement of derivatives positions open at the end of the period in the amount of €304 million (€268 million in 2014). 27 Report on operationsAnnual Report 2015Depreciation, amortization and impairment losses in ces provided under concession arrangements in Brazil 2015 amounted to €7,612 million, a decrease of €5,058 and the impairment recognized in 2014 on the financial million. The decrease is essentially attributable to the im- receivable due from Elcogas, as well as greater capita- pairment losses recognized to align the value of net assets lized interest expense due in part to the increase in in- “held for sale” to their estimated realizable value. More vestments. specifically, while in 2014 such impairment totaled €6,427 million (essentially in respect of generation plants in Italy, The share of income/(losses) of equity investments ac- Russia and Slovakia as well as water use rights in the Aysén counted for using the equity method in 2015 showed net region in Chile), the impairment losses recognized in 2015 income of €52 million. regarded the Enel Russia CGU (€899 million), the Enel Gre- en Power Romania CGU (€155 million), upstream gas explo- Income taxes in 2015 amounted to €1,909 million, equal to ration assets (€159 million) and Slovenské elektrárne (€574 36.1% of taxable income (compared a net tax creditor po- million), the latter to realign the carrying amount with esti- sition of €850 million in 2014). The increase in taxes in 2015 mated realizable value. on the previous year essentially reflects (in addition to the These effects were compounded by a reduction in deprecia- greater pre-tax income): tion and amortization in the amount of €317 million, reflec- > a decrease of €197 million in net deferred tax assets as ting developments in exchange rates and the reduction in a result of the provisions of the Stability Act approved in the carrying amounts due to impairment losses, only partly December 2015; offset by the increase in net writedowns of trade receivables > the positive impact of the recognition in the 4th Quarter totaling €68 million. of 2014 of a tax credit of €1,392 million in respect of the distribution of dividends by Endesa in the 4th Quarter, Operating income in 2015 amounted to €7,685 million, an as well as the tax effect of the significant impairment increase of €4,598 million. losses recognized the previous year; partly offset by: Net financial expense amounted to €2,456 million, a decre- > the negative impact in 2014 (€280 million) of the increa- ase of €674 million. This mainly reflected: se in tax rates (progressively from 20% to 27% in 2018) > a decrease of €129 million in net interest, essentially due under the tax reform in Chile, which led to an adjustment to a reduction in average net financial debt; of net deferred taxation; > an increase of €236 million in net exchange losses as a > in Italy, the benefits (€200 million) of the ruling of uncon- result of exchange rate developments; stitutionality at the end of 2014 of the IRES surtax (the > an increase of €452 million in net income from financial so-called Robin Hood Tax) and the positive impact (€50 derivatives (to hedge interest rates and exchange rates); million) of the changes in the deductibility of personnel > a decrease of €86 million in interest expense in respect costs for IRAP purposes, the essential exemption from of the accretion of provisions for employee benefits and tax of the gains on the disposals of SE Hydropower and early retirement incentives; SF Energy and the change in the IRES rate from 27.5% > a decrease of €240 million in other net financial expen- to 24% as from 2017; se, mainly reflecting the negative adjustment in 2014 of > the change in the tax rate in Spain from 30% to 28%. the financial assets recognized in respect of the servi- 28 Annual Report 2015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 non-current assets Net current assets: - trade receivables - inventories - net receivables due from equalization funds, market operators and energy services operators - other net current assets/(liabilities) - trade payables Total net current assets Gross capital employed Sundry provisions: - 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, 2015 at Dec. 31, 2014 Change 88,686 13,824 607 1,092 104,209 12,797 2,904 (4,114) (5,518) (11,775) (5,706) 98,503 (2,284) (8,413) (10,697) 1,490 89,296 51,751 37,545 89,844 (1,158) 14,027 872 (741) 104,002 (203) (265) 1,833 207 -1.3% -1.4% -30.4% - 0.2% 12,022 775 6.4% 3,334 (430) -12.9% (2,994) (1,120) -37.4% (4,827) (691) -14.3% (13,419) 1,644 12.3% (5,884) 98,118 178 385 3.0% 0.4% (3,687) 1,403 38.1% (7,391) (1,022) -13.8% (11,078) 1,488 88,528 51,145 37,383 381 2 768 606 162 3.4% - 0.9% 1.2% 0.4% Property, plant and equipment and intangible assets (inclu- companies (Altomonte, Enel Green Power Strambino Solar ding investment property) came to €88,686 million at De- and Enel Green Power San Gillio) from the scope of conso- cember 31, 2015, a decrease of €1,158 million. The decli- lidation. ne is essentially attributable to depreciation, amortization and impairment losses for the year (€5,974 million) and the Goodwill amounted to €13,824 million, a decrease of €203 negative impact of the translation of financial statements million on December 31, 2014. The change is essentially due prepared in foreign currencies (€2,455 million), which was to the disposal of the Portuguese companies of the Rene- especially significant for the Colombian peso, the Brazilian wable Energy Division (€257 million) and to the impairment real and the Russian ruble. These factors were only partly losses on the goodwill of Enel Green Power Romania (€13 offset by capital expenditure for the year (€7,713 million) and million) recognized as a result of the adverse market and the changes in the scope of consolidation (€238 million). The regulatory scenario in that country. These decreases were latter essentially reflects the acquisition of control of 3Sun, partly offset by the positive effects of the adjustment at cur- BLP Energy (an Indian renewables generator) and a number rent exchange rates of goodwill denominated in currencies of smaller companies operating in renewables generation in other than the euro (€51 million), which was especially pro- the United States. These effects were only partly offset by nounced for the US dollar, as well as the recognition of €6 the disposal of the Portuguese companies of the Renewable million in goodwill from the acquisition of control of a number Energy Division and the exit of the Italian solar generation of companies in Mexico by the Renewable Energy Division. 29 Report on operationsAnnual Report 2015 Equity investments accounted for using the equity method than offset by the recognition of current taxes (net of amounted to €607 million, a decrease of €265 million com- adjustments of prior years) amounting to €2,042 mil- pared with the end of the previous year. The decline mainly lion; reflects the reclassification under assets held for sale of - a decrease in other net current liabilities of €333 mil- Hydro Dolomiti Enel, the distribution of dividends and the lion, of which €241 million as a result of the payment disposal of the Portuguese company ENEOP, which was of liabilities connected with dividends to be disbursed classified under this item in 2014. These factors were partly recognized in 2014, mainly in respect of the Colombian offset by the portion of the net income reported by compa- companies; nies accounted for using the equity method attributable to - a decrease in net current financial assets of €363 mil- the Group. lion, essentially reflecting the decline in the fair value of derivatives, only partly offset by an increase in net Other net non-current assets at December 31, 2015 prepaid financial expense; amounted to €1,092 million, an increase of €1,833 million - an increase in other net tax payables other than income on December 31, 2014 (net liabilities of €741 million). tax of €156 million, essentially in respect of taxes and The change is mainly attributable to the increase of €1,931 surtaxes on the consumption of electricity and gas; million in the net assets in respect of cash flow hedge deri- > a decrease in trade payables of €1,644 million, mainly in vatives and the increase of €41 million in the value of other Italy and partly reflecting the decrease in costs for the equity investments, including the adjustment to fair value of purchase of electricity and materials. the investment in Bayan Resources. These factors were only partly offset by the decline of €37 million in financial assets Sundry provisions amounted to €10,697 million, a decrea- in respect of service concession arrangements. se of €381 million on the previous year. The decline essen- tially reflected the following factors: Net current assets came to a negative €5,706 million at De- > a decrease of €1,403 million in the provision for post- cember 31, 2015, a decrease of €178 million on December employment and other employee benefits, mainly due to 31, 2014. The change is attributable to the following deve- the unilateral revocation of the energy discount benefit lopments: for retired Italian employees as from December 31, 2015; > an increase in trade receivables of €775 million, mainly > an increase of €1,559 million in provisions for risks and due to the changes in a number of collection policies charges, largely attributable to provisions for early retire- compared with 2014 and the effects of Authority Reso- ment incentives following the new agreement reached on lution 654/2015, which produced an increase in revenue early terminations, which was signed in December 2015, from electricity transport and the associated receivables; in accordance with Article 4 of Law 92/2012 in Italy, the > a decrease in inventories of €430 million, largely attributa- introduction of a new early retirement incentive scheme ble to a decline in inventories of green certificates (€216 (Plan de Salida) in Spain, and the granting of a lump-sum million) and stocks of gas and other fuels (€217 million) as benefit under the agreements with the trade unions for a result of a decline in average prices; the former beneficiaries of the energy discount benefit > a decrease in net receivables due from equalization fun- in Italy; ds, market operators and energy services operators of > a decrease of €513 million in net deferred tax liabilities, €1,120 million, mainly in Italy, following Authority Re- mainly due to exchange differences on the net deferred solution 268/2015 (the “Grid Code”), which establishes tax liabilities of companies with a currency other than the a different methodology for determining the A and UC euro and the partial reversal of net receivables for defer- rate components. Another factor was the decrease in net red tax assets following the change in the IRES rate in receivables deriving from the application of equalization Italy from 27.5% to 24% as from January 1, 2017, as esta- mechanisms to electricity purchases; blished in the 2016 Stability Act. > a decrease in other current assets less related liabilities of €691 million. This was attributable to: Net assets held for sale amounted to €1,490 million at De- - a decrease in net income tax receivables of €485 mil- cember 31, 2015 (€1,488 million at December 31, 2014). They lion, essentially associated with the payment of income include the net assets, valued at their estimated realizable taxes in the amount of €1,516 million, which was more value on the basis of the current status of negotiations, of 30 Annual Report 2015 Slovenské elektrárne, Hydro Dolomiti Enel, Compostilla and other net assets of smaller companies, which, in view of the decisions taken by management, meet the requirements of IFRS 5 for classification as assets held for sale. SE Hydropo- wer and SF Energy, which were classified under this account the previous year, were sold during the year. Net capital employed at December 31, 2015 amounted to €89,296 million and was funded by shareholders’ equity at- tributable to the shareholders of the Parent Company and non-controlling interests in the amount of €51,751 million and net financial debt of €37,545 million. At December 31, 2015, the debt/equity ratio was 0.73 (0.73 at December 31, 2014). 31 Report on operationsAnnual Report 2015Analysis of the Group’s 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 borrowings - bonds - other borrowings Long-term debt Long-term financial receivables and securities Net long-term debt Short-term debt: Bank borrowings: - short-term portion of long-term bank borrowings - other short-term bank borrowings Short-term bank borrowings Bonds (short-term portion) Other borrowings (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 with banks and short-term securities Cash and cash equivalents and short-term financial receivables Net short-term debt NET FINANCIAL DEBT Net financial debt of “Assets held for sale” at Dec. 31, 2015 at Dec. 31, 2014 Change 6,863 35,987 2,022 44,872 (2,335) 42,537 844 180 1,024 4,570 319 213 1,698 64 6,864 (769) (147) (1,020) (304) (10,640) (12,880) (4,992) 37,545 841 7,022 39,749 1,884 48,655 (2,701) 45,954 824 30 854 4,056 245 2,599 457 166 7,523 (1,566) (177) (1,654) (323) (13,228) (16,948) (8,571) 37,383 620 (159) (3,762) 138 (3,783) 366 (3,417) 20 150 170 514 74 (2,386) 1,241 (102) (659) 797 30 634 19 2,588 4,068 3,579 162 221 -2.3% -9.5% 7.3% -7.8% 13.6% -7.4% 2.4% - 19.9% 12.7% 30.2% -91.8% - -61.4% -8.8% 50.9% 16.9% 38.3% 5.9% 19.6% 24.0% 41.8% 0.4% 35.6% Net financial debt amounted to €37,545 million at December > bonds amounted to €35,987 million, a decrease of €3,762 31, 2015, an increase of €162 million on December 31, 2014. million on the end of 2014, mainly due to: More specifically, net long-term debt fell by €3,417 million, - the reclassification to short term of the current portion the balance of a decrease in long-term financial receivables of bonds maturing within the next 12 months, including of €366 million and a decline in gross long-term debt of a floating-rate bond in the total amount of €1,000 mil- €3,783 million. lion and a fixed-rate note of €2,000 million, both issued With regard to the latter aggregate: by Enel SpA and maturing in February 2016, as well as > bank borrowings amounted to €6,863 million, a decrease a fixed-rate bond issued by Enel Finance International of €159 million due mainly to the reclassification to short in the amount of €1,082 million, maturing in September term of the share of long-term bank borrowings falling 2016; due within 12 months. This was partly offset by drawings - new issues made in 2015, including a non-binding offer on financing by the Latin American companies in the to exchange in January 2015 through which Enel Finan- amount of €266 million and drawings on the part of Ende- ce International repurchased bonds in the total amount sa on a EIB loan of €300 million; of €1,429 million and at the same time issued a senior 32 Annual Report 2015 fixed-rate note of €1,462 million maturing in January paid to counterparties in over-the-counter derivatives tran- 2025; sactions on interest rates, exchange rates and commodities - exchange losses on bonds (including current portion) of €634 million. during the year of about €820 million. The main transactions carried out in 2015 included: Net short-term debt showed a creditor position of €4,992 > the agreement on August 27, 2015 of a 15-year loan of million at December 31, 2015, a decrease of €3,579 million €145 million by the South African company Enel Green on the end of 2014, the result of the decrease in other short- Power RSA Proprietary Limited, secured by a guarantee term borrowings of €659 million and the decrease in cash from SACE SpA. At December 31, 2015, the loan had and cash equivalents and short-term financial receivables in been drawn in the amount of €30 million; the amount of €4,068 million, partly offset by an increase in > the following bond repayments: short-term bank borrowings in the amount of €170 million, - €1,000 million in respect of a fixed-rate bond, issued by mainly as a result of the new bank borrowings by a number Enel SpA in 2007, maturing in January 2015; of Latin American companies. - €1,300 million in respect of a fixed-rate bond, issued by Other short-term debt, totaling €6,864 million, includes - €1,195 million in respect of a fixed-rate bond, issued commercial paper issued by Enel Finance International and by Enel Finance International in 2011, maturing in June Enel SpA in 2007, maturing in January 2015; International Endesa BV amounting to €213 million, as well 2015. as bonds maturing within 12 months amounting to €4,570 million. The forward starting revolving credit facility of about €9.44 Finally, cash collateral paid to counterparties in over-the- billion obtained in February 2013 by Enel SpA and Enel Fi- counter derivatives transactions on interest rates, exchange nance International, falling due in April 2018, was renegotia- rates and commodities totaled €1,020 million, while cash ted on February 11, 2015, reducing its cost and extending its collateral received from such counterparties amounted to term until 2020. €1,698 million. The facility was undrawn at December 31, 2015, as were the committed credit lines obtained by Enel SpA and Enel Cash and cash equivalents and short-term financial recei- Finance International. vables came to €12,880 million, down €4,068 million com- In addition, on July 16, 2015, a €450 million credit facility was pared with the end of 2014, mainly due to the decrease in agreed between Enel SpA and UniCredit SpA, replacing the cash with banks and short-term securities in the amount of €400 million facility agreed on July 18, 2013, which was to €2,588 million and in other short-term financial receivables terminate in July 2016. for €19 million, as well as the decrease in cash collateral 33 Report on operationsAnnual Report 2015Cash flows Millions of euro Cash and cash equivalents at the beginning 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) 2015 13,255 9,572 (6,421) (5,382) (234) 10,790 2014 7,900 10,058 (6,137) 1,536 (102) 13,255 Change 5,355 (486) (284) (6,918) (132) (2,465) (1) Of which cash and cash equivalents equal to €13,088 million at January 1, 2015 (€7,873 million at January 1, 2014), short-term securities equal to €140 million at January 1, 2015 (€17 million at January 1, 2014) and cash and cash equivalents pertaining to assets held for sale equal to €27 million at January 1, 2015 (€10 million at January 1, 2014). (2) Of which cash and cash equivalents equal to €10,639 million at December 31, 2015 (€13,088 million at December 31, 2014), short-term securities equal to €1 million at December 31, 2015 (€140 million at December 31, 2014) and cash and cash equivalents pertaining to assets held for sale equal to €150 million at December 31, 2015 (€27 million at December 31, 2014). Cash flows from operating activities in 2015 were a positive Cash flows from financing activities absorbed liquidity in €9,572 million, down €486 million on the previous year, mainly the amount of €5,382 million, while in 2014 they showed cash due to increased use of cash in connection with the change in generated of €1,536 million. The flow in 2015 is essentially as- net current assets. sociated with the reduction of net financial debt (the net balance of repayments and new borrowing) in the amount of €3,541 Cash flows from investing/disinvesting activities in 2015 million and the payment of dividends totaling €2,297 million, of absorbed funds in the amount of €6,421 million, while in 2014 which €1,316 million paid to Enel SpA shareholders. This was they had absorbed liquidity totaling €6,137 million. only partly offset by higher receipts on transactions involving More specifically, cash requirements in respect of investments non-controlling interests in the amount of €456 million. More in property, plant and equipment and in intangible assets specifically, the latter include: amounted to €7,762 million in 2015, up €1,061 million on the > the receipt of €450 million (net of transaction costs) from previous year, mainly due to increased investment abroad and the disposal of 49% of EGPNA Renewable Energy Part- in renewable technologies. ners, a generation company operating in the United Sta- Investments in entities or business units, net of cash and cash tes; equivalents acquired, amounted to €78 million in 2015 and re- > the outlay of €9 million for the purchase of the remai- garded the acquisition of 100% of a number of minor compa- ning 49% of Energia Eolica, an Italian company active in nies operating in the Mexican wind farm development sector, the wind generation sector, in which the Group had pre- the acquisition of 68% of BLP Energy, a company operating in viously held the other 51%; the renewables sector in India, the acquisition of 78.6% of Er- > the net positive impact of other minor transactions (ca- dwärme Oberland, a company specialized in the development pital increases and decreases in companies in Chile, the of geothermal projects in Germany as well as payments on ac- United States and South Africa) totaling €15 million. count for future equity investments. In 2015, the disposal of entities and business units, net of cash In 2015, cash flows from operating activities in the amount of and cash equivalents sold, generated cash flows of €1,350 mil- €9,572 million only partly covered the cash needs for financing lion, mainly accounted for by the disposals of SE Hydropower activities in the amount of €6,421 million and for investing acti- and SF Energy, operating in the Italian hydroelectric generation vities totaling €5,382 million. The difference is reflected in the sector, the disposal of the ENEOP Group and other Portuguese decrease in cash and cash equivalents, which at December 31, companies of the Renewable Energy Division as well as the 2015 amounted to €10,790 million, compared with €13,255 mil- disposal of a number of minor companies in Latin America and lion at the end of 2014. This decrease also reflects the effect North America. of negative developments in the exchange rates of the various Cash flows generated by other investing/disinvesting activities local currencies against the euro, equal to €234 million. in 2015 amounted to €69 million, and are essentially attributable to ordinary disinvestments during the period. 34 Annual Report 2015 Results by business area The representation of performance by business area presen- the Renewable Energy Division, which, in view of its cen- ted here is based on the approach used by management in tralized management by the Enel Green Power sub-holding monitoring Group performance for the two periods under company, has greater autonomy than the other Divisions. In review, taking account of the operational model adopted by addition, account was also taken of the possibilities for the the Group as described above. simplification of disclosures associated with the materiali- Taking account of the provisions of IFRS 8 regarding the ty thresholds also established under IFRS 8 and, therefore, management approach, the new organization modified the the item “Other, eliminations and adjustments” includes not structure of reporting, as well as the representation and only the effects from the elimination of intersegment tran- analysis of Group performance and financial position, as sactions, but also the figures for the Parent Company, Enel from the start of 2015. More specifically, performance by SpA, and the Upstream Gas Division. business area reported in this Annual Report was determi- ned by designating the Regions and Countries perspective The following chart outlines these organizational arrange- as the primary reporting segment, with the exception of ments. SEGMENT REPORTING 2014 SEGMENT REPORTING 2015 HOLDING SALES GLOBAL DIVISIONS GENERATION & ENERGY MANAGEMENT ITALY LOCAL BUSINESSES GENERATION AND TRADING INFRASTRUCTURE AND NETWORKS UPSTREAM GAS RENEWABLE ENERGY INFRASTRUCTURE AND NETWORKS IBERIA & LATIN AMERICA IBERIAN PENINSULA LATIN AMERICA INTERNATIONAL EASTERN EUROPE RENEWABLE ENERGY RENEWABLE ENERGY OTHER OTHER ITALY IBERIAN PENINSULA LATIN AMERICA EASTERN EUROPE I S E R T N U O C / S N O G E R I 35 Report on operationsAnnual Report 2015Similarly, the figures for the 1st Quarter of 2014 have been > the Iberia and Latin America Division, which had already restated to take account of the new organization. Leaving undergone reorganization in 2014, is now divided into the aside certain movements of minor companies, the main Regions “Iberian Peninsula” and “Latin America”; changes were as follows: > the service and support operations resident in Italy are > the Sales, Generation and Energy Management, and In- now reported under the Country “Italy”, rather than in the frastructure and Networks Divisions, which operated al- residual segment. most entirely in Italy, are now reported under the Country “Italy”; SEGMENT REPORTING 2014 SEGMENT REPORTING 2015 HOLDING SALES GLOBAL DIVISIONS GENERATION & ENERGY MANAGEMENT ITALY LOCAL BUSINESSES GENERATION AND TRADING INFRASTRUCTURE AND NETWORKS UPSTREAM GAS RENEWABLE ENERGY ITALY IBERIAN PENINSULA LATIN AMERICA EASTERN EUROPE S E I R T N U O C / S N O I G E R INFRASTRUCTURE AND NETWORKS IBERIA & LATIN AMERICA IBERIAN PENINSULA LATIN AMERICA INTERNATIONAL EASTERN EUROPE RENEWABLE ENERGY RENEWABLE ENERGY OTHER OTHER 36 Annual Report 2015Segment information for 2015 and 2014 Results for 2015 (1) Millions of euro Iberian Peninsula Latin America Italy Eastern Europe Renewable Energy Other, eliminations and adjustments Total Revenue from third parties 38,155 19,644 10,599 4,488 2,747 25 75,658 Revenue from transactions with other segments 1,489 461 28 343 264 (2,585) - Total revenue 39,644 20,105 10,627 4,831 3,011 (2,560) 75,658 Net income/(expense) from commodity contracts measured at fair value 201 8 (4) (17) (25) 5 168 Gross operating margin 6,098 3,111 3,167 1,308 1,826 (213) 15,297 Depreciation, amortization and impairment losses Operating income Capital expenditure 2,093 1,714 4,005 1,397 1,562 (2) 985 926 2,241 1,819 1,807 (499) 947 879 229 (3) 2,466 125 (338) 52 7,612 7,685 7,113 (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 year. (2) Does not include €1 million regarding units classified as “held for sale”. (3) Does not include €648 million regarding units classified as “held for sale”. Results for 2014 restated (1) (2) Millions of euro Iberian Peninsula Latin America Italy Eastern Europe Renewable Energy Other, eliminations and adjustments Total Revenue from third parties 37,679 20,766 9,645 4,928 2,662 111 75,791 Revenue from transactions with other segments 710 186 3 371 259 (1,529) - Total revenue 38,389 20,952 9,648 5,299 2,921 (1,418) 75,791 Net income/(expense) from commodity contracts measured at fair value (185) (111) (3) (1) 76 (1) (225) Gross operating margin 6,343 3,203 3,092 1,210 1,938 (29) 15,757 Depreciation, amortization and impairment losses Operating income Capital expenditure 4,425 1,963 1,918 1,240 1,460 993 1,543 1,549 1,609 3,886 (2,676) 936 814 1,124 1,658 39 12,670 (68) 45 3,087 6,701 (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 year. (2) The figures have been restated to enable comparison with the results for 2015, which are presented on the basis of the new organization of the Enel Group, which as from this year represents the basis for the planning, reporting and assessment of the performance and financial position of the Group, both inter- nally by management and with respect to the financial community. 37 Report on operationsAnnual Report 20152015 restated Change 2015 restated Change 2015 restated Change 2015 restated Change 2014 3,935 1,759 - - 1,398 1,422 260 258 3,933 1,643 - 7 (2) (116) (24) 2 - 7 Other, eliminations and adjustments 2014 2014 - - - - - - - - - - - - - - - - - - - - - - - - - (41) (41) Total 2014 6,098 6,343 3,111 3,203 3,167 3,092 1,308 1,210 - - - - - (245) (92) 75 98 (184) (460) 1,826 1,938 (112) 1,826 1,938 (112) 7,241 7,374 (133) 1,826 1,938 (112) (178) (137) 15,297 15,757 (178) (137) (213) (29) In addition to the foregoing, the Group monitors performan- margin for the two periods under review, offering visibility ce at the Global Division level, classifying results by busi- of performance not only from a Region/Country perspective ness line. The following table presents the gross operating but also by Division/business line. Gross operating margin Local businesses Global Divisions Generation and Trading Infrastructure and Networks Renewable Energy Millions of euro End-user markets Italy Iberian Peninsula Latin America Eastern Europe Renewable Energy Other, eliminations and adjustments 2015 1,336 479 - 11 - - 2014 restated 1,124 780 - 11 - - Change 2015 Services 2014 restated Change 212 (301) - - - - 32 (46) (74) (4) - - 127 (135) (32) 6 - - (95) 89 (42) (10) - - 2015 797 1,035 1,843 1,041 - 2014 restated 1,157 799 1,702 935 - (42) 12 Change (360) 236 141 106 - (54) 69 Total 1,826 1,915 (89) (92) (34) (58) 4,674 4,605 38 Annual Report 2015Millions of euro End-user markets Generation and Trading Infrastructure and Networks Renewable Energy Other, eliminations and adjustments Local businesses Global Divisions Gross operating margin 2015 restated Change 2015 restated Change 2015 restated Change 797 1,157 (360) Italy 1,336 1,124 Iberian Peninsula 479 780 Eastern Europe 11 11 Latin America Renewable Energy Other, eliminations and adjustments - - - 2014 - - - 212 (301) - - - - Services 2014 127 (135) (32) 6 - - 32 (46) (74) (4) - - 2014 799 1,702 935 - 1,035 1,843 1,041 - (42) 12 (95) 89 (42) (10) - - 236 141 106 - (54) 69 Change 2015 2014 restated Change 2015 2014 restated Change 2015 2015 3,933 1,643 2014 restated 3,935 1,759 1,398 1,422 260 258 - 7 - - (2) (116) (24) 2 - 7 - - - - - - - - - - - - 1,826 1,938 (112) - - - - - - - - (178) Total 1,826 1,915 (89) (92) (34) (58) 4,674 4,605 7,241 7,374 (133) 1,826 1,938 (112) (178) Total 2014 restated 6,098 6,343 3,111 3,203 3,167 3,092 1,308 1,210 Change (245) (92) 75 98 1,826 1,938 (112) - - - - - - - - - - (41) (41) (137) (213) (29) (137) 15,297 15,757 (184) (460) 39 Report on operationsAnnual Report 20151 Italy Net efficient generation capacity 27,671 2015 33,690 MW 2014 Performance in 2015 millions of euro Thermal plants 16,743 Hydroelectric plants 10,893 Alternative resources 35 Thermal plants 22,463 Hydroelectric plants 11,186 Alternative resources 41 Electricity distribution networks 2015 Distribution lines High voltage Medium voltage km 1,140,215 Low voltage 13 351,493 788,709 Customers average number of 27,072,083 2015 27,207,897 2014 Free electricity market 6,105,541 Free electricity market 5,473,322 Regulated electricity market 20,966,542 Regulated electricity market 21,734,575 Revenue 39,644 Services, eliminations and adjustments (6,573) Generation and Trading 23,174 End-user markets 15,138 Infrastructure and Networks 7,905 Gross operating margin Capital expenditure 6,098 Infrastructure and Networks 3,933 Services 32 1,562 (1) Infrastructure and Networks 1,134 Services 66 Generation and Trading 797 End-user markets 1,336 End-user markets 124 Generation and Trading 238 (1) Natural gas 3,711,422 Natural gas 3,470,692 (1) Does not include €1 million regarding units classified as “held for sale”. 10 40 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 Annual Report 20151 Italy Net efficient generation capacity 27,671 2015 33,690 MW 2014 Performance in 2015 millions of euro Thermal plants 16,743 Hydroelectric plants 10,893 Alternative resources 35 Thermal plants 22,463 Hydroelectric plants 11,186 Alternative resources 41 Electricity distribution networks 2015 Distribution lines High voltage Medium voltage km 1,140,215 Low voltage 13 351,493 788,709 Customers average number of 27,072,083 2015 27,207,897 2014 Free electricity market 6,105,541 Free electricity market 5,473,322 Regulated electricity market 20,966,542 Regulated electricity market 21,734,575 Revenue 39,644 Services, eliminations and adjustments (6,573) Generation and Trading 23,174 End-user markets 15,138 Infrastructure and Networks 7,905 Gross operating margin 6,098 Infrastructure and Networks 3,933 Services 32 Capital expenditure 1,562 (1) Infrastructure and Networks 1,134 Services 66 Generation and Trading 797 End-user markets 1,336 End-user markets 124 Generation and Trading 238 (1) Natural gas 3,711,422 Natural gas 3,470,692 (1) Does not include €1 million regarding units classified as “held for sale”. 10 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 41 Report on operationsAnnual Report 2015Operations Net electricity generation Millions of kWh Thermal Hydroelectric Other resources Total net generation - of which Italy - of which Belgium 2015 43,495 11,939 8 55,442 55,442 2014 Change 42,528 967 2.3% 15,861 (3,922) -24.7% 8 - - 58,397 (2,955) 57,707 (2,265) -5.1% -3.9% - 690 (690) - In 2015, net electricity generation amounted to 55,442 mil- kWh). Excluding the impact of the change in the scope of lion kWh, a decrease of 5.1%, or 2,955 million kWh on 2014. consolidation associated with the Marcinelle Energie plant More specifically, the decline in hydro generation (-3,922 from that change, following the early termination of the million kWh), mainly associated with the deterioration in wa- tolling agreement for the operation of that facility by Enel ter conditions compared with the previous year, was only Trade at the end of 2014, the increase in thermal generation partly offset by an increase in thermal output (+967 million amounted to 1,657 million kWh. Contribution to gross thermal generation Millions of kWh Fuel oil Natural gas Coal Other fuels Total 2015 2014 Change 274 0.6% 499 1.1% (225) -45.1% 8,126 17.3% 7,761 16.9% 365 4.7% 38,177 81.3% 37,146 80.9% 1,031 2.8% 391 0.8% 498 1.1% (107) -21.5% 46,968 100.0% 45,904 100.0% 1,064 2.3% Gross thermal generation in 2015 totaled 46,968 million of coal as a result of the increased competitiveness of this kWh, an increase of 1,064 million kWh (+2.3%) compared raw material. with 2014. The increase was mainly due to the rise in the use 42 Annual Report 2015 Net efficient generation capacity MW Thermal plants (1) Hydroelectric plants Alternative resources at Dec. 31, 2015 at Dec. 31, 2014 Change 16,743 10,893 35 22,463 (5,720) -25.5% 11,186 (293) -2.6% 41 (6) -14.6% Total net efficient capacity 27,671 33,690 (6,019) -17.9% (1) Of which 2,564 MW unavailable due to long-term technical issues (5,460 MW at December 31, 2014). Net efficient capacity in 2015 totaled 27,671 MW, a reduction Environment and for Economic Development to shut down of 6,019 MW on the previous year. generation assets pursuant to the provisions of Law 290 of The unavailability due to long-term technical issues is mainly October 27, 2003. connected with additional requests from the Ministries for the 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) 1,140,215 1,136,667 Electricity transported on Enel’s distribution network (millions of kWh) (1) 226,569 222,975 (1) The figure for 2014 reflects a more accurate determination of amounts transported. 2015 13 2014 20 Change (7) -33.9% 351,493 350,358 788,709 786,289 1,135 2,420 3,548 3,594 0.3% 0.3% 0.3% 1.6% Electricity transported on Enel‘s distribution network in Italy The change is essentially in line with the increase in electri- in 2015 increased by 3,594 million kWh (+1.6%), going from city demand in Italy. 222,975 million kWh in 2014 to 226,569 million kWh in 2015. 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 2015 2014 Change 25,933 10,904 1,819 38,656 49,369 88,025 25,148 10,742 1,479 785 162 340 3.1% 1.5% 23.0% 37,369 1,287 3.4% 49,734 87,103 (365) 922 -0.7% 1.1% (1) Supplies to large customers and energy-intensive users (annual consumption greater than 1 GWh). 43 Report on operationsAnnual Report 2015Electricity sold in 2015 totaled 88,025 million kWh, up 922 gradual shift of customers from regulated markets to the million kWh compared with the previous year. These deve- free market. lopments are consistent with those in recent years, with the Average number of customers Free market: - mass-market customers - business customers (1) - safeguard market customers Total free market Regulated market 2015 2014 Change 6,012,183 5,387,579 624,604 11.6% 52,625 40,733 51,215 34,528 1,410 6,205 2.8% 18.0% 6,105,541 5,473,322 632,219 11.6% - enhanced protection market customers 20,966,542 21,734,575 (768,033) TOTAL 27,072,083 27,207,897 (135,814) -3.5% -0.5% (1) Large customers and energy-intensive users (annual consumption greater than 1 GWh). Natural gas sales Gas sales (millions of m3): - mass-market customers (1) - business customers Total sales 2015 2014 Change 3,394 677 4,071 2,937 559 3,496 457 118 575 15.6% 21.1% 16.4% Average number of customers 3,711,422 3,470,692 240,730 6.9% (1) Includes residential customers and microbusinesses. Gas sales in 2015 totaled 4,071 million cubic meters, an previous year, essentially attributable to sales to residential increase of 575 million cubic meters compared with the customers and microbusinesses. Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure (1) Does not include €1 million regarding units classified as “held for sale”. The following tables break down performance by type of business in 2015. 44 2015 2014 restated Change 39,644 38,389 6,098 4,005 1,562 (1) 6,343 1,918 1,460 1,255 (245) 2,087 3.3% -3.9% - 102 7.0% Annual Report 2015Revenue Millions of euro Generation and Trading Infrastructure and Networks End-user markets Services Eliminations and adjustments Total 2015 2014 restated Change 23,174 7,905 15,138 1,191 (7,764) 39,644 22,586 7,183 15,374 1,087 (7,841) 38,389 588 722 2.6% 10.1% (236) -1.5% 104 77 1,255 9.6% 1.0% 3.3% Revenue in 2015 amounted to €39,644 million, an increase Infrastructure and Networks operations, largely reflec- of €1,255 million compared with 2014 (+3.3%), the result of ting: the following main factors: - an increase of €560 million in rate revenue, largely at- > an increase of €558 million (+2.6%) in revenue from Ge- tributable to the regulatory changes introduced with neration and Trading operations compared with 2014. Resolution 654/2015 of the Authority for Electricity, Gas The increase is primarily attributable to: and the Water System (the “Authority“), which elimina- - an increase of €2,330 million in revenue from fuel sa- ted the “regulatory lag”, and to the increase in transmis- les on domestic and international wholesale markets, sion rates with Resolution 655/2014, only partly offset mainly due to a rise in the volumes handled as a result by the reduction in distribution rates (as established of an increase in intermediation business; under Authority Resolution 146/2015); - an increase of €106 million in revenue from non-recur- - an increase of €172 million associated with the recogni- ring transactions. In particular, in 2015 this included the tion of adjustments and revisions of estimates made in sale of SF Energy and SE Hydropower totaling €156 previous years, essentially associated with equalization million. In 2014, the item included the remeasurement mechanisms for grid losses; at fair value of the net assets of SE Hydropower (€50 - an increase in revenue from the sale of electronic me- million) following the loss of control of that company ters to distribution companies in the Iberian Peninsula in accordance with the provisions of the shareholder (€60 million); agreements; - a decrease of €62 million in revenue following the re- - a decrease of €902 million in revenue from electricity duction in transfers from the Electricity Equalization sales. The change is essentially attributable to the re- Fund for white certificates owing to the decline in volu- duction in revenue from sales on the Power Exchange mes and the decrease in the unit grant for the period; (€582 million), associated with falling average sales pri- - a decrease of €24 million in connection fees; ces, which was accompanied by a reduction in sales of > a decline of €236 million (-1.5%) in revenue from end- electricity to the other Group companies, especially the user markets for electricity, essentially reflecting: Italian companies operating in end-user markets (€121 - a decline of €683 million in revenue on the regulated million), as well as in sales to other domestic resellers electricity market as a result of the reduction in the (€187 million); average number of customers and the decline in the - a decrease of €560 million in revenue from the sale of annual average price set by the Authority; CO2 emissions allowances, owing to lower volumes handled; - an increase of €272 million in revenue from sales to end users on the natural gas market, primarily reflecting an - a decrease of €410 million in revenue from trading on increase in quantities sold to mass-market customers; international electricity markets due to a decline in ave- - an increase of €175 million in revenue on the free elec- rage sales prices, which more than offset the effect of tricity market as a result of an increase in quantities an increase in quantities handled (+8.2 TWh); sold (+1.3 TWh). > an increase of €722 million (+10.1%) in revenue from 45 Report on operationsAnnual Report 2015Gross operating margin Millions of euro Generation and Trading Infrastructure and Networks End-user markets Services Total 2015 797 3,933 1,336 32 6,098 2014 restated Change 1,157 3,935 1,124 127 6,343 (360) (2) 212 (95) (245) -31.1% -0.1% 18.9% -74.8% -3.9% The gross operating margin in 2015 amounted to €6,098 with the trade unions for early retirement incentives million, a decrease of €245 million (-3.9%) compared with for personnel under Article 4 of Law 92/2012 and the 2014. The decrease is essentially attributable to: payment of a lump-sum benefit to retired employees > a decrease of €360 million in the margin from Generation who had been receiving the energy discount following and Trading operations, mainly reflecting: revocation of that benefit, with a corresponding rever- - a reduction in the margin on generation, reflecting a sal of the associated provision; more unfavorable generation mix as a result of poor - a positive adjustment of €63 million of the provision water conditions in an environment of falling wholesale for risks and litigation, recognized in the 1st Quarter of prices; 2014 following the settlement between Enel Distribu- - the change in the contribution of disposals, discussed zione, A2A and A2A Reti Elettriche concerning pending earlier under revenue, in the amount of €106 million; litigation before the Court of Appeal of Milan; - the net impact (€112 million) of the new agreement - a reduction of €24 million in the margin from connec- with the trade unions for early retirement incentives tion fees; for personnel under Article 4 of Law 92/2012 and the - a reduction in operating expenses; payment of a lump-sum benefit to retired employees > an increase of €212 million in the margin from end-user who had been receiving the energy discount following markets (+18.9%), mainly attributable to: revocation of that benefit, with a corresponding rever- - an increase of €306 million in the margin on the free sal of the associated provision; markets for electricity and gas (€254 million of which > a decrease of €2 million in the margin from Infrastructure attributable to the margin on electricity) due to the in- and Networks operations (-0.1%), largely due to: crease in quantities sold for both commodities; - an increase of €560 million in the margin on electricity - a reduction in the margin on the regulated electricity transport, primarily reflecting the net impact of the re- market as a result of the contraction in revenue due to gulatory change introduced with Authority Resolution the decline in the number of customers served; 654/2015, as well as the positive impact of €139 million - the net impact (€89 million) of the new agreement with from prior-year items; these factors were only partly of- the trade unions for early retirement incentives for per- fset by the reduction in distribution rates; sonnel under Article 4 of Law 92/2012 and the payment - a decrease of €269 million in the margin on EECs due of a lump-sum benefit to retired employees who had mainly to the change in cost reimbursement mechani- been receiving the energy discount following revoca- sm for the purchase of such certificates; tion of that benefit, with a corresponding reversal of the - the net impact (€179 million) of the new agreement associated provision. 46 Annual Report 2015 Operating income Millions of euro Generation and Trading Infrastructure and Networks End-user markets Services Total 2015 419 2,914 690 (18) 4,005 2014 restated Change (1,546) 2,926 472 66 1,918 1,965 (12) 218 (84) 2,087 - -0.4% 46.2% - - Operating income amounted to €4,005 million. With a re- due to the impact of the impairment losses recognized at duction of €2,332 million in depreciation, amortization and the end of 2014 on conventional generation plants in Italy, impairment losses, this represented an increase of €2,087 which also gave rise to an impairment of €2,108 in the pre- million on the €1,918 million posted in 2014. The decrease in vious year. depreciation, amortization and impairment losses is largely Capital expenditure Millions of euro Generation and Trading Infrastructure and Networks End-user markets Services Total 2015 238 (1) 1,134 124 66 1,562 2014 restated Change 285 967 141 67 1,460 (47) 167 (17) (1) 102 -16.5% 17.3% -12.1% -1.5% 7.0% (1) Does not include €1 million regarding units classified as “held for sale”. Capital expenditure in 2015 amounted to €1,562 million, > a decrease of €47 million in investment in Generation up €102 million on the previous year. More specifically, the and Trading; change is attributable to: > a decrease of €17 million in end-user markets. > an increase of €167 million in investment in Infrastruc- ture and Networks, primarily in work to improve and maintain service quality standards; 47 Report on operationsAnnual Report 2015 2 Iberian Peninsula Net efficient generation capacity 21,207 2015 21,713 Thermal plants 13,168 Hydroelectric plants 4,721 Nuclear plants 3,318 Thermal plants 13,674 Hydroelectric plants 4,721 Nuclear plants 3,318 Electricity distribution networks Distribution lines 2015 MW 2014 km 317,675 Performance in 2015 millions of euro Revenue 20,105 Services, eliminations and adjustments (4,463) Infrastructure and Networks 2,667 Generation and Trading 6,301 End-user markets 15,600 Gross operating margin Capital expenditure 3,111 Infrastructure and Networks 1,643 Services (46) 985 Infrastructure and Networks 615 Services 2 End-user markets 479 Generation and Trading 1,035 End-user markets 49 Generation and Trading 319 High voltage Medium voltage Low voltage 19,479 118,436 179,760 10 48 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 Annual Report 20152 Iberian Peninsula Thermal plants 13,168 Hydroelectric plants 4,721 Nuclear plants 3,318 Thermal plants 13,674 Hydroelectric plants 4,721 Nuclear plants 3,318 Electricity distribution networks Distribution lines 2015 High voltage Medium voltage Low voltage 19,479 118,436 179,760 MW 2014 km 317,675 Net efficient generation capacity Performance in 2015 millions of euro 21,207 2015 21,713 Revenue 20,105 Services, eliminations and adjustments (4,463) Infrastructure and Networks 2,667 Generation and Trading 6,301 End-user markets 15,600 Gross operating margin 3,111 Infrastructure and Networks 1,643 Services (46) Capital expenditure 985 Infrastructure and Networks 615 Services 2 End-user markets 479 Generation and Trading 1,035 End-user markets 49 Generation and Trading 319 10 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 49 Report on operationsAnnual Report 2015Operations Net electricity generation Millions of kWh Thermal Nuclear Hydroelectric Total net generation 2015 40,129 25,756 7,176 73,061 2014 Change 36,141 3,988 11.0% 24,762 994 4.0% 8,778 (1,602) -18.3% 69,681 3,380 4.9% Net electricity generation in the Iberian Peninsula in 2015 decline in water resources was largely met by an increase totaled 73,061 million kWh, an increase of 3,380 million in thermal generation. kWh compared with 2014. The increase in demand and the Contribution to gross thermal generation Millions of kWh High-sulfur fuel oil (S>0.25%) Natural gas Coal Nuclear fuel Other fuels Total 2015 2014 Change 5,632 5,167 8.1% 7.5% 5,460 3,037 8.6% 4.7% 172 3.2% 2,130 70.1% 27,441 39.7% 25,567 40.0% 1,874 7.3% 26,806 38.8% 25,776 40.3% 1,030 4.0% 4,116 5.9% 4,124 6.4% (8) -0.2% 69,162 100.0% 63,964 100.0% 5,198 8.1% Gross thermal generation in 2015 totaled 69,162 million fuels, was particularly significant for natural gas, while coal kWh, an increase of 5,198 million kWh compared with the and nuclear fuel remained the most used fuels. previous year. The increase, which regarded all types of Net efficient generation capacity MW Thermal plants Nuclear plants Hydroelectric plants at Dec. 31, 2015 at Dec. 31, 2014 Change 13,168 13,674 (506) -3.7% 3,318 4,721 3,318 4,721 - - - - Total net efficient capacity 21,207 21,713 (506) -2.3% Net efficient capacity in 2015 totaled 21,207 MW, a decrease of 506 MW on the previous year connected with the closure in 2015 of the Foix thermal plant. 50 Annual Report 2015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) 2015 19,479 118,436 179,760 317,675 98,225 2014 19,597 117,877 177,054 314,528 96,404 Change (118) 559 2,706 3,147 1,821 -0.6% 0.5% 1.5% 1.0% 1.9% Electricity transported in 2015 totaled 98,225 million kWh, an increase of 1,821 million kWh. Electricity sales Millions of kWh Electricity sold by Enel 2015 92,899 2014 Change 93,928 (1,029) -1.1% Electricity sales to end users in 2015 amounted to 92,899 (operating in the regulated market) customers to the free million kWh, a decrease of 1,029 million kWh compared market, which was not fully offset by new customers acqui- with 2014, as a result of the increasing liberalization of the red by Endesa Energia (on the free market). market and the consequent switch of Endesa Energia XXI Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure The following tables break down performance by type of business in 2015. Revenue Millions of euro Generation and Trading Infrastructure and Networks End-user markets Services Eliminations and adjustments Total 2015 2014 restated Change 20,105 20,952 (847) 3,111 1,397 985 3,203 1,240 993 (92) 157 (8) -4.0% -2.9% 12.7% -0.8% 2015 2014 restated Change 6,301 2,667 6,225 2,599 15,600 15,827 251 (4,714) 20,105 322 (4,021) 20,952 76 68 (227) (71) (693) (847) 1.2% 2.6% -1.4% -22.0% -17.2% -4.0% 51 Report on operationsAnnual Report 2015Revenue declined by €847 million, reflecting: - a decrease of €105 million in revenue from the sale of > a decrease of €227 million in revenue from end-user electricity by the generation companies. This revenue markets, essentially due to the decline in amounts of was largely in relation to the Division companies that electricity and gas sold, as well as the reduction in the sell electricity and so is also reflected in an analogous average sales price of the latter commodity. These factors increase in eliminations; were only partly offset by developments in electricity pri- > an increase of €68 million in revenue from Infrastructure ces, which increased over the year as a whole; and Networks operations, primarily reflecting the increa- > an increase of €76 million in revenue from Generation se in quantities transported and the rise in revenue from and Trading operations, primarily associated with: connection fees. - an increase of €183 million in revenue from the sale and measurement at fair value of environmental cer- tificates; Gross operating margin Millions of euro Generation and Trading Infrastructure and Networks End-user markets Services Total 2015 1,035 1,643 479 (46) 3,111 2014 restated Change 799 1,759 780 (135) 3,203 236 (116) (301) 89 (92) 29.5% -6.6% -38.6% 65.9% -2.9% The gross operating margin amounted to €3,111 million, on Generation and Trading operations, primarily asso- a decrease of €92 million compared with 2014, reflecting: ciated with: > a decrease in the gross operating margin on end-user - an improvement in the margin on generation, largely markets, largely due to the decline in the margin on elec- attributable to the higher average sales prices; tricity sales, which reflects higher electricity procurement - the positive impact of a number of regulatory chan- costs, as well as a decline in the margin on natural gas ges, including those concerning water use fees in the sales; amount of €46 million and the impact of lower fees on > a decrease of €116 million in the margin on Infrastructure generation in the extra-peninsular area for 2014 due to and Networks operations, reflecting higher costs in 2015 adjustments related, in part, to previous periods (2012 as a result of the introduction of a voluntary early retire- and 2013); ment scheme for employees; - an increase of €186 million in the margin on envi- > an increase of €236 million in the gross operating margin ronmental certificates. Operating income Millions of euro Generation and Trading Infrastructure and Networks End-user markets Services Total 52 2015 2014 restated Change 267 868 322 (60) 1,397 (133) 919 631 (177) 1,240 400 (51) (309) 117 157 - -5.5% -49.0% 66.1% 12.7% Annual Report 2015 Operating income in 2015, after depreciation, amortization rment losses largely reflects the extension of the useful life and impairment losses of €1,714 million (€1,963 million in of a number of generating plants at the end of 2014 and a de- 2014), totaled €1,397 million, an increase of €157 million on cline in impairment of certain property, plant and equipment 2014. The reduction in depreciation, amortization and impai- and intangible assets in 2015 compared with 2014. Capital expenditure Millions of euro Generation and Trading Infrastructure and Networks End-user markets Services Total 2015 2014 restated Change 319 615 49 2 985 322 640 31 - 993 (3) (25) 18 2 (8) -0.9% -3.9% 58.1% - -0.8% Capital expenditure amounted to €985 million, a decrease plants (€299 million) as well as work on the distribution net- of €8 million compared with the previous year. In particular, work (€586 million), notably projects related to improving capital expenditure in 2015 primarily concerned generation service quality. 53 Report on operationsAnnual Report 2015 3 Latin America Net efficient generation capacity 17,012 2015 16,602 MW 2014 Performance in 2015 millions of euro Thermal plants 7,716 Hydroelectric plants 9,218 Wind plants 78 Thermal plants 7,731 Hydroelectric plants 8,793 Wind plants 78 Revenue 10,627 Argentina Brazil Chile Colombia Peru 1,127 2,771 3,327 2,159 1,243 Argentina Brazil Argentina Brazil Gross operating margin 3,167 4,384 976 4.403 976 Chile Colombia Peru Chile Colombia Peru Argentina Brazil Chile Colombia Peru 6,286 3,407 1,959 6,286 3,012 1,925 280 491 938 973 485 Electricity distribution networks 2015 Distribution lines High voltage Medium voltage km 316,496 Low voltage Capital expenditure 1,819 Argentina Brazil Chile Colombia Peru 12,173 157,077 147,246 350 371 377 538 183 10 54 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 Annual Report 20153 Latin America Net efficient generation capacity 17,012 2015 16,602 MW 2014 Performance in 2015 millions of euro Thermal plants 7,716 Hydroelectric plants 9,218 Wind plants 78 Thermal plants 7,731 Hydroelectric plants 8,793 Wind plants 78 Revenue 10,627 Argentina Brazil Chile Colombia Peru 1,127 2,771 3,327 2,159 1,243 Argentina Brazil Argentina Brazil Gross operating margin 3,167 4,384 976 4.403 976 Chile Colombia Peru Chile Colombia Peru Argentina Brazil Chile Colombia Peru 6,286 3,407 1,959 6,286 3,012 1,925 280 491 938 973 485 Electricity distribution networks 2015 Distribution lines High voltage Medium voltage km 316,496 Low voltage Capital expenditure 1,819 Argentina Brazil Chile Colombia Peru 12,173 157,077 147,246 350 371 377 538 183 10 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 55 Report on operationsAnnual Report 2015Operations Net electricity generation Millions of kWh Thermal Hydroelectric Other sources Total net generation - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru 2015 26,252 34,012 138 60,402 15,204 4,398 18,294 13,705 8,801 2014 26,142 33,999 158 60,299 14,390 5,225 18,063 13,559 9,062 Change 110 13 (20) 103 814 (827) 231 146 (261) 0.4% - -12.7% 0.2% 5.7% -15.8% 1.3% 1.1% -2.9% Net electricity generation in 2015 totaled 60,402 million plants in Colombia and Argentina as a result of rising de- kWh, an increase of 103 million kWh compared with 2014, mand, while hydroelectric generation was virtually unchan- mainly due to an increase in generation by the thermal ged. Contribution to gross thermal generation Millions of kWh 2015 2014 Change High-sulfur fuel oil (S>0.25%) Natural gas Coal Other fuels Total 1,643 20,367 3,156 2,308 6.0% 74.1% 11.5% 8.4% 1,590 5.8% 53 21,504 79.1% (1,137) 2,391 1,707 8.8% 6.3% 3.3% -5.3% 32.0% 35.2% 1.0% 765 601 282 27,474 100.0% 27,192 100.0% Gross thermal generation in 2015 amounted to 27,474 mil- year, essentially due to a reduction in the use of natural gas lion kWh, an increase of 282 million kWh on the previous in Peru. Net efficient generation capacity MW Thermal plants Hydroelectric plants Wind plants Total net efficient capacity - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru at Dec. 31, 2015 at Dec. 31, 2014 Change 7,716 9,218 78 17,012 4,384 976 6,286 3,407 1,959 7,731 8,793 78 16,602 4,403 976 6,286 3,012 1,925 (15) 425 - 410 (19) - - 395 34 -0.2% 4.8% - 2.5% -0.4% - - 13.1% 1.8% Net efficient capacity amounted to 17,012 MW at the end of 2015, an increase of 410 MW on the previous year, essentially due to the expansion of installed capacity in Colombia. 56 Annual Report 2015Electricity distribution and transport networks 2015 2014 Change 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) 12,173 12,089 157,077 154,767 147,246 144,896 316,496 311,752 Electricity transported on Enel’s distribution network (millions of kWh) (1) - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru 78,030 18,492 22,311 15,657 13,946 7,624 (1) The figure for 2014 reflects a more accurate calculation of quantities transported. Electricity transported in 2015 totaled 78,030 million kWh, an increase of 399 million kWh. Electricity sales Millions of kWh Free market Regulated market Total - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru 2015 6,062 57,370 63,432 15,450 19,506 13,203 8,463 6,810 77,631 18,025 22,878 15,702 13,667 7,359 2014 5,891 57,217 63,108 14,980 19,982 13,257 8,225 6,664 84 2,310 2,350 4,744 399 467 (567) (45) 279 265 171 153 324 470 (476) (54) 238 146 Change 0.7% 1.5% 1.6% 1.5% 0.5% 2.6% -2.5% -0.3% 2.0% 3.6% 2.9% 0.3% 0.5% 3.1% -2.4% -0.4% 2.9% 2.2% Electricity sales in 2015 amounted to 63,432 million kWh, an increase of 324 million kWh, in line with developments in demand. Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure The following tables show performance by country in 2015. 2015 2014 restated Change 10,627 3,167 2,241 1,819 9,648 3,092 1,549 1,609 979 75 692 210 10.1% 2.4% 44.7% 13.1% 57 Report on operationsAnnual Report 2015Revenue Millions of euro Argentina Brazil Chile Colombia Peru Total 2015 2014 restated Change 1,127 2,771 3,327 2,159 1,243 10,627 712 2,994 2,774 2,116 1,052 9,648 415 (223) 553 43 191 979 58.3% -7.4% 19.9% 2.0% 18.2% 10.1% Revenue in 2015 posted an increase of €979 million. The > an increase of €553 million in revenue in Chile, largely due to: rise was primarily attributable to: - favorable developments in exchange rates between the > an increase of €415 million in revenue in Argentina, of local currency and the euro (€129 million); which €247 million associated with the impact of Resolu- - an increase in rates in the regulated market; ción 32/2015, with which regulators established a theoreti- - the full consolidation of Inversiones Gas Atacama fol- cal rate framework for distribution companies that enables lowing the acquisition (on April 22, 2014) of an additio- them to recover the extra operating costs for the remune- nal 50%, giving control over the company, as well as ration of personnel incurred to keep the service in opera- a number of minor non-recurring operations (Túnel El tion, as well as other grants under the PUREE program and Melón, Maitenes, Agua Santiago Poniente); the Mecanismo de Monitoreo de Costos (MMC). These > an increase of €43 million in revenue in Colombia, largely factors were accompanied by the effects of the increase attributable to an increase in amounts generated and sold in the quantity of electricity sold by both the generation and in average sales prices for both generation companies companies and distribution companies; and distribution companies, only partly offset by the im- > a decrease of €223 million in revenue in Brazil, largely at- pact of exchange rate developments; tributable to the depreciation of the local currency against > an increase of €191 million in revenue in Peru, primarily due the euro (totaling €507 million) and the broad decline in to an increase in quantities sold and exchange rate effects. demand, only partly offset by rate revisions and a rise in average sales prices; Gross operating margin Millions of euro Argentina Brazil Chile Colombia Peru Total 2015 2014 restated Change 280 491 938 973 485 3,167 29 791 743 1,097 432 3,092 251 (300) 195 (124) 53 75 - -37.9% 26.2% -11.3% 12.3% 2.4% The gross operating margin amounted to €3,167 million, offset by the increase in operating costs, especially per- an increase of €75 million (+2.4%) compared with 2014, re- sonnel costs following a contractual pay adjustment, and flecting: an increase in the average workforce; > an increase of €251 million in the gross operating mar- > an increase of €195 million in the gross operating margin gin in Argentina, reflecting the introduction of Resolución in Chile, due to an increase in the margin on generation 32/2015 noted earlier, the impact of which was only partly and distribution, as well as the appreciation of the local 58 Annual Report 2015 currency with respect to the euro (€38 million); by exchange rate losses (€145 million); > an increase of €53 million in the gross operating margin in > a reduction of €300 million in the gross operating margin Peru, primarily owing to exchange rate developments and in Brazil, reflecting the decline in demand in the country to greater volumes sold; and the impact of the drought, which has led to an incre- > a reduction of €124 million in the gross operating margin ase in electricity prices, hurting companies that distribute in Colombia, where the positive impact of the increase in and sell electricity, as well as exchange rate losses (€91 output and amount distributed was almost entirely offset million). Operating income Millions of euro Argentina Brazil Chile Colombia Peru Total 2015 2014 restated Change 210 145 722 816 348 (19) 376 (41) 920 313 2,241 1,549 229 (231) 763 (104) 35 692 - -61.4% - -11.3% 11.2% 44.7% Operating income in 2015 totaled €2,241 million, including use rights in the region of Aysén recognized in response to €926 million in depreciation, amortization and impairment the uncertainty about the continuation of the project owing losses (€1,543 million in 2014), an increase of €692 million to a number of legal and procedural constraints. Deprecia- over 2014. In addition to the change in the gross operating tion and amortization were in line with 2014, given that the margin, the performance reflects the effects of the recogni- effects of the entry into service of a number of plants were tion in 2014 of impairment losses (€589 million) on water essentially offset by exchange rate effects. Capital expenditure Millions of euro Argentina Brazil Chile Colombia Peru Total 2015 2014 restated Change 350 371 377 538 183 276 306 432 434 161 1,819 1,609 74 65 (55) 104 22 210 26.8% 21.2% -12.7% 24.0% 13.7% 13.1% Capital expenditure amounted to €1,819 million, an incre- the Los Condores hydroelectric facility in Chile; ase of €210 million on the previous year. More specifically, > work on the El Quimbo hydroelectric plant (which ente- investment in 2015 regarded: red service at the end of 2015), and on the distribution > works to improve the distribution grid and modernize grid in Colombia; thermal plants in Argentina; > the extension and upgrading of the distribution grid in > work on the distribution grid in Brazil; Peru. > work on the Bocamina and Tarapacá thermal plants and 59 Report on operationsAnnual Report 2015 4 Eastern Europe Net efficient generation capacity 13,382 2015 14,481 MW 2014 Performance in 2015 millions of euro Thermal plants 9,950 Nuclear plants 1,814 Hydroelectric plants 1,590 Other resources 28 Thermal plants 10,310 Nuclear plants 1,814 Hydroelectric plants 2,329 Other resources 28 Russia Slovakia Belgium Russia Slovakia Belgium Revenue 4,831 Romania Russia Slovakia Other countries 1,004 1,062 2,401 364 Gross operating margin 1,308 Romania Russia Slovakia Other countries 8,944 4,032 406 9,107 4,968 406 281 164 871 (8) Electricity distribution networks 2015 Distribution lines km 91,285 High voltage Medium voltage Low voltage 6,584 35,043 49,658 Capital expenditure 229 (1) Romania Russia Other countries 116 112 1 (1) Does not include €648 million regarding units classified as “held for sale”. 10 60 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 Annual Report 20154 Eastern Europe Thermal plants 9,950 Nuclear plants 1,814 Hydroelectric plants 1,590 Thermal plants 10,310 Nuclear plants 1,814 Hydroelectric plants 2,329 Other resources 28 Other resources 28 Russia Slovakia Belgium Russia Slovakia Belgium Net efficient generation capacity 13,382 2015 14,481 MW 2014 Performance in 2015 millions of euro Revenue 4,831 Romania Russia Slovakia Other countries 1,004 1,062 2,401 364 Gross operating margin 1,308 Romania Russia Slovakia Other countries 8,944 4,032 406 9,107 4,968 406 281 164 871 (8) Electricity distribution networks 2015 Distribution lines km 91,285 High voltage Medium voltage Low voltage 6,584 35,043 49,658 Capital expenditure 229 (1) Romania Russia Other countries 116 112 1 (1) Does not include €648 million regarding units classified as “held for sale”. 10 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 61 Report on operationsAnnual Report 2015Operations Net electricity generation Millions of kWh Thermal Nuclear Hydroelectric Other resources Total net generation - of which Russia - of which Slovakia - of which Belgium 2015 45,024 14,081 2,385 42 61,532 42,090 18,292 1,150 2014 44,229 14,420 Change 795 (339) 1.8% -2.4% 4,225 (1,840) -43.6% 52 (10) -19.2% 62,926 (1,394) 42,376 (286) -2.2% -0.7% 20,550 (2,258) -11.0% - 1,150 - Net electricity generation in 2015 amounted to 61,532 operation of the Gabcˇíkovo plant. The decrease was partly million kWh, a decrease of 1,394 million kWh compared offset by the generation in Belgium at the Marcinelle Ener- with 2014. The change was mainly due to the decline in gie thermal plant, which was operated until the end of 2014 generation in Slovakia from nuclear (-339 million kWh) and through a tolling agreement by the “Italy” Country and is hydroelectric (-1,840 million kWh) resources, the latter also now included in the “Eastern Europe” Region. resulting from the early termination of the contract for the Contribution to gross thermal generation Millions of kWh High-sulfur fuel oil (S>0.25%) Natural gas Coal Nuclear fuel Total 2015 - 2014 Change - 186 0.3% (186) - 25,552 40.7% 25,325 40.7% 22,098 35.2% 21,255 34.1% 227 843 0.9% 4.0% 15,146 24.1% 15,499 24.9% (353) -2.3% 62,796 100.0% 62,265 100.0% 531 0.9% Gross thermal generation in 2015 increased by 531 million tion from natural gas in Belgium and from coal in Russia was kWh, totaling 62,796 million kWh. The increase in genera- only partly offset by a reduction in the use of nuclear fuel. 62 Annual Report 2015Net efficient generation capacity MW Thermal plants Nuclear plants Hydroelectric plants Other resources at Dec. 31, 2015 at Dec. 31, 2014 Change 9,950 1,814 1,590 28 10,310 (360) -3.5% 1,814 2,329 28 - - (739) -31.7% - - Total net efficient capacity 13,382 14,481 (1,099) - of which Russia - of which Slovakia - of which Belgium 8,944 4,032 406 9,107 4,968 406 (163) (936) - -7.6% -1.8% -18.8% - Net efficient generation capacity decreased by 1,099 MW in to operate the Gabcˇíkovo plant and the decommissioning 2015, mainly reflecting the early termination of the contract of one of the units of the Vojany coal-fired plant in Slovakia. 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) 2015 6,584 35,043 49,658 91,285 14,582 2014 6,572 34,998 49,562 91,132 14,063 Change 12 45 96 153 519 0.2% 0.1% 0.2% 0.2% 3.7% Electricity transported – entirely in Romania – increased by sociated with newly-installed connections, which reflect the 519 million kWh (+3.7%), rising from 14,063 million kWh growth in the electricity network in that country. to 14,582 million kWh in 2015. The increase was mainly as- Electricity sales Millions of kWh Free market Regulated market Total - of which Romania - of which France - of which Slovakia 2015 10,407 5,353 15,760 7,691 3,966 4,103 2014 10,410 5,926 16,336 8,156 3,442 4,738 Change (3) (573) (576) (465) - -9.7% -3.5% -5.7% 524 15.2% (635) -13.4% Electricity sold in 2015 decreased by 576 million kWh, from nia, mainly due to the gradual liberalization of the market; 16,336 million kWh to 15,760 million kWh. The decline is > an increase of 524 million kWh in quantities sold in France; ascribable to: > a decrease of 635 million kWh in sales in Slovakia, fol- > a decrease of 465 million kWh in quantities sold in Roma- lowing the trend in generation. 63 Report on operationsAnnual Report 2015 Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure (1) Does not include €648 million regarding units classified as “held for sale”. The following tables show performance by country in 2015. Revenue Millions of euro Romania Russia Slovakia Other countries Total 2015 2014 restated Change 4,831 1,308 (499) 229 (1) 5,299 1,210 (468) 98 -8.8% 8.1% (2,676) 2,177 -81.4% 936 (707) -75.5% 2015 2014 restated Change 1,004 1,062 2,401 364 4,831 1,021 1,494 2,494 290 5,299 (17) (432) (93) 74 (468) -1.7% -28.9% -3.7% 25.5% -8.8% Revenue in 2015 amounted to €4,831 million, down €468 of the Gabcˇíkovo plant, in an environment of falling avera- million (-8.8%) compared with the previous year. This re- ge prices; flected: > a decrease of €17 million in revenue in Romania, essentially > a decrease of €432 million in revenue in Russia, primarily reflecting the contraction in volumes sold due to the libera- due to the depreciation of the ruble against the euro (€357 lization of the market, the effect of which was only partly million) and the decline in average electricity prices; offset by the increase in amounts transported and a rise in > a decrease of €93 million in revenue in Slovakia, attributa- new connections; ble to the contraction in volumes generated and sold, partly > an increase of €74 million in revenue in Belgium as a result reflecting the termination of the contract for the operation of an increase in volumes produced. Gross operating margin Millions of euro Romania Russia Slovakia Other countries Total 2015 2014 restated Change 281 164 871 (8) 1,308 305 358 537 10 1,210 (24) (194) 334 (18) 98 -7.9% -54.2% 62.2% - 8.1% The gross operating margin amounted to €1,308 million, in Slovakia, mainly due to the partial reversal of the pro- an increase of €98 million compared with 2014. This mainly vision for nuclear waste disposal charges (€550 million) reflected: following an analysis by independent experts, who took > an increase of €334 million in the gross operating margin account of the regulatory changes introduced in July 2015 64 Annual Report 2015 by the Slovakian government, which approved a new stra- margin, caused by a decline in the sales prices of elec- tegy for handling the “back end” of spent nuclear fuel, tricity in conjunction with rising costs for the purchase the measures of which include the postponement of the of fuel, as well as exchange losses, which brought about start of permanent storage of waste from 2037 to 2065. a decrease of €55 million in the gross operating margin; This was only partly offset by a decline in electricity sales > a decrease of €24 million in the gross operating margin prices; in Romania, almost entirely due to electricity sales acti- > a decrease of €194 million in the gross operating margin vities, which reflected developments in electricity sales, in Russia, mainly due to the contraction of the generation and to a number of prior-year items recognized in 2014. Operating income Millions of euro Romania Russia Slovakia Other countries Total 2015 168 (839) 184 (12) (499) 2014 restated Change 201 (201) (2,605) (71) (2,676) (33) (638) 2,789 59 2,177 -16.4% - - 83.1% 81.4% Operating income in 2015 showed a loss of €499 million, continuation of adverse market conditions for the Enel an improvement of €2,177 million compared with 2014, Russia CGU (€899 million in 2015; €365 million in 2014); mainly attributable to: > a decrease in depreciation of property, plant and > a reduction in impairment losses recognized following equipment for Enel Russia of €79 million (€143 million in adjustment of assets to their estimated realizable value 2014) and for Slovenské elektrárne of €93 million (€126 (determined on the basis of offers received and deve- million in 2014); lopments in the sales process) for Slovenské elektrár- > exchange gains from translation of €282 million as a re- ne (€574 million in 2015; €2,878 million in 2014) and on sult of the depreciation of the ruble. the basis of the outcome of impairment testing and the Capital expenditure Millions of euro Romania Russia Slovakia Other countries Total 2015 2014 restated Change 116 112 - (1) 1 229 83 188 665 - 936 33 (76) (665) 1 (707) 39.8% -40.4% - - -75.5% (1) Does not include €648 million regarding units classified as “held for sale”. Capital expenditure amounted to €229 million, a decre- to the classification under assets held for sale of Slovenské ase of €707 million compared with the previous year. The elektrárne. Excluding that reclassification, capital expendi- change is attributable to higher costs incurred in Russia in ture would have decreased by €59 million, of which €17 2014 to restore operations at the Sredneuralskay combined- million regarding Slovakian plants, especially the Mochovce cycle plant following the stoppage at the end of 2013 and nuclear plant. 65 Report on operationsAnnual Report 2015 5 Renewable Energy Net efficient generation capacity 10,470 2015 9,626 MW 2014 Performance in 2015 millions of euro Geothermal plants 833 Wind plants 6,575 Hydroelectric plants 2,624 Geothermal plants 833 Wind plants 5,696 Hydroelectric plants 2,624 Revenue 3,011 Europe and North Africa Latin America North America Sub-Saharan Africa and Asia 1,814 650 533 14 Other resources 439 Other resources 473 Gross operating margin 1,826 Europe and North Africa Latin America North America Sub-Saharan Africa and Asia Italy Iberian Peninsula Greece Romania and Bulgaria Italy Iberian Peninsula Greece Romania and Bulgaria 1,105 364 352 5 3,044 1,705 290 576 3,133 1,836 290 576 Capital expenditure 2,466 United States and Canada Panama, Mexico, Guatemala and Costa Rica Brazil and Chile Other countries United States and Canada Panama, Mexico, Guatemala and Costa Rica Brazil and Chile Other countries Europe and North Africa Latin America North America Sub-Saharan Africa and Asia 2,507 1,005 1,161 182 2,083 816 882 10 317 1,548 289 312 10 66 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 Annual Report 20155 Renewable Energy Geothermal plants 833 Wind plants 6,575 Hydroelectric plants 2,624 Geothermal plants 833 Wind plants 5,696 Hydroelectric plants 2,624 Net efficient generation capacity 10,470 2015 9,626 MW 2014 Performance in 2015 millions of euro Revenue 3,011 Europe and North Africa Latin America North America Sub-Saharan Africa and Asia 1,814 650 533 14 Other resources 439 Other resources 473 Gross operating margin 1,826 Europe and North Africa Latin America North America Sub-Saharan Africa and Asia Italy Iberian Peninsula Greece Italy Iberian Peninsula Greece Romania and Bulgaria Romania and Bulgaria 1,105 364 352 5 3,044 1,705 290 576 3,133 1,836 290 576 Capital expenditure 2,466 United States and Canada Panama, Mexico, Guatemala Brazil United States and Canada Panama, Mexico, Guatemala Brazil and Costa Rica and Chile Other countries and Costa Rica and Chile Other countries Europe and North Africa Latin America North America Sub-Saharan Africa and Asia 2,507 1,005 1,161 182 2,083 816 882 10 317 1,548 289 312 10 Relazione finanziaria annuale 2015 Relazione sulla gestione 11 67 Report on operationsAnnual Report 2015Operations Net electricity generation Millions of kWh Hydroelectric Geothermal Wind Other resources Total net generation - 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 - of which other countries 2015 10,426 6,205 16,066 876 33,573 13,076 4,383 - 549 1,420 7,368 3,841 2,869 67 2014 11,452 5,954 13,896 496 31,798 14,117 4,359 347 488 1,351 6,674 2,904 1,550 8 Change (1,026) 251 2,170 380 1,775 (1,041) 24 (347) 61 69 694 937 1,319 59 -9.0% 4.2% 15.6% 76.6% 5.6% -7.4% 0.6% - 12.5% 5.1% 10.4% 32.3% 85.1% - Net electricity generation by the Division totaled 33,573 generation following the disposal of operations in France at million kWh in 2015, an increase of 1,775 million kWh on the end of 2014 (-347 million kWh). 2014. The increase is attributable to an increase of 2,816 Net electricity generation in Italy in 2015 decreased by million kWh in generation abroad, mainly from the increase 1,041 million kWh on 2014, primarily reflecting the contrac- in wind generation in Latin America (+1,691 million kWh) tion in hydroelectric output (-841 million kWh) owing to po- and North America (+769 million kWh), as a result of the orer water conditions. That decrease was partly offset by expansion of installed capacity, hydroelectric generation the increase in geothermal generation (+261 million kWh) in Panama (+527 million kWh) thanks to better water con- due to the expansion in installed capacity since the Bagno- ditions and solar generation in Chile (+233 million kWh). re plant was put into service. These factors were only partly offset by the decline in wind Net efficient generation capacity MW Hydroelectric plants Geothermal plants Wind plants Other resources Total net efficient capacity - of which Italy - of which Iberian Peninsula - 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 - of which other countries 68 at Dec. 31, 2015 at Dec. 31, 2014 Change 2,624 833 6,575 439 10,470 3,044 1,705 290 576 2,507 1,005 1,161 182 2,624 833 5,696 473 9,626 3,133 1,836 290 576 2,083 816 882 10 - - 879 (34) 844 (89) (131) - - 424 189 279 172 - - 15.4% -7.3% 8.8% -2.8% -7.1% - - 20.4% 23.2% 31.6% - Annual Report 2015 Net efficient generation capacity increased by 844 MW, of Brazil (118 MW), Chile (61 MW) and Uruguay (50 MW). The- which 933 MW abroad. More specifically, the increase in se effects were only partly offset by the decrease in instal- net installed wind capacity was mainly attributable to new led capacity due to the disposal of wind plants in Portugal plants in the United States (424 MW), Mexico (202 MW), and solar plants in Italy. Performance Millions of euro Revenue Gross operating margin Operating income Capital expenditure The following tables show performance by geographical area in 2015. Revenue Millions of euro Europe and North Africa Latin America North America Sub-Saharan Africa and Asia Total 2015 2014 restated Change 3,011 1,826 879 2,466 2,921 1,938 1,124 1,658 90 (112) (245) 808 3.1% -5.8% -21.8% 48.7% 2015 2014 restated Change 1,814 1,985 (171) 650 533 14 537 396 3 3,011 2,921 113 137 11 90 -8.6% 21.0% 34.6% - 3.1% Revenue in 2015 amounted to €3,011 million, an increase of Africa, mainly due to a reduction in revenue from the electri- €90 million (+3.1%) compared with the previous year. This city sales in Italy in reflection of the decline in hydroelectric is the result of: generation and the change in the scope of consolidation as > an increase of €137 million in revenue in North America, a result of the disposal of Enel Green Power France in De- primarily due to the positive impact of the appreciation of cember 2014. This was partly offset by the positive effects the US dollar against the euro (€88 million), the increase in of the acquisition of control of 3Sun (€117 million in respect volumes generated, a rise in income from tax partnerships of negative goodwill and the remeasurement at fair value of and the increase in other revenue as a result of the disposal the Group’s previous interest in the company), the consoli- of certain assets; dation of a number of projects held by the Portugal-based > an increase of €113 million in revenue in Latin America, lar- ENEOP consortium (gains and remeasurement at fair value gely due to an increase in generation in Chile, Mexico and for a total €29 million) and the recognition of the indemnity Costa Rica (totaling €102 million); provided for in the agreement with STM (€12 million). > a decrease of €171 million in revenue in Europe and North 69 Report on operationsAnnual Report 2015Gross operating margin Millions of euro Europe and North Africa Latin America North America Sub-Saharan Africa and Asia Total 2015 1,105 364 352 5 1,826 2014 restated Change 1,461 202 276 (1) 1,938 (356) 162 76 6 (112) -24.4% 80.2% 27.5% - -5.8% The gross operating margin in 2015 amounted to €1,826 electricity in Brazil and Panama; in Panama, better water million, a decrease of €112 million (-5.8%) compared with conditions helped reduce the costs of purchasing electri- 2014. The decrease is attributable to: city in order to honor sales contracts. The increase was > a decrease of €355 million in the gross operating margin partly offset by higher operating costs due to the expan- in Europe, mainly due to the decrease in revenue as a sion in installed capacity in Brazil, Chile and Mexico; result of lower average sales prices and the increase in > an increase of €76 million in the gross operating margin costs due to the formalization of a number of agreements in North America – taking account of favorable exchan- for the early retirement of personnel in Italy; ge rate developments for €58 million – reflecting the in- > an increase of €162 million in the gross operating margin crease in revenue, only partly offset by the increase in in Latin America – taking account of favorable exchange personnel costs and operating costs associated with the rate developments for €36 million – reflecting the incre- expansion of installed capacity. ase in revenue and the reduction in costs of purchasing Operating income Millions of euro Europe and North Africa Latin America North America Sub-Saharan Africa and Asia Total 2015 2014 restated Change 459 249 168 3 879 834 142 149 (1) 1,124 (375) 107 19 4 (245) -45.0% 75.4% 12.8% - -21.8% Operating income in 2015 amounted to €879 million, a ket and regulatory scenario in the renewables sector in that decrease of €245 million, taking account of a rise of €133 country. Other factors included the writedown of a num- million in depreciation, amortization and impairment losses, ber of specific assets of 3Sun, the expansion of installed mainly due to the impairment loss on the residual goodwill capacity on the American continent, value adjustments of and property, plant and equipment of Enel Green Power specific projects in North America and the writedown of Romania (€155 million) as a result of the unfavorable mar- receivables in the Europe region. Capital expenditure Millions of euro Europe and North Africa Latin America North America Sub-Saharan Africa and Asia Total 70 2015 317 1,548 289 312 2,466 2014 restated Change 373 927 332 26 1,658 (56) 621 (43) 286 808 -15.0% 67.0% -13.0% - 48.7% Annual Report 2015 Capital expenditure in 2015 amounted to €2,466 million, (€151 million), photovoltaic plants in Chile (€344 million) and an increase of €808 million on the previous year. Capital South Africa (€194 million) and hydroelectric plants in Brazil expenditure mainly regarded wind plants in Latin America and Costa Rica (€221 million). (€822 million), North America (€257 million) and Europe Other, eliminations and adjustments Operations Hydrocarbon reserves and annual output Hydrocarbon reserves: Proven reserves (P1) of hydrocarbons at the end of the year (millions of barrels of oil equivalent) Proven and probable reserves (2P) of hydrocarbons at the end of the year (millions of barrels of oil equivalent) Contingent resources (2C) of gas (millions of barrels of oil equivalent) 2015 2014 Change 16 42 4 18 46 - (2) (4) 4 Projects under developments at the end of 2015 were lo- ble (2012 for Isarene and 2015 for Enel Longanesi Deve- cated as follows: lopment), Enel’s interest in 2015 amounted to: > in Algeria, where the Group, through Enel Trade, holds > 16.3 million barrels of oil equivalent of proven reserves a stake of 18.4% of the “Isarene” permit in partnership (P1), of which: with Petroceltic International and Sonatrach (an Algerian - 15.9 million barrels of oil equivalent for the Isarene field; state-owned company); - 0.4 million barrels of oil equivalent for the Enel Longa- > in Italy, where the Group, through Enel Longanesi Deve- nesi Development field; lopment, holds 33.5% of the hydrocarbon extraction per- > 42.1 million barrels of oil equivalent of proven and proba- mit at Bagnacavallo. ble reserves (2P) of which: The Upstream Gas Division continued the process of cer- - 41.6 million barrels of oil equivalent for the Isarene field; tifying the reserves of the assets it had under development. - 0.5 million barrels of oil equivalent for the Enel Longa- More specifically, following the acquisition and analysis nesi Development field. of the seismic data for the Enel Longanesi Development The new certification of part of the 2P reserves certified project, a new assessment was performed in 2015 by an part of the reserves as contingent resources (3.7 million external certifier. barrels of oil equivalent). On the basis of the most recent assessments availa- Performance Millions of euro Revenue (net of eliminations) Gross operating margin Operating income Capital expenditure 2015 2014 restated Change 852 (213) (338) 52 1,025 (29) (68) 45 (173) (184) (270) -16.9% - - 7 15.6% Revenue net of eliminations in 2015 totaled €852 million, Excluding the income (equal to €82 million) from the a decrease of €173 million on the previous year (-16.9%). adjustment of the price in the 1st Quarter of 2014 on the 71 Report on operationsAnnual Report 2015sale of Artic Russia in 2013 with respect to the earn-out clau- der Article 4 of the Fornero Act and the payment of a lump- se contained in contracts with the buyer of that company, sum benefit to retired employees who had been receiving revenue decreased by €91 million compared with 2014. The the energy discount following revocation of that benefit, latter decrease is largely attributable to a decrease of €116 partly offset by a corresponding reversal of the associated million in revenue from engineering activities as a result of a provision. This effect was accompanied by a contraction in decline in operations in 2015 compared with 2014 (including unit margins on certain services provided to other Group Di- the Porto Empedocle liquefied natural gas regasification ter- visions. minal and the Mochovce nuclear plant). This was only partly offset by increased revenue (€24 million) for information and Operating income in 2015 showed a loss of €338 million, communication technology services. a deterioration of €270 million on the previous year, taking The gross operating margin in 2015, a loss of €213 million, tization and impairment losses, essentially reflecting the deteriorated by €184 million compared with 2014. Excluding impairment of €159 million recognized on upstream gas ex- the effect of the price adjustment noted above, the gross ploration assets as a result of difficulty encountered in conti- operating margin deteriorated by €106 million. This reflected nuing projects and developments in the price scenario in the account of an increase of €86 million in depreciation, amor- the increase in costs following the new agreement with the global fuel market. trade unions for early retirement incentives for personnel un- Capital expenditure Capital expenditure in 2015 amounted to €52 million, an increase of €7 million on 2014. 72 Annual Report 2015Performance and financial position of Enel SpA Performance The following table summarizes the performance of Enel SpA in 2015 and 2014. Millions of euro Revenue Revenue from services Other revenue and income Total Costs Consumables Services, leases and rentals Personnel Other operating expenses Total Gross operating margin Depreciation, amortization and impairment losses Operating income Net financial income/(expense) and income from equity investments Income from equity investments Financial income Financial expense Total Income before taxes Income taxes NET INCOME FOR THE YEAR 2015 2014 Change 237 8 245 1 199 176 24 400 (155) 327 (482) 2,024 3,535 4,267 1,292 810 (201) 1,011 245 1 246 2 185 120 19 326 (80) 543 (623) 1,818 2,412 3,331 899 276 (282) 558 (8) 7 (1) (1) 14 56 5 74 (75) (216) 141 206 1,123 936 393 534 81 453 Revenue from services totaled €237 million (€245 million in Costs for consumables amounted to €1 million in 2015, 2014) and essentially regards services provided to subsidiari- down €1 million on 2014. They are accounted for by purcha- es as part of Enel SpA’s direction and coordination functions ses of consumables from third-party suppliers. and the rebilling of costs incurred by Enel SpA but pertaining to the subsidiaries. Costs for services, leases and rentals amounted to €199 The decrease of €8 million is mainly attributable to a decline million in 2015, of which charges from third parties in the in pass-through rebilling of a number of Group companies amount of €126 million and from Group companies in the for management fees and technical fees, partly offset by an amount of €73 million. The costs attributable to third par- increase in revenue from communication activities. ties mainly regarded communication expenses, technical Other revenue and income came to €8 million, up €7 mil- and corporate organization consulting. Those in respect of lion on the previous year. The item is essentially composed services provided by Group companies regard IT and admi- of the rebilling of costs for the personnel of Enel SpA secon- nistrative services and purchasing, as well as rentals and ded to other Group companies. personnel training received from Enel Italia Srl, and costs for and professional services as well as strategic, management Report on operation 73 Annual Report 2015the personnel of a number of Group companies seconded to Net financial expense amounted to €732 million and es- Enel SpA. The total change compared with 2014 amounted sentially reflects interest expense on financial debt (€956 to €14 million and is essentially attributable to higher costs million), offset by net income on interest rate derivatives in respect of IT assistance services and personal services (€57 million) and interest and other income on financial as- rendered by Enel Italia Srl and higher costs registered in re- sets (totaling €160 million). spect of Enel Iberoamérica SL for personnel seconded to The decrease in net financial expense on the previous year, global service activities. equal to €187 million, was essentially the result of a decline Personnel costs totaled €176 million in 2015, an increase payment of a number of bonds during the year and the net of €56 million on the previous year. The rise is essentially positive changes in derivatives transactions relating to Enel in interest on financial debt (€82 million) following the re- attributable to the increase in “wages and salaries” and the SpA (€98 million). associated social security contributions (a total of €32 mil- lion) as a result of the increase in the average workforce and Income taxes showed a tax receivable of €201 million, to the costs of the new agreements for the early retirement mainly due to the reduction in taxable income for IRES pur- of personnel under Article 4 of the Fornero Act (€31 million), poses compared with statutory taxable income as a result partly offset by the decrease in other costs as a result of of the exclusion of 95% of dividends received from subsi- the unilateral revocation of the electricity discounts formerly diaries and the deductibility of Enel SpA interest expense for granted to retired personnel, with the reversal of the asso- the Group’s consolidated taxation mechanism in accordance ciated provision at December 31, 2015 (€10 million). with corporate income tax law (Article 96 of the Uniform Other operating expenses amounted to €24 million in rence between the two years in the amount of dividends 2015, up €5 million compared with 2014, mainly due to the received from subsidiaries and the non-deductibility of im- allocation of €3 million to the provision for “compensation pairment losses on equity investments in 2015 meeting the and elimination of retired employee electricity discount” requirements of Article 87 of the Uniform Income Tax Code. Income Tax Code). This essentially reflected both the diffe- established at December 31, 2015. The gross operating margin was a negative €155 million, with €558 million the previous year. Net income for the year totaled €1,011 million, compared a deterioration of €75 million on the previous year, mainly attributable to the increase in personnel costs and rental and lease costs. Depreciation, amortization and impairment losses amounted to €327 million in 2015, a decrease of €216 million compared with 2014. The change is attributable to the decli- ne in impairment losses on equity investments in 2015 from the previous year, which regarded the value adjustment of the interests in Enel Trade SpA (€250 million) and Enel Inge- gneria e Ricerca SpA (€65 million). The operating result showed a loss of €482 million, an im- provement of €141 million compared with 2014. Income from equity investments amounted to €2,024 mil- lion. The item regards dividends approved in 2015 by subsi- diaries, associates and other companies (€1,818 million in 2014) and shows an increase of €206 million on the previous year, essentially due to the special dividend paid by Enel Ibe- roamérica SL (€479 million). 74 Annual Report 2015Analysis of the financial position Millions of euro Net non-current assets: - property, plant and equipment and intangible assets - equity investments - net other non-current assets/(liabilities) Total Net current assets: - trade receivables - net other current assets/(liabilities) - trade payables Total Gross capital employed Provisions: - employee benefits - provisions for risks and charges and net deferred taxes Total Net capital employed Shareholders’ equity NET FINANCIAL DEBT at Dec. 31, 2015 at Dec. 31, 2014 Change 21 38,984 71 39,076 283 (627) (164) (508) 19 38,754 (299) 38,474 132 (533) (139) (540) 38,568 37,934 (291) 28 (263) 38,305 24,880 13,425 (302) 115 (187) 37,747 25,136 12,611 2 230 370 602 151 (94) (25) 32 634 11 (87) (76) 558 (256) 814 Net non-current assets amounted to €39,076 million, an in- with the consolidated taxation mechanism (€196 million); crease of €602 million. The change is essentially attributable > an increase of €25 million in trade payables. to the following factors: > an increase of €230 million in investments in subsidiaries, Net capital employed at December 31, 2015, came to reflecting the following transactions: the recapitalization €38,305 million, funded by shareholders’ equity of €24,880 of Enel Trade SpA (€500 million) and Enel Ingegneria e million and net financial debt of €13,425 million. Ricerca SpA (€40 million), with the former subsequently written down by €250 million and the latter by €65 million; Shareholders’ equity came to €24,880 million at December the establishment of Enel Open Fiber SpA, with payment 31, 2015, a decrease of €256 million on the previous year. of share capital of €5 million, entirely owned by Enel SpA; The change is attributable to the distribution of the dividend > an increase of €370 million in “net other non-current as- for 2014 of €1,316 million (€0.14 per share) and the recogni- sets”, essentially due to the increase in the value of non- tion of net income for the year of €1,060 million (including an current derivatives. income recognized directly in equity of €49 million, largely attributable to the change, net of tax effects, of the reserve Net current assets came to a negative €508 million, a de- for cash flow hedge derivatives). crease of €32 million on December 31, 2014. The change reflects: Net financial debt amounted to €13,425 million, with a > an increase of €151 million in trade receivables, mainly debt/equity ratio of 53.9% (50.2% at the end of 2014). from Group companies, for management and coordina- tion services from Enel SpA. The change reflected de- velopments in revenue from such services and the mo- dification of the timing of receipts compared with the previous year; > an increase of €94 million in “net other current liabilities”, mainly in respect of the decrease in the income tax re- ceivables of Enel SpA (€306 million), partly offset by an increase in intercompany IRES receivables connected Report on operation 75 Annual Report 2015  Analysis of the financial structure Net financial debt and changes in the period are detailed in the table below. (2,785) (2,785) (1) 45 (2,741) 699 (1) (500) 1,246 1,444 (46) (5) 586 529 1,047 3,555 814 Millions of euro Long-term debt: - bonds Long-term debt - financial receivables from others - debt assumed and loans to subsidiaries Net long-term debt Short-term debt/(liquidity): at Dec. 31, 2015 at Dec. 31, 2014 Change 14,503 14,503 (5) (72) 14,426 17,288 17,288 (4) (117) 17,167 - short-term portion of long-term borrowings 3,062 2,363 - short-term bank borrowings - short-term debt due to Group companies - cash collateral received Short-term debt - short-term portion of loans assumed/granted - other short-term financial receivables - cash collateral paid - net short-term financial position with Group companies - cash and cash equivalents and short-term securities Net short-term debt/(liquidity) NET FINANCIAL DEBT 2 - 1,669 4,733 (46) (8) (86) 331 (5,925) (1,001) 13,425 3 500 423 3,289 - (3) (672) (198) (6,972) (4,556) 12,611 Net financial debt at December 31, 2015 amounted to €13,425 > the repayment of two tranches of the Ina and Ania bonds million, an increase of €814 million, the result of a decrease and the repurchase of own bonds in the total amount of in the net short-term creditor position (€3,555 million) and a €94 million. decrease in net long-term financial debt (€2,741 million). The main transactions in 2015 impacting debt can be sum- Cash and cash equivalents amounted to €5,925 million, a marized as follows: decrease on December 31, 2014 of €1,047 million, mainly > the repayment of €2,300 million on two retail bonds; attributable to the above bond repayments and normal cen- > the repayment of €500 million on the Intercompany Short tral treasury functions performed by Enel SpA. Term Deposit Agreement (a short-term credit facility with Enel Finance International NV); 76 Annual Report 2015Cash flows Millions of euro Cash and cash equivalents at the start of the year Cash flows from operating activities Cash flows from investing/disinvesting activities Cash flows from financing activities Cash and cash equivalents at the end of the year 2015 6,972 1,062 (560) (1,549) 5,925 2014 3,123 926 (11) 2,934 6,972 Change 3,849 136 (549) (4,483) (1,047) Cash flows from operating activities came to a positive Cash flows in respect of financing activities were a negative €1,062 million (€926 million in 2014), essentially attributa- €1,549 million (a positive €2,934 million in 2014). They were ble to dividends from subsidiaries, the net negative balance essentially generated by the repayment of bonds and the of interest paid and collected and payments on account of repurchase of own bonds in the amount of €2,394 million, IRES on behalf of all Group companies participating in the the payment of dividends for 2014 totaling €1,316 million consolidated taxation mechanism. and the net increase of €2,508 million in net short-term fi- Cash flows from investing activities were a negative €560 nancial debt. million (a negative €11 million in 2014). They include €542 In 2015, the cash requirements generated by financing acti- million in respect of the recapitalization of the subsidiaries vities (€1,549 million) and investing activities (€560 million) Enel Trade SpA, Enel Ingegneria e Ricerca SpA and Enel Oil were funded by €1,062 million from liquidity generated by & Gas SpA, €5 million for the establishment of Enel Open operating activities and €1,047 million from the use of cash Fiber SpA and €15 million for investments in property, plant and cash equivalents accumulated the previous year. Con- and equipment and intangible assets. Disinvesting activities sequently, cash and cash equivalents at December 31, 2015 regarded the transfer to Enel Trade SpA of the interest in amounted to €5,925 million, compared with €6,972 million Enel Oil & Gas SpA, which generated cash flows of €2 mil- at the start of the year. lion. Report on operation 77 Annual Report 2015Significant events in 2015 12 January Enel Green Power extends framework agreement with Vestas to develop additional wind capacity in the United States 26 January New bond issue of up to €1 billion to back exchange offers for existing bonds is authorized On January 12, 2015, Enel Green Power, acting throu- On January 26, 2015, the Board of Directors authorized one gh its subsidiary Enel Green Power North America Inc. or more new bond issues, to be carried out by December (“EGPNA”), extended the framework agreement signed at 31, 2015, with a total maximum principal amount of up to €1 the end of 2013 with Vestas for the development of wind billion. farms in the United States. The 2013 agreement, which pro- The authorization is intended to allow Enel to make new bond vided for Vestas to supply wind turbines, has supported and issues to serve any exchange offers for bonds previously is- will continue to support EGPNA’s successful growth in the sued by the Company under the Global Medium-Term Notes United States. Program, in order to optimize the Enel Group’s capital and The capacity yet to be developed under the 2013 agreement, financial structure and to permit it to seize any opportunities together with the current extension, will enable EGPNA to that may arise in international financial markets. qualify up to approximately 1 GW of future wind capacity in the United States for Federal Production Tax Credits (PTCs). 27 January Exchange of bonds and issue of new bonds On January 27, 2015, Enel Finance International NV (“EFI”), a wholly-owned subsidiary of Enel SpA, following a non- binding public exchange offer that ran from January 14 to January 21, purchased bonds issued by EFI and guaranteed by Enel in the total amount of €1,429 million. The considera- 78 Annual Report 2015tion for the purchase was represented by (i) senior fixed-rate basis points, while the commitment fee has been reduced notes with a minimum lot size of €100,000 (and multiples of to 35% of the spread from the previous 40%, i.e. from 76 €1,000) issued by EFI (under the Global Medium-Term No- basis points to 28 basis points. tes Program of EFI and Enel) and guaranteed by Enel, in the A number of Italian and foreign banks were involved in the principal amount of €1,463 million and (ii) cash in the amount transaction, with Mediobanca serving as the documentation of €194 million. agent. The transaction was carried out as part of the optimization of EFI’s financial management. It is intended to pursue ac- tive management of the Group’s maturity structure and the cost of funds. The new notes, which EFI issued as part of the exchange offer under the Global Medium-Term Notes Program with an Enel guarantee, bear an interest rate of 25 February Updates of disposal plan 1.966% and mature on January 27, 2025. On February 25, 2015, the Enel Board of Directors examined 29 January Disposal of SF Energy the updates of the plan for disposals of the Group’s equity investments in Eastern Europe, announced to the market on July 10, 2014. Under the strategic guidelines set out in the new business plan to be presented to the financial com- munity, it decided to suspend the process of disposing of the distribution and sales assets in Romania and to continue On January 29, 2015, the agreement signed on November 7, with the disposal of the generation assets held in Slovakia. 2014 by Enel Produzione, a subsidiary of Enel, for the sale of its stake in SF Energy was finalized at a price of €55 million. Of the entire stake, 50% was sold to SEL - Società Elet- trica Altoatesina (the counterparty in the agreement), while the remaining 50% was sold to Dolomiti Energia following exercise of its pre-emption rights. The disposal is part of the 18 March Memorandum of understanding with ENEA agreements signed on that date between Enel Produzione On March 18, 2015, Enel and ENEA signed a memorandum of and SEL. 12 February Renegotiation of revolving credit facility of about €9.4 billion understanding to innovate together in the generation techno- logy sector, with a focus on renewables. The agreement pro- vides for the parties to collaborate on technologies for the use of alternative fuels in traditional plants, such as biomass and plant waste, as well as on the development of technologies for the environment, the climate and to enhance the flexibility of using traditional power plants. A separate line of research On February 12, 2015, Enel SpA and its Dutch subsidiary will seek to optimize solutions to generate electricity from Enel Finance International renegotiated the revolving credit wave motion in the sea, while other work will focus on new facility of about €9.4 billion agreed on February 8, 2013, re- generation photovoltaic technology. Two Enel-ENEA working ducing its cost and extending the facility’s maturity to 2020 groups have been formed to address these research areas, from the original expiry date of April 2018. with the aim of developing a joint detailed work plan on issues The credit facility, which can be used by Enel and/or by Enel of common interest within six months. Following this initial Finance International with a Parent Company guarantee, is exploratory phase, efforts will shift to implementing the activi- not connected with the Group’s debt refinancing program. ties of common interest. It is intended to provide the Group’s treasury with an extre- mely flexible and practical instrument for managing working capital. The cost of the credit facility varies in relation to Enel’s credit rating and bears a spread on Euribor that, based upon Enel’s current rating, falls to 80 basis points from the previous 190 79 Report on operationsAnnual Report 201531 March 30 March Loan for operations in South Africa On March 30, 2015, Enel Green Power, acting through its subsidiary Enel Green Power RSA, signed a loan agreement for a total of 2,100 million South African rand (equivalent to of this nature for its North American subsidiary’s obligations under this agreement. 1 April Enel Green Power - Marubeni agreement on Asia-Pacific renewables cooperation about €160 million) with KfW IPEX-Bank, the latter as lender, On April 1, 2015, Enel Green Power and Japan-based Ma- sole lead arranger and agent, with partial credit insurance rubeni Corporation signed a two year memorandum of un- coverage provided by the German export credit agency, Eu- derstanding (MoU) to jointly evaluate potential business op- ler Hermes. The loan, secured by a parent company guaran- portunities in renewable projects mainly in the Asia-Pacific tee from Enel Green Power, will provide Enel Green Power region. Cooperation under the MoU will focus on geother- RSA with two separate lines of financing, with maturities of mal, wind, solar and hydro projects mainly located in the Phi- 7 and 17 years respectively, bearing an interest rate in line lippines, Thailand, India, Indonesia, Vietnam, Malaysia and with the market benchmark. The loan will be used to finance Australia as well as other areas that may be identified at a the investment in the Gibson Bay wind farm, located in Ea- later stage. Only projects in the development phase will be stern Cape Province of South Africa. The plant will have 37 considered, therefore excluding projects under construction turbines with a capacity of 3 MW each, for a total installed and operating assets from the scope of the cooperation. capacity of 111 MW and capable of generating about 420 GWh of power a year. 13 April Award of South African public tender for renewables Disposal of certain assets in North America On April 13, 2015, Enel Green Power was awarded the right to enter into power supply contracts with the South Afri- On March 31, 2015, Enel Green Power North America can utility Eskom for 425 MW of wind power projects in (“EGPNA”) entered into an agreement with General Electric the fourth phase of the Renewable Energy Independent Po- (GE) Energy Financial Services for the sale of a 49% sta- wer Producer Procurement Programme (REIPPPP) tender, ke in a newly created company, EGPNA Renewable Energy sponsored by the South African government. In line with Partners (“EGPNA REP”), for a total of approximately $440 REIPPPP rules, Enel Green Power took part in the tender million. EGPNA REP owns generation assets totaling 560 through vehicle companies in which it holds the majority of MW of capacity, with a mix of already operational generation the shares, in partnership with major local players. technologies including wind, geothermal, hydro and solar. It The three wind projects (Oyster Bay - 142 MW, Nxuba - 141 also owns a 200 MW wind plant now under construction. All MW and Karusa - 142 MW) will be constructed in the Eastern of the assets are located in North America. Within the new Cape and Northern Cape Provinces, in areas with abundant company, in addition to a minority stake, GE Energy Financial wind resources. The Oyster Bay and Nxuba projects will be Services will also receive, for an initial period of three years, completed and enter service in 2017, while Karusa will enter a right of first refusal to invest in operating assets developed service in 2018. Once fully operational, the three projects, out of EGPNA’s project pipeline and other operating assets which will require a total investment of about €500 million, offered for sale by EGPNA. The $440 million is subject to will be able to generate around 1,560 GWh per year, thereby certain price adjustments, customary for transactions of significantly contributing to meeting the rising demand for this nature. The amount associated with plants in operation energy in South Africa in a way that is sustainable for the was paid immediately, while the closing for the plant under environment. construction will take place once it enters service, which is scheduled for the end of the year. Enel Green Power provi- Subsequently, on June 10, 2015, Enel Green Power was ded parent company guarantees customary for transactions awarded the right to sign two 20-year electricity supply con- 80 Annual Report 2015tracts with South African utility Eskom for an additional 280 rate reorganization, in compliance with the applicable law. MW of wind power projects under the same conditions as the REIPPPP tender. More specifically, the Soetwater (142 MW) and Garob (138 MW) wind farms, which will be built in areas of the Northern Cape Province, will be completed and enter operation by 2018 for a total investment of approxima- tely €340 million. Once completed, the two facilities will be 5 May Standard & Poor’s changes its outlook for Enel able to generate around 1,000 GWh per year. On May 5, 2015, Standard & Poor’s announced that it had 15 April Disposal of stake in SE Hydropower revised its outlook for Enel from stable to positive. The rating agency noted that the positive outlook reflected the excep- tional resilience the Group has shown in the adverse eco- nomic and regulatory climate in the key mature markets in which it operates (Italy and Spain). In particular, the agency found that Enel’s credit metrics could improve over the re- On April 15, 2015, the sale by Enel Produzione of a 40% ference period (2015-2017) thanks to the actions envisaged stake in SE Hydropower for a price of €345 million, pursuant in the strategic plan, including the asset disposal strategy, to the agreement signed on November 7, 2014, was comple- the rationalization of operating expenses, the flexibility of ted. The stake was sold to SEL - Società Elettrica Altoatesina investments and the optimization of debt and cash flow ma- SpA upon meeting the final condition precedent set forth in nagement. the agreement. The sale falls within the scope of the agreements signed on the same date by Enel Produzione and SEL and already announced by Enel to the market. 7 May 22 April Rationalization of Latin American companies Award of renewable energy tender in Turkey On May 7, 2015, Enel Green Power entered the Turkish re- newable energy market after being awarded, through its wholly-owned subsidiary Vektor SA, the right to enter into a power supply contract with the 23 MW Isparta solar pho- On April 22, 2015, the Board of Directors of Enel examined tovoltaic project. The electricity produced by the Isparta so- and agreed upon the possibility that the boards of directors lar park will be sold to a subsidiary of TEIAS under the go- of Enersis and its subsidiaries Empresa Nacional de Electri- vernment’s feed-in-tariff system. The Isparta facility, which cidad (“Endesa Chile”) and Chilectra could begin assessing is expected to be completed and enter service in 2018, will a corporate reorganization to separate power generation and be able to generate more than 35 GWh per year once fully distribution activities in Chile from those in the other Latin operational, significantly contributing to meeting the rising American countries. This initiative is part of the previously demand for energy in Turkey with an environmentally sustai- announced Group rationalization and simplification program. nable solution. The reorganization would eliminate a number of duplications and overlaps among the companies that report to Enersis, which are impeding the full valuation of the associated as- sets for all shareholders, reducing the visibility of the various businesses and making the decision-making process unne- cessarily complex. Clearly differentiating operations in Chile 11 May Memorandum of understanding with Terna from those in other Latin American countries would facilitate On May 11, 2015, Enel and Terna signed a memorandum of value creation for Enersis, Endesa Chile and Chilectra, and understanding (MoU) for cooperation in identifying, asses- all of their shareholders. The competent bodies of Enersis, sing and developing integrated initiatives and opportunities Endesa Chile and Chilectra will assess the possible condi- in greenfield (for the creation of new assets) and/or brown- tions and procedures for the implementation of the corpo- field (for the acquisition of existing assets) projects related 81 Report on operationsAnnual Report 2015to transmission systems in the countries – with the excep- tion of Italy – where Enel and Terna have a strategic or com- mercial interest. More specifically, outside of Italy, Enel is interested, including through Group companies, in the acqui- sition, development and operation of projects regarding hi- 12 May Construction of a co-generation plant in Mexico gh-voltage transmission or connection grids in the countries On May 12, 2015, the Enel Group, in partnership with Aben- it operates in, including those integrated with power genera- goa, a company that specializes in innovative technological tion or distribution operations, through both the construction solutions aimed at sustainable energy development, was of new assets and the acquisition of existing assets. At the selected by Mexican oil and gas company Pemex to develop same time, Terna is interested in providing technical coope- a 517 MW power and 850 tons/hour steam co-generation ration in the analysis of the electricity system, grid planning plant in the area of Salina Cruz, in Mexico’s Oaxaca State. and the design, operation and maintenance of transmission The co-generation plant to be built by Enel, Abengoa and assets, as well as evaluating the acquisition or development PMX Cogeneración (an affiliate company indirectly owned of transmission assets as part of integrated initiatives. by Pemex) will provide the Pemex refinery with part of the Under the MoU, in the event that one of the parties identi- electricity and steam produced by the new plant, while the fies an opportunity that it deems could be of mutual interest, remaining electricity generated will be sold on the market. or even of exclusive interest to the other party, it may offer that party information on the opportunity as a priority. These opportunities will be assessed by the two companies on the basis of their common interests. The agreement will last for 13 May Francesco Starace appointed to United Nations Global Compact three year. 12 May Agreement with Tesla on the development of batteries in solar and wind plants On May 13, 2015, the United Nations announced that its Secre- tary-General Ban Ki-moon appointed Francesco Starace, Chief Executive Officer of the Enel Group, to the Board of Directors of the United Nations Global Compact. The Global Compact is the world’s largest corporate sustainability initiative, and the On May 12, 2015, Enel Green Power and Tesla finalized an Board is a cornerstone of its governance framework, helping agreement for the testing of the integration of Tesla’s statio- to shape strategy and policy and providing advice on all Global nary energy storage systems with Enel Green Power’s so- Compact-related matters, particularly on those regarding su- lar and wind plants. The deal seeks to increase output from stainability. Among the main activities of the Global Compact is Enel Green Power facilities and supply advanced services its LEAD initiative. Enel is one of the six global companies run- for better overall integration of renewables into the grid. The ning the LEAD Board Programme, which aims to reinforce the companies will begin their collaboration with the selection role of boards of directors in integrating sustainability issues of an initial pilot site, where a Tesla battery system, which into their corporate strategies. has a power output capacity of 1.5 MW and energy storage Francesco Starace is the first representative of an Italian busi- capacity of 3 MWh, will be installed. The agreement is part ness to be appointed to the Board. His appointment is effective of a broader memorandum of understanding between the from June 1, 2015 for a term of three years. two companies that provides for both the integration of Tesla energy systems into Enel’s business and the development of electric mobility. The agreement falls within Enel Green Power’s broader program for the testing of stationary stora- ge systems. 3 June Enel confirmed in the Euronext Vigeo sustainability index On June 3, 2015, Enel was confirmed in the Euronext Vigeo - World 120 index, listing the 120 most sustainable compa- nies with the largest free-float market capitalization in Euro- pe, North America and the Asia Pacific region. Enel was also 82 Annual Report 2015confirmed in the regional Euronext Vigeo Eurozone 120 and SE4Good is an equity index series designed to foster in- Europe 120 indexes, which respectively list the 120 most vestment in companies based on their ESG performance. sustainable companies with the largest free-float in the Eu- Companies included in the FTSE4Good Index Series meet rozone and the European region. Enel has been included in a variety of environmental, social and governance criteria. these indexes for three straight years, ever since their in- ception. Euronext Vigeo updates its inclusion criteria every six months, ensuring that the sustainability credentials of companies listed in its indices are constantly tested against the latest trends and developments. Endesa and Enel Green Power have been included in the 27 July Reorganization of operations in Latin America Euronext Vigeo - World 120 index since the end of 2014. In On July 27, 2015, the boards of directors of Enersis SA (“Ener- turn, these companies have also been included in the Euro- sis”) and its subsidiaries Empresa Nacional de Electricidad SA next Vigeo Europe 120 and Eurozone 120 indexes since their (“Endesa Chile”) and Chilectra SA (“Chilectra”), following an inception three years ago. analysis of the corporate reorganization project to separate the Enel inclusion in these indexes serves as recognition of its electricity generation and distribution operations carried out in firm commitment to sustainability. The Euronext Vigeo in- Chile from those conducted in other Latin American countri- dexes acknowledge the efforts of leading companies that es, agreed that the reorganization shall be achieved through place sustainable development at the core of their busi- the following corporate transactions: (i) the partial spin-off of ness agenda. Vigeo draws up the indexes’ composition by Endesa Chile and Chilectra by allocating all of the assets and analyzing nearly 330 indicators for each company based on liabilities they hold in other Latin American countries (i.e. other 38 criteria, including respect for the environment; protection than Chile) to two newly-established companies, named, re- of human rights and recognition of companies’ human capi- spectively, “Endesa Américas” and “Chilectra Américas”; (ii) tal; relations with stakeholders; corporate governance and the partial spin-off of Enersis by allocating all of the assets and business ethics; integrity in influencing policy and efforts liabilities it holds in Chile (including its stakes in Endesa Chile to fight corruption; and the prevention of social and envi- and Chilectra) to a newly-established company named “Ener- ronmental dumping in the supply and subcontracting chain. sis Chile”, with a concomitant change of the Enersis company In addition to these three rankings, the Enel Group also parti- name into “Enersis Américas”, which will continue to own all of cipates in the world’s leading sustainability indices, including the assets and liabilities held in other Latin American countries the Dow Jones Sustainability Index World, the Dow Jones (including the stakes in the newly-established companies En- Sustainability Index Europe, FTSE4Good, the Carbon Disclo- desa Américas and Chilectra Américas); and (iii) the merger of sure Leadership Index, the Carbon Performance Leadership Endesa Américas and Chilectra Américas into Enersis Améri- Index and Newsweek Green Ranking. cas. This surviving company will therefore own all of the stakes 13 July Enel again in the FTSE4Good index held by the Enersis Group in other Latin American countries (i.e. other than Chile). Enersis Chile and Enersis Américas are expected to be based in Chile and their shares listed on the same markets on which the Enersis Group companies’ shares are currently listed. None of these transactions will require the existing shareholders to commit additional financial resources. On July 13, 2015, the Enel Group was once again confirmed On November 6, 2015, the boards of directors of its Chilean in the prestigious FTSE4Good index, having been awarded subsidiaries Enersis, Endesa Chile and Chilectra agreed that an overall score of 4.3 out of 5 in its ESG (Environmental the corporate restructuring aimed at separating electricity ge- - Social - Governance) performance. The FTSE4Good index neration and distribution operations in Chile from those in other measures the performance of companies in areas such as Latin American countries was in the interest of their respective the fight against climate change, governance, respect for companies. human rights and combatting corruption. Enel Green Power, Those boards also met again to discuss the convening of their the renewables company of the Enel Group, was also confir- respective extraordinary shareholders’ meetings to approve med as a participant in the index. the overall corporate reorganization and launch the first phase Created by the global index company FTSERussell, FT- of the transaction involving the partial demergers of Enersis, 83 Report on operationsAnnual Report 2015Endesa Chile and Chilectra. In view of the final phase of the corporate reorganization, which provides for the merger of En- desa Américas and Chilectra Américas into Enersis Américas, the boards of directors of Enersis, Endesa Chile and Chilectra 13 October also agreed, acting on the basis of the opinions of financial advi- Enel starts production at El Quimbo sors and independent experts on the valuations of the compa- On October 13, 2015, Emgesa started production at the El nies that will be involved in that merger, an indicative exchange Quimbo hydropower plant in Colombia. With an installed ca- ratio falling within a range of between: pacity of 400 MW, the facility is located in the region of Huila, > a minimum of 2.3 and a maximum of 2.8 shares of Ener- about 350 kilometers southwest of Bogota, and is fed by the sis Américas for each share of Endesa Américas; Magdalena, the country’s largest river. The filling of the reser- > a minimum of 4.1 and a maximum of 5.4 shares of Ener- voir began in late June after the completion of the principal sis Américas for each share of Chilectra Américas. civil works, which then led to the entry into service of the first The documentation used by the boards of Enersis, Endesa of the plant’s two units. Ahead of the start of commercial ope- Chile and Chilectra as the basis of their approval of the reorga- rations, trials were carried out at the plant for around 20 days. nization is available to the public on the websites of the com- With the commissioning of the second unit the facility will panies involved. be able to produce about 2.2 TWh per year, enough to meet On December 18, 2015, the extraordinary shareholders’ me- around 4% of the country’s electricity demand and reducing etings of the Chilean subsidiaries Enersis, Endesa Chile and the impact of El Niño, which has caused drought conditions, Chilectra approved the first phase of the above corporate re- on the supply of electricity in the country. organization. The split was then carried out with effect from February 1, 2016. 26 October Enel confirmed in STOXX Global ESG Leaders Index Enel again in the Dow Jones Sustainability Index World On October 26, 2015, the Enel Group was admitted to the STOXX Global ESG Leaders Index for the second year in a On September 10, 2015, the Enel Group, for the twelfth con- row. The index measures the performance of companies’ secutive year, was included in the Dow Jones Sustainability environmental, social and governance (ESG) practices based Index World (DJSI World). The index comprises just 317 com- on an assessment carried out by Sustainalytics, a leading panies around the world, fewer than 10% of those selected sustainability rating agency. by RobecoSAM for assessment for admission to the DJSI. Enel is one of 10 Italian companies in the DJSI World. 2 November Sale of the Porto Marghera site 10 September 24 September Acquisition of BLP Energy On November 2, 2015, the sale of Enel’s Porto Marghera site was completed. The coal-fired Giuseppe Volpi thermal On September 24, 2015, Enel Green Power acquired a majority power station, which has been largely inactive for the past stake in BLP Energy (“BLP”), the utility-scale wind and solar three years, has been sold together with the surrounding subsidiary of Bharat Light & Power, for a total of about €30 area to three companies already operating in the port logi- million. BLP, one of the most important renewables companies stics, structural metalworking and plant engineering industri- in India, current owns and operates wind plants in the states of es: Porto Invest, Simic and CITI. This is the first plant that Gujarat and Maharashtra with a total installed capacity of 172 Enel has disposed of within the Futur-E project, which envi- MW and total annual output of about 340 GWh. The company sages the redevelopment of 23 thermoelectric plants, many also has a pipeline of about 600 MW of wind projects at various of which are no longer operational. Two of the three buyers stages of development. (CITI and Simic) will develop new industrial facilities on the 84 Annual Report 2015 site, while the third (Porto Invest) will expand the logistics 1,280 MW. The closing of the sale is conditional on Dolo- operations that it already carries out nearby, operating di- miti Energia SpA (which holds the remaining 51% of HDE) rectly and through associated companies. The investments waiving or not exercising its right of pre-emption and on associated with these initiatives will have a major positive the buyer receiving clearance from the EU antitrust autho- impact on economic activity and employment in the Porto rity. The transaction will enable the Enel Group to reduce Marghera area, both in the construction phase and in the its consolidated net financial debt by an amount equal to, operation of the new industrial activities. approximately, the total consideration noted above. 3 November Agreement for sustainable wind power renewal 17 November Integration of Enel and Enel Green Power On November 3, 2015, E2i, Enel Green Power, ERG Renew, On November 17, 2015, the Boards of Directors of Enel Falck Renewables and IVPC, together with Legambiente and SpA (“Enel”) and Enel Green Power SpA (“EGP”) appro- ANCI, signed the Charter for Sustainable Wind Power Rene- ved a project for the non-proportional spin-off (the “Spin-Off wal. The goal of the document is to specify operational rules, Project”) of part of EGP into Enel (the “Spin-Off”). The Spin- application criteria, standards, procedures and best practices Off envisages: the assignment by EGP to Enel of the spun- that will ensure the effectiveness and transparency of projects off assets, essentially represented by (i) the 100% stake for the renewal of Italy’s existing wind power park in order held by EGP in Enel Green Power International BV, a Dutch to create a sustainability roadmap. Through the upgrading of holding company that holds investments in companies ope- the plants and the use of modern technology, it is possible rating in the renewable energy sector in North, Central and today to reduce the number of wind turbines and generate South America, Europe, South Africa and India; and (ii) the more “green” electricity without reducing installed capacity, assets, liabilities, contracts and other legal relationships as- while offering the electricity network more technical flexibility. sociated with those investments (the “Spun-Off Assets”); The Charter is founded on four key principles: the protection and the retention by EGP of all remaining assets and liabi- and making the most of natural resources in existing sites; lities other than those that are part of the Spun-Off Assets the optimal use of each territory’s resources, maximizing the (and thus, essentially, all Italian operations and a small num- use of existing infrastructure; the containment and mitigation ber of remaining foreign investments). Since the transac- of environmental impacts at each stage of the process; and tion involves a non-proportional spin-off, it is expected that continuity and transparency in the relationship with the area, (i) shareholders of EGP other than Enel may exchange all institutions and local communities. the shares they hold in EGP with Enel shares and (ii) Enel 13 November Agreement for the disposal of Hydro Dolomiti Enel will exchange the shares corresponding to its stake in the Spun-Off Assets with Enel shares, which will be immedia- tely cancelled in accordance with Article 2504-ter, paragraph 2, and Article 2506-ter, paragraph 5, of the Italian Civil Code. The Spin-Off will be carried out on the basis of an exchange ratio of 0.486 newly issued Enel shares for each EGP share On November 13, 2015, Enel Produzione SpA and Fedaia tendered for exchange (the “Exchange Ratio”), with no cash Holdings Sàrl, a Luxemburg-based subsidiary of Macqua- adjustment. As a result, as of the effective date of the Spin- rie European Infrastructure Fund 4 (“MEIF4”), managed by Off, EGP will reduce its share capital by an amount equal to Macquarie Infrastructure and Real Assets, had signed an the value of the Spun-Off Assets while Enel will increase agreement for the sale of the entire stake held by Enel Pro- its share capital to cover the consideration for the Spun-Off duzione in Hydro Dolomiti Enel Srl (“HDE”), equal to 49% Assets. Specifically, Enel will issue up to 770,588,712 new of the share capital, for about €335 million. The sale price is shares – with full rights and a par value of 1 euro each – to be subject to customary completion adjustments. issued to minority shareholders of EGP in accordance with HDE operates 28 hydropower plants, mainly located in the the Exchange Ratio. As of the effective date of the Spin-Off, Province of Trento, with a total installed capacity of about Enel will be the sole shareholder of EGP, and EGP shares 85 Report on operationsAnnual Report 2015will cease to be traded on the Mercato Telematico Azionario, Energetický a prumyslový holding as (“EPH”), for the sale of the stock exchange organized and operated by Borsa Italiana the stake held by Enel Produzione in Slovenské elektrárne, SpA (“MTA”), and on the Spanish continuous electronic tra- equal to 66% of the latter’s share capital. ding system (Sistema de Interconexión Bursátil, SIBE). The sale will be executed by way of a transfer of Enel Pro- On December 23, 2015, the information document associa- duzione’s entire stake in Slovenské elektrárne to a newly ted with the transaction was published. established company (“HoldCo”), and the subsequent sale 26 November Disposal of renewables assets in Portugal to EP Slovakia of 100% of the share capital of the HoldCo. This sale of HoldCo to EP Slovakia is due to be implemented in two phases. In the first phase, Enel Produzione will sell 50% of HoldCo’s share capital to EP Slovakia for €375 million, of which €150 million will be paid upon the closing of the first phase, and On November 26, 2015, Enel Green Power España (“EGPE”, €225 million will be paid upon the closing of the second pha- 60% owned by Enel Green Power and 40% owned by En- se. The consideration could vary subject to the application of desa), has closed the sale of the entire share capital of the adjustment mechanism, as described below. Finerge Gestão de Projectos Energéticos SA (“Finerge In the second phase, a put or a call option can be exercised Gestão”), a wholly-owned EGPE subsidiary operating wind respectively by Enel Produzione or by EP Slovakia, exercisa- farms in Portugal with a net installed capacity of 642 MW, ble 12 months after receiving the Trial Operation Permit of equivalent to a gross capacity of 863 MW, to the Portu- units 3 and 4 of the Mochovce nuclear power plant, which guese company First State Wind Energy Investments SA are currently under construction. On the basis of the cur- (“First State Wind Energy Investments”). The original agre- rent work plan these options are expected to become exer- ement was announced on September 30, 2015. The total cisable within the first half of 2019. Upon exercise of either consideration for the sale is €900 million, including the option, Enel Produzione would transfer the remaining 50% repayment of a shareholder loan to Finerge Gestão. With of the HoldCo’s share capital to EP Slovakia for €375 mil- this sale, Enel Green Power has exited the Portuguese re- lion. Payment will be due at the time of the closing of the newables market. sale and the consideration is subject to the application of The sale was finalized following the completion of the split the adjustment mechanism described below. The closing of (announced on October 28, 2015) of ENEOP - Eólicas de the second phase is subject to obtaining the Final Operation Portugal SA (“ENEOP”), a company that previously owned Permit for Mochovce’s units 3 and 4. a portfolio of operating wind farms with a total installed The total consideration payable over the two phases, equal capacity of 1,333 MW, in which Finerge Gestão held a sta- to €750 million, is subject to an adjustment mechanism. Any ke of 35.96%. As a result of the split, Finerge Gestão fully adjustment will be calculated by independent experts and consolidated six wind farms for a total installed capacity applied upon completion of the second phase on the basis of 445 MW. The above capacity was added to Finerge Ge- of a set of parameters, including the evolution of the net stão’s previous portfolio of majority and minority-owned as- financial position of Slovenské elektrárne, developments in sets, equal to a net consolidated capacity of approximately energy prices in the Slovak market, operating efficiency le- 197 MW (or 418 MW gross). vels at Slovenské elektrárne as measured against benchmar- The total consideration of €900 million paid in full in cash is ks specified in the agreement, and the enterprise value of subject to price adjustments in line with standard practice units 3 and 4 of Mochovce. for this type of transaction. The agreement also provides that, should the options not 18 December Agreement to dispose of Slovenské elektrárne become exercisable under the above timetable, these op- tions could be in any case exercisable starting from June 30, 2022 (the “long stop date”). In that case, the adjustment of the consideration will also take into account the effective enterprise value of the above units. The closing of the transaction is also subject to clearance On December 18, 2015, Enel Produzione SpA signed a con- from the European Union’s antitrust authorities. tract with EP Slovakia BV (“EP Slovakia”), a subsidiary of 86 Annual Report 201522 December Creation of photovoltaic joint venture in Italy On December 22, 2015, Enel Green Power and F2i SGR SpA (“F2i”), acting on behalf of F2i - Fondo italiano per le infrastrut- ture, together with their subsidiaries Enel Green Power Solar Energy Srl and F2i Energie Rinnovabili Srl, closed an agree- ment to create an equally held joint venture, following up on the agreement signed and announced on October 16, 2015. The joint venture, to which Enel Green Power transferred its Italian solar assets, emerged from the merger of F2i Solare 1 and F2i Solare 3, companies controlled by F2i Energie Rinno- vabili, with effect as from December 31st, 2015. The new joint venture, which seeks to become the PV market leader in Italy, thus begins life with a portfolio of 207 MW of installed capacity, the effect of the contribution of 102 MW by Enel Green Power and 105 MW by F2i. The closing of the transaction was completed following sati- sfaction of the conditions provided for in the agreement sig- ned by the parties on October 16, 2015, including approval by the competent EU antitrust authorities. The enterprise value of the Enel Green Power assets amounted to about €234 million and that of the F2i assets to about €282 million, with respec- tive equity values of about €91 million, net of minorities, and about €111 million. Accordingly, Enel Green Power, in order to ensure equal participation in the joint venture, made a cash contribution of about €20 million. An adjustment of these va- lues, using a mechanism customary for this type of transac- tion, is envisaged for 2016. 87 Report on operationsAnnual Report 2015Reference 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) 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 (millions of euro) (1) No. of shares outstanding at December 31 (millions) (1) Calculated on average share price in December. Enel stock weighting in: - FTSE MIB index - Bloomberg World Electric index Rating 2015 1.63 0.82 0.23 0.32 0.16 3.44 4.46 3.44 3.96 37,220 9,403 2014 1.68 0.33 0.05 0.33 0.14 3.35 4.46 3.13 3.75 35,307 9,403 Current (1) at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2013 9.98% 3.00% 9.05% 3.04% 9.45% 2.89% Stable BBB A-2 8.82% 3.12% Stable BBB A-2 Negative Negative Baa2 P2 Baa2 P2 Stable Watch Negative BBB+ F2 BBB+ F2 Standard & Poor’s Outlook Positive Positive Medium/long-term Short-term Outlook Medium/long-term Short-term Outlook Medium/long-term Short-term BBB A-2 Stable Baa2 P2 Stable BBB+ F2 BBB A-2 Stable Baa2 P2 Stable BBB+ F2 Moody’s Fitch (1) Figures updated to January 31, 2016. The year 2015 was characterized by an improvement in the new and significant strains in the financial market in China economic conditions of the advanced countries. Last De- that emerged in the latter part of 2015, accompanied by in- cember, the US Federal Reserve ended its policy of interest creasing worries about the country’s growth potential. These rates around zero that it first adopted in 2008: the decision developments triggered a decline in the prices of raw mate- was prompted by the substantial improvement in the labor rials, with oil prices falling below $30 a barrel. market in the world’s leading economy. Growth continued in the euro area, although the economic By contrast, the weakening of economic activity in the recovery remains fragile. The weakening of foreign demand emerging economies continued. Of special concern are the and the sharp fall in oil prices have revived the downside 88 Annual Report 2015    risks to inflation, posing a consequent threat to growth. €3.892, up 5.3% on the previous year. The Enel stock was In Italy, the recovery continued gradually, thanks in part to one of the best performers among its European peers, re- the improvement in domestic demand and the decline in the gistering a significant level of performance by comparison unemployment rate over the course of 2015. with the other utilities in the euro area. Nevertheless, the start of the year saw an increase in uncer- On June 24, 2015 Enel paid the dividend on 2014 profits of tainty for the international economic outlook. In the emerging €0.14 a share, up 8% on the dividend distributed the pre- countries, and China in particular, growth is continuing to de- vious year. celerate. The weakness of demand is helping to keep oil prices and raw materials prices in general at historically low levels. At December 31, 2015, the Ministry for the Economy and Fi- In the mature economies, these developments are further nance held 25.5% of Enel, while institutional investors held increasing the risk of a level of inflation that is not consistent 51.5% and individual investors held the remaining 23.0%. with price stability. In this environment, the financial markets have also been im- For further information we invite you to visit our corporate pacted by the tensions in China and the emerging markets, website (www.enel.com) and in particular the Investor Rela- posting significant losses in the first two months of the year. tions section (http://www.enel.com/en-GB/investor/), which The main European equity indices closed 2015 with contra- share price, information on corporate bodies and the regula- sting results. tions of shareholders’ meetings, as well as periodic updates The FTSE Italy All Share posted a gain of 15%, the best per- on corporate governance issues. contains financial data, presentations, on-line updates of the former among the European stock markets. The euro-area utilities segment closed the year with a fall (which can be reached by phone at +39-0683054000 or by e- We have also created contact centers for private investors of 5%. mail at azionisti.retail@enel.com) and for institutional investors (phone: +39-0683051; e-mail: investor.relations@enel.com). As regards Enel shares, 2015 ended with the stock price at 89 Report on operationsAnnual Report 2015Performance of Enel share price and the Bloomberg World Electric, Euro STOXX Utilities and FTSE Italia All Share indices from January 1, 2015 to February 5, 2016 EURO 4.80 4.60 4.40 4.20 4.00 3.80 3.60 3.40 3.20 3.00 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Enel Bloomberg World Electric Euro STOXX 600 Utilities FTSE Italia All Share Source: Bloomberg 90 Annual Report 2015Economic and energy conditions in 2015 Economic developments The global economic environment in 2015 was marked by rable goods and the real estate sector performed more er- considerable fragility, characterized by a sharp increase in ratically. In particular, industry showed weakness, with the volatility in the major financial markets and uncertainty about ISM manufacturing index falling for the past six months in the outlook for global economic recovery. World GDP growth a row, which together with the fall in the stock market, the stood at 2.5%, below the average of the last 15 years and flattening of the yield curve (10Yr - 2Yr notes) and the perfor- supported mainly by the improvement in economic activity mance of swap rates at 5 years (5Yr - 5Yr swap rates) have in the advanced countries (which saw GDP rise 1.9%). Con- begun to create fears of a possible recession risk. Inflation ditions in the emerging economies are also a concern, mar- remains well below the 2% target level set by the Federal ked in most cases by a significant deterioration in the twin Reserve, mainly due to low commodity prices (the Core CPI deficits (as in South America and South Africa), a contraction ex food & energy rose by 2.1% over the previous year). In of domestic demand, high inflation and sharp depreciations December last year, the Fed reversed its expansionary mo- in local currencies. More specifically, the strains in the Chi- netary policy with an initial tightening of interest rates. Ho- nese financial market, combined with the prospects of a wever, uncertainty about the impact of the global economic slowdown in the real economy (underscored by the collapse environment (China in particular), a prolonged depression of in investment in real estate, sales of durable goods and in- the prices of oil commodities resulting in expectations of dustrial activities) and the continued expansionary monetary low inflation and economic growth (flattening of the forward policy with the depreciation of the currency (the CNH), as yield curve) and increased volatility in financial markets have well as the collapse in imports together with a rapid outflow raised probability of the Fed calling a new pause in its mone- of foreign capital from the country have exacerbated the ex- tary tightening during the year. pansion of trade by depressing the economies of its major The combined effects of the expansionary monetary stance partners and the countries directly and indirectly exposed of the European Central Bank (the extension of quantitative to China risk on capital and foreign exchange markets (Chi- easing, cutting rates on the deposit facility to -0.15%) toge- le, South Korea, Australia, Taiwan, the Philippines, South ther with the fall in commodity prices and the euro (with the Africa, Indonesia, Russia, Brazil, Mexico and Canada). The latter two factors playing the main role) allowed the euro area downward revision of the outlook for the Chinese economy to achieve expected growth of 1.5% year-on-year, about 60 has raised pressures to sell in mineral commodities markets basis points more than the previous year. Inflation remains (copper, zinc, aluminum, lead, nickel and coal) in response the real Achilles heel for the Central Bank, with a rate of clo- to a decline in use of those materials in industry and in con- se to zero in 2015 and very limited prospects for an upturn in struction. Oil prices in particular stood below the lows rea- the next two years (not reaching the ECB’s 2% target befo- ched at the height of the 2008-2009 crisis as a result of fears re 2018). Employment is improving, but the unemployment of an expansion of oversupply due to lower global demand. rate remains very high (11.4%), still distant from pre-crisis Another threat is the imminent removal of sanctions on Iran. levels (around 8%). The outlook for economic growth in The reasons for these developments are rooted in the stra- the euro area, while improving, remains hampered by the tegy of the OPEC countries to maintain current production weakness of the global environment, by developments in quotas. The economic impact has been devastating for the foreign exchange markets (in the short term, a strengthe- main commodity exporters, such as Russia, South Africa, ning euro could limit growth), by investor sentiment (growth Chile, Colombia, Peru, Australia and Indonesia. has mainly been driven by private consumption while in- The United States ended 2015 with solid GDP growth vestment remains weak) and by the readiness of the ECB (+2.5%), consolidating the recovery in the wake of the glo- (via the extension and strengthening of its expansionary bal financial crisis. The recovery was mainly driven by dome- measures) to calm jitters in the financial markets and foster stic demand due to the strengthening of the labor market greater price stability. (with an improvement in the climate of consumer confiden- The effects of the weak euro, low inflation and an impro- ce, wages, and a decline in unemployment to 4.9%), while vement in the labor market (the Jobs Act) enabled Italy to the manufacturing sector, fixed investment, orders for du- achieve GDP growth, estimated by the IMF at 0.8% com- 91 Report on operationsAnnual Report 2015pared with -0.4% in 2014. The rise is primarily due to an im- lopments in the price of Brent crude will keep downwards provement in consumer confidence (with the improvement pressure on the ruble, but will also allow gradual decline in in the credit market, employment, tax incentives and low inflation (forecast at around 7% over the next 12 months). inflation). However a number of threats to the outlook for With Brent prices around $30 a barrel, the probability of a the future remain: a reduction in fiscal stimulus measures cut in rates by the central bank (CRB) remains rather low. in order to curb the budget deficit, low investor confidence, The economic situation in Brazil is even more worrying, with weak and possibly declining exports due to the economic an estimated contraction of 3.7% in GDP in 2015, inflation slowdown in China, Russia and Brazil, the strengthening currently at 10.7% and a budget deficit of 9.3% of GDP. euro, political instability in the implementation of structu- Political instability, lack of coordination between Congress ral reforms (the Senate, the public sector, a still too rigid and the government in implementing reforms (cutting pu- and unproductive labor market). The IMF has confirmed blic spending, reforming the pension system and increasing its growth forecasts for 2016 and 2017, respectively 1.3% the tax burden) and implementing a sustainable restrictive and 1.2%. However, the recent turbulence in the financial fiscal policy make the outlook for economic recovery extre- markets and “flight to safety” of investors (with a sharp in- mely uncertain. More specifically, the central bank continues crease spreads on government securities), the crisis of the to maintain a tight monetary policy (with interest rates to Italian and European banking system and elevated volatility 14.25%) to support the exchange rate and prevent a worse- in the foreign exchange and commodities markets cast a ning of the outflow of foreign capital, in addition to contai- cloud over the country’s ability to achieve those objectives ning inflation (with a target of 6.5% for 2016). However, the in the next two years (upwards pressure on BTP yields and weak global environment, fiscal instability and high interest a growing deficit suggest that a restrictive fiscal policy is in rates (with the cost of financing in the private sector at over the offing, with negative impact on growth in the absence 30%) undermine the chances of recovery for the Brazilian of effective negotiations between the leading EU countries). economy. Within Latin America, Chile, Colombia and Peru Japan faces a complex economic environment, struggling are still underperforming. Chile should register estimated with recession risk exacerbated by the fall in production and growth of 2% in 2015, compared with an average of 4.6% consumption, while inflation is expected to remain low at over the last five years. The country was hit by the collapse what the Bank of Japan (BOJ) now forecasts will be 0.8% in copper prices (50% of total exports and about 11% of in 2016. The new developments in commodity prices, the GDP), the decline in imports by China (its main trading part- economic slowdown in China and the instability of global ner) and the recession in Brazil. Weak consumer and inve- financial markets prompted the BOJ to adopt negative in- stor confidence, high inflation (although declining somewhat terest rates on deposits (-0.1%) in an attempt to encourage as a result of developments in commodity prices), and the banks to increase lending to businesses, restore investor emergence of higher interest rates in the United States du- confidence and stem further appreciation of the yen. The ef- ring the year remain risk factors for 2016. Despite an unem- fort is challenging, however, with yields on medium to long- ployment rate at a record low, domestic demand is begin- term government securities likely to turn negative, with a ning to reflect the decline in real wages and hence private concomitant risk of disinvestment (except for the BOJ) by consumption (the main growth driver in 2015). Colombia’s investors in Japanese debt. GDP growth is expected to have decelerated from 4.6% in The emerging economies continue to underperform (3.7% 2014 to 2.8% in 2015. The fall in oil prices (52% of exports), compared with 4.4% in 2014). The drivers continue to be only partially offset by the depreciation of the local currency, primarily related to commodities, the economic slowdown the deterioration in the fiscal balance (-4.1% in 2015 com- in China, high debt levels and unsustainable interest rates, pared with 2.3% in 2014) and the overall weak economic excessive exchange rate volatility, with a resulting substan- environment continue to adversely affect the country’s ca- tial outflow of foreign capital. pacity for recovery, despite the good elasticity of domestic Among the emerging countries, Russia and Brazil are in re- demand. Growth in Peru was essentially stable (2.5% com- cession. The former is looking at an expected contraction of pared with 2.4% in 2014), albeit well below the average of 3.7% in GDP due to the collapse in exports owing to low the last five years (5.2%) due to a slowdown in investment oil prices, a depreciation of 60% in the exchange rate (in (public and private) and domestic demand, a slowdown in line with the trend in prices of Brent crude), an inflation rate mining activity due to lower commodity prices in 2015 (cop- of more than 12% and a budget deficit at 3.7%. The deve- per and gold) and a lack of exchange rate flexibility in of- 92 Annual Report 2015fsetting the decline in commodity prices (the central bank is (due to a more stable outlook for copper and gold prices) and focused on maintaining the stability of the currency with a the fishing industry, and the normalization of the investment restrictive monetary policy stance, exacerbating the outflow cycle (with the main benefits going to the construction indu- of foreign reserves). Inflation remains well above the confi- stry) presage a gradual improvement in the economic outlo- dence range (3% +/- 1%), and currently stands at 4.6% year- ok for 2016 and a strengthening of monetary restriction by on-year. The recovery in the real economy in the final months the central bank (in order to hold inflation at its target level). of the year (GDP +4% year-on-year in November, compared The following table shows the growth rates of GDP in the with +3% in October), supported by an increase in mining main countries in which Enel operates. Annual real GDP growth % Italy Spain Portugal Greece France Romania Russia Brazil Chile Colombia Mexico Peru Canada United States 2015 0.8 3.2 1.5 -0.2 1.1 3.5 -3.7 -3.8 2.0 2.8 2.5 2.5 1.2 2.5 Source: National statistical institutes and Enel based on data from ISTAT, INE, EUROSTAT, IMF, OECD and Global Insight. 2014 -0.4 1.4 0.9 0.7 0.2 2.8 0.6 0.1 1.8 4.6 2.3 2.4 2.5 2.4 93 Report on operationsAnnual Report 2015Developments in the main market indicators Money market 1.40 1.35 1.30 1.25 1.20 1.15 1.10 1.05 1.00 0.40 0.30 0.20 0.10 0.00 -0.10 -0.20 Jan 14 Feb 14 Mar 14 May 14 Jun 14 Jul 14 Sep 14 Oct 14 Dec 14 Jan 15 Feb 15 Apr 15 May 15 Jul 15 Aug 15 Sep 15 Nov 15 Dec 15 Euro - US dollar 3-month Euribor International commodity prices The price of Brent collapsed in 2015, falling to $35.8 a barrel OPEC countries, with the revival of Iraqi output in the final at the end of the year (compared with $55.6 in 2014). The months of the year (an increase of 250 thousand barrels a day decline was exacerbated by the widening divergence betwe- last November); and (iii) the lifting of sanctions of Iranian oil en supply and demand, considerable strains and volatility in exports (January 16, 2016), with a potential increase of more financial markets and the strengthening of the dollar over the than 500 thousand barrels a day. course of the year. This has been accompanied by the continuing reluctance of Demand-side factors in the collapse included: (i) the the OPEC countries, with Saudi Arabia in the lead, to reduce slowdown in global economic growth, especially in China production in order to protect market shares (and potentially and the emerging economies; (ii) concern for environmen- further discourage production from unconventional oil). The- tal constraints (COP 21) and the consequent decline in con- se fundamentals were flanked by financial considerations, sumption; and (iii) the appreciation of the dollar and high vo- such as expectations of an increase in interest rates by the latility in financial markets, with an increase in pressure to Federal Reserve, the appreciation of the dollar, and an incre- sell. The supply side was characterized by: (i) an increase ase in investor risk aversion (as from the second half of the in unconventional output (tight oil) in the United States and year) with consequent sell-off of risky assets, including com- Canada in the early part of the year (although it declined in modities. the closing months of 2015); (ii) an increase in production by 94 Annual Report 2015Commodity prices 800 700 600 500 400 300 200 100 0 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Dec 15 Zeebrugge gas (€/toe) API2 coal (€/toe) Brent (€/toe) The collapse in the price of Brent together with the slowdown ever increasing competition from renewables, giving rise to in industrial activity, warmer temperatures, oversupply and a surplus of supply on the market. closer attention to environmental constraints all contributed The contraction in gas prices was more modest, with the to the decline in coal and gas prices. Coal prices fell by 67% spot price of natural gas at the Zeebrugge hub in Europe in 2015 to $47.9/metric ton at the end of the year, compa- falling by 15% over the course of the year, going from 48.4 red with $71.3/metric ton at the end of 2014. The growth pence/therm (end-2014) to 32.2 pence/therm (end-2015). in energy demand is slowing and in many mature markets Despite the decline in global demand due to the economic has turned negative as a result of the combined impact of slowdown, climate effects and the penetration of renewa- the deterioration in economic conditions, new energy effi- bles, the greater competitiveness of gas than coal in electri- ciency measures, stringent environmental policies and the city generation stemmed any sharper decline in prices. 95 Report on operationsAnnual Report 2015Electricity and natural gas markets Developments in electricity demand GWh Italy Spain Romania Russia (1) Slovakia Argentina Brazil (2) Chile (2) (3) Colombia 2015 315,234 248,025 51,205 767,328 29,213 136,099 548,522 53,023 66,175 2014 310,535 243,544 50,641 772,255 28,086 130,654 569,734 52,225 63,570 Change 1.5% 1.8% 1.1% -0.6% 4.0% 4.2% -3.7% 1.5% 4.1% (1) Europe/Urals. (2) Figure for the SIC - Sistema Interconectado Central. (3) Gross of grid losses. Source: Enel based on TSO figures. In Europe, the Mediterranean countries experienced growth posted growth of 1.8% (+1.5% net of calendar and tempera- in electricity demand, above all owing to economic recovery, ture effects), considerably lower than estimated GDP growth partly offset by climate effects. More specifically, Italy posted of 3%. More specifically, slowdown in private and industrial growth of 1.5% (1.4% net of climate and calendar effects), consumption began in 2008, partly owing to efficiency gains reversing the negative trend of the past three years. Driving and partly to structural factors. In Russia, demand contracted the growth were the South macro-area (which includes Cam- in 2015 (-0.6%) compared with 2014, a small decline com- pania, Puglia, Calabria and Basilicata), which registered the pared with the recession under way in the country. Demand largest gain at +4.4%, the Tuscany and Emilia Romagna area continued to rise in Latin America, with significant increases with +4.3% and the Center area (which includes Lazio, Abruz- in Argentina (+4.2%), Colombia (+4.1%) and Chile (+1.5%). zo, Marche, Molise and Umbria) with +2.3% on 2014. Spain Demand contracted in Brazil (-3.7%), reflecting the recession. 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 2015 2014 Change 180,871 44,751 14,589 5,816 24,676 270,703 46,381 317,084 (1,850) 315,234 167,080 59,575 15,089 5,567 21,837 269,148 43,716 312,864 (2,329) 310,535 13,791 (14,824) (500) 249 2,839 1,555 2,665 4,220 479 4,699 8.3% -24.9% -3.3% 4.5% 13.0% 0.6% 6.1% 1.3% 20.6% 1.5% Source: Terna - Rete Elettrica Nazionale (monthly report - December 2015). 96 Annual Report 2015 In 2015, domestic electricity demand increased by 1.5% (to In 2015, net electricity generation increased by 0.6% or 1,555 315,234 million kWh) compared with 2014. Of total electricity million kWh, to 270,703 million kWh. More specifically, in an demand, 85.3% was met by net domestic electricity gene- environment of increased electricity demand, the decrease ration for consumption (85.9% in 2014) with the remaining in hydroelectric generation in the amount of 14,824 million 14.7% being met by net electricity imports (14.1% in 2014). kWh, mainly attributable to less favorable water availability In 2015, net electricity imports increased by 2,665 million of 13,791 million kWh as well as an increase in generation kWh mainly as a result of lower average sales prices on in- from other renewables (photovoltaic, +2,839 million kWh and ternational markets, which were made even more attractive geothermal, +249 million kWh) as a result of the expansion in by the national production mix, penalized by the decline in installed capacity in the country. conditions, was offset by an increase in thermal generation hydroelectric output. Spain Electricity generation and demand in the peninsular market Millions of kWh Net electricity generation Consumption for pumping Net electricity exports (1) Electricity demand 2015 254,011 (4,520) (1,466) 248,025 2014 253,578 (3,406) (6,628) 243,544 Change 433 (1,114) 5,162 4,481 0.2% -32.7% 77.9% 1.8% (1) Includes the balance of trade with the extra-peninsular system. Source: Red Eléctrica de España (Balance eléctrico: Estadística diaria del sistema eléctrico español peninsular - December 2015 report). Volumes for 2014 are updated to December 9, 2015. Electricity demand in the peninsular market in 2015 rose by with the previous year. This essentially reflected the net effect 1.8% compared with 2014 reaching 248,025 million kWh. De- of a decline in exports and an increase in imports driven by mand was entirely met by net domestic generation for con- lower average sales prices on international markets. sumption. Net electricity exports in 2015 decreased by 77.9% compared kWh), essentially due to greater electricity demand. Net electricity generation in 2015 rose by 0.2% (433 million Electricity generation and demand in the extra-peninsular market Millions of kWh Net electricity generation Net electricity imports Electricity demand 2015 13,547 1,333 14,880 2014 13,289 1,298 14,587 Change 258 35 293 1.9% 2.7% 2.0% Source: Red Eléctrica de España (Balance eléctrico: Estadística diaria del sistema eléctrico español extrapeninsular - December 2015 report). Volumes for 2014 are updated to January 13, 2016. Electricity demand in the extra-peninsular market in 2015 Net electricity generation in 2015 rose by 1.9% or 258 million increased by 2.0% compared with 2014, reaching 14,880 kWh as a result of higher demand for electricity in the extra- million kWh. Of total electricity demand, 91.0% was met by peninsular market. net electricity generation in the extra-peninsular area, with the remaining 9.0% being met by net electricity imports, all from the peninsular system. The latter totaled 1,333 million kWh in 2015. 97 Report on operationsAnnual Report 2015 Electricity prices Electricity prices Italy Spain Russia Slovakia Brazil Chile Colombia Average baseload price 2015 (€/MWh) Change in baseload price 2015-2014 Average peakload price 2015 (€/MWh) Change in peakload price 2015-2014 52.3 50.3 21.3 33.6 79.8 81.9 119.5 0.4% 9.1% 31.0% -0.3% -62.9% -19.2% 39.6% 58.7 56.8 24.9 42.8 131.2 178.1 585.3 -0.4% 9.8% 33.1% -0.1% -52.5% -14.6% 211.3% Price developments 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 2015 2014 Change (%) 0.25 0.16 0.23 0.13 0.23 0.15 0.11 0.08 0.10 0.08 0.09 0.12 0.24 0.16 0.22 0.13 0.23 0.15 0.12 0.07 0.10 0.08 0.09 0.11 4.2% - 4.5% - - - -8.3% 14.3% - - - 9.1% (1) Annual price net of taxes - annual consumption of between 2,500 kWh and 5,000 kWh. (2) Annual price net of taxes - annual consumption of between 70,000 MWh and 150,000 MWh. Source: Eurostat. Electricity price developments in Italy Power Exchange - PUN IPEX (€/MWh) 51.8 47.9 56.7 52.8 52.5 46.5 50.4 58.9 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2015 2014 Average residential user with annual consumption of between 2,641 and 4,440 kWh with subscribed capacity of more than 3kW (euro/kWh): price net of taxes 0.24 0.24 0.24 0.25 0.25 0.24 0.24 0.25 Source: GME (Energy Markets Operator); Authority for Electricity, Gas and the Water System. 98 Annual Report 2015 In Italy, the average uniform national sales price of electricity The average annual price (net of taxes) for residential users on the Power Exchange rose slightly in 2015, edging up by set by the Authority for Electricity, Gas and the Water Sy- 0.4% compared with 2014. stem fell slightly in 2015, declining by 1.1%. Natural gas markets Gas demand Millions of m3 Italy Spain 2015 64,798 28,657 2014 61,501 25,897 Change 3,297 2,760 5.4% 10.7% Demand for natural gas in 2015 rose substantially both in competitiveness of gas costs than those of other conventio- Italy and Spain. The increase was mainly attributable to more nal resources. extensive use in electricity generation owing to the greater Italy Domestic gas demand Millions of m3 Distribution networks Industry Thermal generation Other (1) Total 2015 31,081 12,705 19,609 1,402 64,798 2014 29,239 13,098 17,368 1,796 61,501 Change 1,841 (392) 2,241 (394) 3,297 6.3% -3.0% 12.9% -21.9% 5.4% (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 2015 totaled 64,798 mil- an increase in residential and civil uses associated with the lion cubic meters, an increase of 5.4% on the previous year. economic recovery led by private consumption, and greater The contraction in consumption in industry was offset by use in conventional generation. Price developments Average residential user with annual consumption of between 481 and 1,560 m3 (euro/m3): price net of taxes 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2015 2014 0.51 0.48 0.48 0.49 0.54 0.51 0.47 0.51 Source: Authority for Electricity, Gas and the Water System. The annual average sales price of natural gas in Italy decreased by 3.2% in 2015. 99 Report on operationsAnnual Report 2015 Regulatory and rate issues The European regulatory framework Summer Package ge also emphasizes that self-consumption will play an in- creasingly important role in the system and it is therefore On July 15, 2015, the European Commission presented necessary to remove all barriers to its spread. At the same new proposals for action in the so-called Summer Package, time, it will also be necessary to ensure appropriate finan- thereby launching the activities provided for in the Energy cing of network and system costs even in the presence of a Union document presented in February. massive expansion of self-consumption. The package comprises a series of documents intended to In order to achieve medium and long-term emissions reduc- give consumers a new role in the energy market (through tion targets, the Commission has also proposed a reform a communication on the retail market and a document on of the ETS, confirming its key role in the European decar- self-consumption), to launch a redesign of the European bonization strategy. The document raises the ambition of electricity market (with a communication and a consultation on market design) and to revise the EU Emissions Trading the ETS with a view to achieving a 40% reduction in CO2 emissions by 2030. It also proposes measures to safeguard System as an instrument for achieving the European emis- domestic industry from the risk of carbon leakage through sions reduction targets at 2030 (through a proposal for legi- compensation mechanisms for costs and to support techno- slation to revise the ETS Directive). logical innovation as a driver of the progressive transition to The package identifies a number of reform needs within the a low-carbon economy. European energy sector, including the need to increase in- tegration, improve flexibility, promote long-term signals, im- prove the retail market with a key contribution from smart Market Stability Reserve grids and strengthen the CO2 market. More specifically, the energy market must converge to- On October 6, 2015, the Decision establishing the Mar- ket Stability Reserve in the EU’s Emissions Trading System wards greater integration of European electricity markets: (2015/1814) was published. The introduction of the reserve the day-ahead market, the intraday market and the balan- is intended to stabilize the ETS market with an automatic cing market. In addition, in order to ensure the necessary in- adjustment mechanism for volumes put to bid in order to miti- vestment and reduce risks for energy operators, long-term gate imbalances in supply and demand. markets will be developed through the definition of long- The reserve will begin to absorb excess allowances in the ETS term contracts and the need to use those instruments as from January 2019: 12% of the surplus allowances accumula- drivers for achieving decarbonization. ted by the system will be deducted from the amount at auc- Market integration will have to involve renewables as well. tion and transferred to the reserve. The mechanism for deduc- Such resources must be able to participate in the market tions from the volumes to be auctioned will only be activated and be able to provide ancillary services and balancing. As if the total number of allowances in circulation exceeds 833 they play a fundamental role in the transition to a low-carbon million. If the total number is less than 400 million, 100 million economy, renewable resources can, if necessary, be pro- allowances will be released from the reserve and added to the moted using competitive mechanisms, such as auctions, volumes being auctioned. In conjunction with the introduction using more coordinated approaches at the regional level. of the Market Stability Reserve, the Decision also provided for The retail market is also included in the proposals. The role the transfer to the reserve of the 900 million emissions allo- of the consumer needs to be updated thanks to greater wance involved in the backloading mechanism (these volumes market competition (simplification of switching, access to were initially to be auctioned in 2019-2020). real-time consumption data). This will be achieved through the promotion of smart grids and expanding the dissemina- tion of smart appliances, which will enable active consumer REMIT reporting participation. Distribution system operators will have a very On October 7, 2015, the first phase of REMIT reporting be- important role as facilitators of this process, one that will gan. It involves orders and transactions executed on orga- have to be supported by incentive mechanisms. The packa- nized markets and most data on capacity and plant usage. 100 Annual Report 2015Data on transactions executed outside of organized mar- Decree 164/2000, calling for the liberalization of the import, kets, transmission contracts and usage of LNG and storage production and sale of gas and the separation of network plants will be transmitted to the Agency for the Cooperation infrastructure management from other activities through the of Energy Regulators (ACER) beginning on April 7, 2016. establishment of distinct companies. As regards the model The reporting is intended to support market monitoring by for unbundling transport from other non-network activities, ACER and national regulators. with Resolution 515/2013/R/gas, the Authority for Electrici- Circular Economy Package On December 2, the European Commission’s Communi- ty, Gas and the Water System (the “Authority”) mandated the transition to ownership unbundling pursuant to Directive 2009/73/EC. cation containing an action plan on the circular economy The following sections discuss the general regulatory fra- was published. It also contains legislative measures, na- mework and the main measures taken in 2015. mely proposed revisions of the Waste Directives (2008/98/ EC, 1994/62/EC, 1999/31/EC, 2000/53/EC, 2006/66/EC and 2012/19/EC). The plan sets out the measures to be adopted in the coming years and covers the entire value chain of materials/products on the basis of the principle of optimal and efficient use of resources, maintaining the value con- tained in the materials in the system and minimizing waste. The measures cover the design, consumption and post-life management of products, and the management of waste, byproducts and secondary raw materials, specific measu- res for certain sectors and financial measures. The Italian regulatory framework The current structure of the Italian electricity market is the result of the liberalization process begun in 1992 with Direc- tive 1992/96/EC, transposed into Law with Legislative De- cree 79/1999. This decree provided for: the liberalization of electricity generation and sale; reserving transmission and ancillary services to an independent network operator; the granting of concessions for distribution to Enel and other companies run by local governments; the unbundling of net- work services from other activities. The introduction of Directives 2003/54/EC and 2009/72/ EC (transposed with Law 125/2007 and Legislative Decree 93/2011, respectively) in Italy lent further impetus to the pro- cess, particularly through the complete opening of the retail market and the confirmation of the total independence of the national transmission network operator (already provi- ded for in the Decree of the Prime Minister of May 11, 2004) by separating its ownership from that of other electricity operators. The process of liberalizing the natural gas market began with Directive 1998/30/EC, transposed in Italy through Legislative 101 Report on operationsAnnual Report 2015Italy Generation Electricity Wholesale production and market Electricity generation was completely liberalized in 1999 with Legislative Decree 79/1999 and can be performed by anyone possessing a specific permit. The electricity generated can be sold wholesale on the or- ganized spot market (IPEX), managed by the Energy Mar- kets Operator (GME), and through organized and over-the- counter (OTC) platforms for trading forward contracts. The organized platform includes the Forward Electricity Market (FEM), managed by the GME, in which forward electrici- ty contracts with physical delivery are traded. Trading can also be conducted in derivatives with electricity as their underlying are traded. The organized market for such tran- sactions is the forward market (IDEX), operated by Borsa Italiana, while financial derivatives can also be negotiated on OTC platforms. Generators may also sell electricity to companies engaged in energy trading, to wholesalers that buy electricity for re- sale at retail, and to the Acquirente Unico (Single Buyer), whose duty is to ensure the supply of energy to enhanced protection service customers. In addition, for the purposes of the provision of dispatching services, which is the efficient management of the flow of electricity on the grid to ensure that deliveries and withdra- wals are balanced, electricity generated may be sold on a dedicated market, the Ancillary Services Market (MSD), where Terna procures the required resources from gene- rators. The Authority and the Ministry for Economic Development are responsible for regulating the electricity market. More specifically, with regard to dispatching services, the Autho- rity has adopted a number of measures regulating plants essential to the security of the electrical system. These plants are deemed essential based on their geographical lo- cation, their technical features and their importance to the solution of certain critical grid issues by Terna. In exchange for being required to have electricity available and providing binding offers, these plants receive special remuneration determined by the Authority. Decree Law 91 of June 24, 2014 provides for all schedu- lable generation units located in Sicily with a capacity of more than 50 MW to be declared essential to system secu- 102 rity under a cost reimbursement system. The rules will re- main in force as from January 1, 2015 until the completion of the “Sorgente-Rizziconi” interconnector between Sicily and continental Italy, which is scheduled for 2016. 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 ARG/ elt 98/2011, which establishes the criteria for introducing a market mechanism for compensating generation capaci- ty that replaces the current administered reimbursement. This mechanism involves holding auctions through which Terna will purchase from generators the capacity required to ensure that the electricity system is adequately supplied in the coming years. With a decree of the Minister for Economic Development of June 30, 2014, the capacity market operational mechani- sm previously issued for consultation by the Authority was approved. The mechanism is based on the allotment, by auction, of op- tion contracts (reliability options) that provide for payment of a premium, established in the auction with the setting of a marginal price, against which a generator undertakes to return any positive difference between the price formed on the spot electricity and auxiliary services market and a benchmark price set ex-ante in the option contract. The rules approved provide for a cap and a floor for the pre- mium to be paid for existing capacity. The floor is paid for all existing capacity and will be set by the Authority. With Resolution 95/2015/R/eel, the Authority proposed to the Ministry for Economic Development that the opening of the Capacity Market be moved forward, with an initial phase of implementation beginning on January 1, 2017 and ending no later than December 31, 2020, with the launch of full operation of the mechanism. Under the Authority’s proposal, during the initial phase, there would be no direct foreign demand and resources permitted in the market, but their contribution would be measured for statistical purpo- ses. The Authority also proposes that, during that phase, the minimum remuneration for existing capacity be deter- mined on the basis of the avoidable fixed costs of a com- bined-cycle plant. This proposal has been submitted to the Ministry for Economic Development for approval. Annual Report 2015On February 24, 2015, the market coupling model for the Gas Italian, Austrian, French and Slovenian day-ahead trading markets was launched. Market coupling is a mechanism for integrating day-ahead markets (MGP) that, in setting the electricity prices for the different segments of the Europe- an market involved, also allocates the transport capacity available between those segments, thereby optimizing the use of interconnections. The Council of State, with its decision of March 20, 2015, affirmed the repeal of the Authority’s Resolutions 342/2012/R/eel, 197/2013/R/eel, 239/2013/R/eel and 285/2013/R/eel containing urgent measures designed to contain the dispatching costs associated with the imbalan- cing of plants not admitted to the Ancillary Services Mar- ket (MSD). Following the decision, Terna recalculated the revenue and cost entries pertaining to the imbalancing that had been invoiced in periods prior to the issue of the decision and made the relative adjustments. After the decision was announced, the Authority initiated the process of consulting with the operators concerning the specific proposals for reforming the rules on effective imbalancing, aimed at correcting the distortions that cur- rently affect it. With Resolution 333/2015/R/eel, the Authority also began the process for establishing the procedures for implemen- ting the Council of State decision for the years 2012, 2013 and 2014. Wholesale market The extraction, import (from EU countries) and export of natural 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 operator commits to creating 4 billion cubic meters in new storage capacity by 2015. Under this provision, the Mi- nistry for Economic Development approved Eni’s proposed plan to create new storage in early 2011. To date, 2.6 billion cubic meters in new storage capacity has been created. Law 9/2014 establishes that, in order to limit the costs for the system, the remaining storage capacity (up to 4 billion cubic meters) be created only if there is market demand for it. The operators have not shown any interest in the auc- tions held and, therefore, no further storage capacity has been created. Following the approval of the Parliamentary committees and the positive opinion of the Authority, on March 6, 2013, the Ministerial Decree approving the rules for the natural gas forward market (“MT Gas”) was signed, with operations beginning on September 2, 2013. The forward market com- pleted the structure of the Italian wholesale market, joining the spot trading platform (the “Gas Exchange”), which has been operating since 2010, and the balancing market begun in December 2011 under the rules set by the Authority. With regard to the scheme for greenhouse gas emission allowance trading established with Directive 2003/87/ Transport, storage and regasification Transport, storage and regasification (of LNG) are subject to EC, on December 23, 2015, the Ministry for Economic regulation by the Authority, which sets the rate criteria for Development settled an initial tranche of Enel Produzio- engaging in these activities at the start of each regulatory ne’s receivable arising in respect of the failure to allocate period (lasting 4 years) and updates the rates annually. free allowances and the absence of the right to flexibility Storage is carried out under a concession (for a maximum in phase 2 (2008/2012). In addition, the 2016 Stability Act of 20 years) issued by the Ministry for Economic Deve- (Law 208/2015) amended Article 19 of Legislative Decree lopment (MED) to applicants that satisfy the requirements 30/2013, eliminating the deadline of 2015 for payment of of Legislative Decree 164/2000. The Decree of February 6, the receivables referred to above. 2015 of the MED retained the criteria established in 2014 for allocating capacity through auction for 2015 as well. LNG activities are subject to the grant of a special ministe- rial permit. Access to transport, storage and regasification capacity is provided through non-discriminatory mechanisms establi- shed by the Authority in order to guarantee third-part access (TPA). The Ministry for Economic Development may grant an exemption from the TPA rules to companies that own stora- 103 Report on operationsAnnual Report 2015ge or regasification plants or cross-border gas interconnec- tors. The exemption is granted upon the explicit request of the companies involved and on the basis of an assessment of the benefits of the infrastructure for the system. Distribution Electricity As to gas transport rates, the Council of State affirmed the Distribution and metering Enel Distribuzione provides distribution and metering servi- voiding of the resolutions setting the rate for the 2010-2013 ces under a 30-year concession set to expire in 2030. period, denying the Authority’s appeal and accepting the ar- guments put forth by Enel Trade. The Authority lodged an The distribution rates are set by the Authority at the start of appeal against the ruling of the Council of State. The appeal each regulatory period based on covering the total cost of of the resolutions establishing the rate criteria for 2014-2017 providing the services, considering operating costs, depre- is pending before the Regional Administrative Court. ciation and providing an appropriate return on capital. The rate component covering operating costs is updated With Resolution 556/2015/R/gas, the Authority confirmed annually using a price-cap mechanism (i.e. based on the the amounts due to companies admitted to the mechanism inflation rate and an annual rate of reduction of unit costs for the promotion of renegotiation of long-term gas supply called the X-factor). The return-on-capital and depreciation contracts (APR). 104 components are revised each year to take account of new investments, depreciation and the revaluation of existing as- sets using the deflator for gross fixed capital formation. With Resolution 146/2015/R/eel, the Authority published the reference rates for distribution and sales activities for 2015 to be used in determining, for each operator, the level of revenue to be recognized for the performance of their ac- tivities. With Resolution 654/2015/R/eel, the Authority, in conjun- ction with the publication of the mandatory grid rates to be charged to end users in 2016, specified the criteria for the new rate period for electricity distribution and metering, which will be in force for the next eight years (2016-2023). The next rate period has been divided into two sub-periods of four years each (NPR1 for 2016-2019 and NPR2 for 2020- 2023), with an interim revision scheduled for 2020. For the first sub-period (NPR1), while the Authority essen- tially confirmed the general regulatory framework, it intro- duced substantial amendments concerning the timing and procedures for remunerating new investments in rates. More specifically, the Authority reduced the so-called “re- gulatory lag”, shortening to a maximum of one year (from the two years in the previous regulatory period) the period before new investments are recognized in rates, while at the same time eliminating the increase of one percentage point of WACC. The latter had been introduced by the Authority in 2012 to offset the financial burden imposed by the delayed recognition of new investments. Operators are therefore required to notify the Authority by the end of the year of their preliminary accounts of in- vestments made during the year, enabling the Authority to insert the data in the calculation of the mandatory rate publi- Annual Report 2015shed by the end of the year for the subsequent year. These the relationship between sellers and distributors concerning investments are then inserted in the regulatory asset base the guarantees given by sellers to distributors, the payment as from January 1 of the year following their realization. Con- terms for the transport service by sellers and the terms of sequently, operators can match the revenue generated by payment of the system costs and other components by di- the investments with their amortization. stributors to the Electricity Equalization Fund and the Energy The Authority also increased by five years the useful lives of Services Operator (GSE). The resolution also provided for low and medium-voltage power lines that entered service the elimination starting from 2016 of the uncollectible por- after December 31, 2007. tion of turnover withheld by distributors as a result of the Finally, the level of operating costs recognized and the pro- strengthening of the system of guarantees. With Resolution cedures for returning any extra efficiency gains to customers 447/2015/R/eel, the Authority deferred the entry into force were also specified. More specifically, the Authority maintai- of the portions of the Code that were originally to have ta- ned the symmetric division of extra efficiency gains and the ken effect in October 2015, ordering that the entire Code restitution until 2019 of gains achieved and temporarily main- shall enter force as from January 2016. With the subsequent tained to firms in the third and fourth regulatory periods. The Resolution 609/2015/R/eel, the Authority eliminated the re- X-factor used in updating eligible operating costs was set at quirement for banks and insurance companies that issued 1.9% for distribution operations and 1% for metering activi- sureties to have a rating (without prejudice to the other re- ties. quirements provided for in the Code) and the deadline by For the second sub-period (NPR2), the Authority announced which traders may make the initial adjustment of guarantees the transition to rate regulation based on total costs (the To- was postponed. tex method). With Resolution 583/2015/R/com the Authority revised the With Resolution 377/2015/R/eel, the Authority completed method used to determine the rate of return on capital and the regulatory framework governing losses on the distribu- set a rate of 5.6% for distribution and metering activities for tion grid, revising the conventional loss percentages as from 2016-2018. In particular, the Authority established a specific January 1, 2016 and the equalization mechanism for losses 6-year rate period for the WACC, with a mid-period update to apply to distributors as from 2015. More specifically, the of the main parameters in the formula on the basis of ma- equalization mechanism takes account of the geographical croeconomic conditions (interest and inflation rates) in 2018. diversification of losses on distribution grids. As regards service quality, the Authority, with Resolution With its Resolution 296/2015/R/com, the Authority amended 646/2015/R/eel, established output-based regulation for the functional unbundling requirements for operators in the electricity distribution and metering services, including the electricity and gas sector. principles for regulating service quality for 2016-2023 (TIQE In the resolution, the Authority confirmed that companies 2016-2023). must maintain a separation between the brand and com- The resolution retains the existing general approach to go- munication policies (including the company name) of the di- verning service quality, which provides for the Authority to stribution companies and those of the companies that sell set annual trend levels for the following service continuity power. Furthermore, in the electricity sector, there must also indicators for low-voltage customers: be a separation between those companies that sell electrici- > duration of long-service interruptions; ty on the free market and those that do so on the enhanced > number of long and short-service interruptions. protection market. Separate rules apply to medium-voltage customers. Commercial activities related to distribution, especially inter- Distributors receive bonuses or penalties each year, depen- facing with the end user, must be conducted utilizing infor- ding on whether actual performance, as determined on the mation channels, physical locations and personnel that are basis of the continuity indicators, exceed or fall short of the distinct from those used for the sale of electricity and natural specified trend levels. gas. These separation requirements apply to companies that The resolution also indicates the start of future regulation for sell electricity on the free market and to those on the enhan- innovative investment in the distribution grid. ced protection market. With Resolution 268/2015/R/eel, the Authority established The provisions are effective immediately. However, compa- the Model Grid Code for transport services, which governs nies have until June 30, 2016 to meet the new requirement 105 Report on operationsAnnual Report 2015for the separation of brand and communication policies. The by May 31 of each year that they hold a number of white deadline for compliance with the provisions on the use of certificates equal to at least 50% (60% for years 2015-2016) separate information channels, physical locations and per- of their obligation, with the residual obligation be covered in sonnel is January 1, 2017. the subsequent years. The decree also set out the process for transferring mana- With Resolution 582/2015/R/eel the Authority, in implemen- gement of the white certificate mechanism to the Energy tation of Legislative Decree 102/2014 transposing the EU Services Operator (GSE), while the Authority will remain directive on energy efficiency, initiated, with effect from responsible for determining the rate grant using the new January 1, 2016, the reform of electricity rates for residen- criteria set out in the Ministerial decree. tial customers. The goal of the reform is to eliminate the The Authority, with its Resolution 13/2014/R/efr, introduced progressivity of the grid rate and system charges so as to a mechanism for recovering the costs of purchasing white encourage efficient consumption and to eliminate the exi- certificates. It allows distributors to recover a cost equal to sting system of cross-subsidies among various categories of the market average, less a spread of €2 per certificate. residential customers in order to ensure that rates are con- The potential financial impact of the mechanism is thereby sistent with the real costs of the service. The reform will be significantly reduced, although distributors are still subject implemented gradually, entering full force as from January 1, to the “physical” obligation to deliver the EECs in order to 2018. The Authority also established that as from January 1, meet the national targets. 2017 the diversification of levels of contractual power will be Legislative Decree 102 of July 4, 2014, implementing Direc- increased, so as to give end users greater choice in selecting tive 2012/27/EU on energy efficiency, set out the cumulative the volume most appropriate to their needs. In addition, for national energy savings target for the 2014-2020 period to at least two years (as from January 1, 2017), the amount of be achieved using a variety of incentives. It also established connection fees and other fixed charges that customers pay that the EEC mechanism must result in a savings of at least to distribution companies for changes in power levels carried 60% of such target by 2020. out remotely will be reduced from their current levels. The decree also required the MED, in the course of updating In parallel, in order to neutralize any rate increases for custo- the guidelines on the procedures for issuing EECs, to inclu- mers in financial hardship, the Authority updated, as from de measures for making the mechanism more efficient, en- January 1, 2016, the amount of the social bonus. hancing energy savings achieved through measures aimed On December 10, 2015, the Competition Authority (AGCM) With Decision 13/2015 of June 29, 2015, the Authority set notified Enel SpA and Enel Distribuzione SpA of the start of the definitive rate subsidy for 2014 equal to €105.83/toe. a penalty proceeding aimed at ascertaining the existence of The preliminary rate subsidy for 2015 was set at €108.13/ a Group strategy intended to hinder the development of the toe and will be revised based upon the final market price for at improving practices and preventing speculative practices. smart metering market. Unless extended, the proceeding is the reference period. scheduled to be completed by December 31, 2016. Energy efficiency - white certificates Energy efficiency in final uses has been promoted in Italy mainly through the Energy Efficiency Certificate mecha- nism (EECs or white certificates) launched on January 1, 2005 in accordance with the provisions of the related de- crees of July 20, 2004. The mechanism requires the Ministry for Economic Deve- lopment (MED) to determine the national energy savings targets that must be achieved each year by electricity and gas distribution companies. With the decree of December 28, 2012, the MED establi- shed the energy savings targets for the 2013-2016 period. In order to avoid penalties, distributors must demonstrate 106 Annual Report 2015Sales Electricity IIS to manage contract transfers and switching, as well as significantly expanding the central database, in order to sim- plify data exchange among operators on the main customer management processes, including metering information. As provided for by Directive 2003/54/EC, starting from July 1, 2007 all end users may freely choose their electricity sup- On February 20, 2015 the government approved the “Com- plier on the free market or participate in regulated markets. petition Bill”, which provides for the repeal of the temporary Law 125/2007 identified these regulated markets as the rules governing gas and electricity prices as from Janua- “enhanced protection” market (for residential customers ry 1, 2018. The Bill, currently being debated in Parliament, and small businesses with low-voltage connections) and establishes that the consequent measures shall be adopted the “safeguard” market (for larger customers not eligible with a decree of the MED and assigns the Authority the for enhanced protection services). task of drafting the measures to ensure provision of univer- Free-market operators are awarded contracts to provide sa- sal service. In order to define a reform of existing market feguard services on a geographical basis through three-year mechanisms for customer protection, in 2015 the Authority auctions. Enel Energia was awarded contracts to provide began a specific proceeding to govern transitional solutions services to five of the ten areas subject to auction for the within the scope of the reform. 2014-2016 period (Veneto, Emilia Romagna, Friuli Venezia Giulia, Sardinia, Campania, Abruzzo, Calabria and Sicily). By contrast, enhanced protection service is provided by sel- Gas lers connected with distributors. Legislative Decree 164/2000 established that as from Ja- nuary 1, 2003, all customers may freely choose their natu- Prices are set by the Authority and are updated quarterly ba- ral gas supplier on the free market. sed on criteria designed to ensure that the operators’ costs However, sales companies must also offer a safeguard ser- are covered. More specifically, the Authority periodically vice to their customers (only for residential customers pur- updates the component for covering the operators’ costs suant to Decree Law 69 of June 21, 2013), together with in the enhanced protection market (RCV) so as to ensure their own commercial offers, at the regulated prices esta- that their costs are covered (operating costs, delinquency blished by the Authority. charges and amortization and depreciation) and that they If there is no company supplying this service, the conti- receive a fair return on capital. Resolutions 670/2014/R/eel nuity of supply for small customers not in arrears on bill and 659/2015/R/eel established rates for 2015 and 2016. payments (residential and other uses with an annual con- Operators set their own prices for free market services, sumption of less than 50,000 standard cubic meters) and with the Authority’s role limited to setting rules to protect for users involved in providing public services shall be en- both customers and operators. sured by the supplier of last resort. If the customer is in arrears with bill payments or it is not possible for the sup- In recent years, the Authority has adopted measures aimed plier of last resort to provide service, supply continuity is at containing operators’ credit risk, which has risen in re- ensured by the default distribution supplier selected, like cent years due in particular to the economic crisis. the supplier of last resort, through voluntary tenders for More specifically, in 2015, with Resolution 258/2015/R/com, geographically-based contracts. The public procedures car- the Authority took action to increase the accountability of ried out in September 2014 identified the suppliers of last distributors in cutting off service to customers in arrears. resort for the period October 1, 2014 - September 30, 2016. The Authority is also continuing the implementation of the Enel Energia was selected as supplier of last resort for 7 Integrated Information System (IIS). This system, establi- out of the 8 geographical areas covered by the auction and shed under Law 129/2010, is designed to manage the flow as default distribution supplier for 6 out of 8 areas. of information between gas and electricity market opera- tors and is based upon a central database of withdrawal Starting from October 1, 2013, the reform of the financial points, initially created for the electricity sector and exten- terms and conditions applied to safeguard market custo- ded to the gas sector in 2015. mers entered force. In this situation, the Authority modi- In other 2015 developments, the Authority provided for the fied the procedures for determining the raw material com- 107 Report on operationsAnnual Report 2015ponent, indexing it fully to spot market prices, introduced components to ensure a gradual transition (including one Renewable energy specifically for the renegotiation of long-term contracts) In Italy, a variety of mechanisms, differing by resource and and increased the component covering retail sales costs to size of plant, are used to encourage electricity generation enhance cost-reflectivity. from renewable resources. The objectives and support in- With regard to the raw material (gas) cost component, on struments are established by Parliament in a manner consi- January 24, 2014, the Regional Administrative Court of stent with EU directives in this sector, while implementation Lombardy, in the course of an action brought by Enel Ener- is handled by the Energy Services Operator (GSE), which is gia and Enel Trade, voided the resolutions by which the Au- responsible for managing incentives for renewables. thority changed the formula for determining (and thereby reducing) the QE component for the 2010-2011 and 2011- 2012 gas years. On April 10, 2014, the Authority filed an appeal with the Council of State. Solar power incentives - Energy Account With regard to the definition of the component covering na- Existing photovoltaic plants receive incentive through the so- tural gas supply rates, the Authority also confirmed the cur- called Energy Account, a mechanism which consists in the rent procedures for the 2015-2016 gas year, with full inde- payment of feed-in premiums over and above the price of xing to the spot prices reported on the Dutch Title Transfer the electricity for power delivered to the grid over 20 years. Facility (TTF), pending the development of greater liquidity With the Ministerial Decree of July 5, 2012, the incentive in the Italian wholesale markets. system for photovoltaics was overhauled in order to ensure the more orderly growth of the sector and realign tariffs with With Resolution 258/2015/R/eel, the Authority, in addition European averages. The Fifth Energy Account is based on a to stiffening penalties for distributors who fail to cut off system of comprehensive feed-in tariffs that have been re- customers in arrears (similar to measures for the electricity duced by an average of 40% from the previous system. The industry), reduced the time period allowed for switching to decree sets an annual ceiling on total incentives (including three weeks starting from 2016. those already paid out under the previous Energy Accounts) of €6.7 billion, which was reached on June 6, 2013, thereby terminating incentives for new plants. Renewable resources other than photovoltaic: auctions, green certificates and comprehensive rates The primary incentive mechanism in use today to support renewable energy technologies other than photovoltaics is a system of subsidized rates awarded either directly or in Dutch auctions organized by the GSE. The mechanism was established with Legislative Decree 28/2011 transposing Di- rective 2009/28/EC and the associated Ministerial Decree with implementing measures of July 6, 2012. More specifically, small plants (with a capacity of up to 5 MW, as well as hydroelectric plants up to 10 MW and geo- thermal plants up to 20 MW) will receive incentives through comprehensive rates differentiated by type and size of the plant. Larger plants qualify for additional incentives over the market price, established on the basis of Dutch auctions run by the GSE. Plant owners must submit bids for a percentage reduction from the opening price, equal to the comprehen- 108 Annual Report 2015sive rate for the last capacity bracket for small plants. The 2013, in order to foster better programming and integration value of the incentive is then set net of the zonal hourly price of such plants into the national electrical system. for electricity. Following an appeal lodged by a number of associations of renewables generators, the Council of State voided Resolu- Plants that entered service by December 31, 2012 qualify for tion 281/2012/R/efr, at the same time establishing the stan- a green certificates mechanism (introduced with Legislative dards to be followed by the Authority in properly regulating Decree 79/1999). Under this system, electricity producers the subject matter. More specifically, the Council of State and importers are required to deliver a share of renewable clarified that non-schedulable resource plants must partici- energy. This obligation can be satisfied by purchasing green pate in sharing imbalancing costs, thereby avoiding impro- certificates from renewables generators. per socialization of costs. Likewise, the regulation must take The amount of the incentive depends upon the market value into account the specific characteristics of each resource in at which operators can purchase green certificates to meet terms of predicting the delivery of electricity to the grid. their obligation. This market value is set within a range. The The Authority, with Resolution 522/2014/R/eel, reimposed im- maximum value (cap) is equal to the price at which the GSE balancing payments on NSRRs, in accordance with the gui- places the certificates it holds on the market (calculated as delines of the Council of State, starting from January 1, 2015. provided for in Article 2, paragraph 148 of Law 244/2007), which came to €124.90/MWh for renewables generation in 2014. The minimum price is equal to the price at which the GSE withdraws green certificates exceeding the required share from the market. For the years in the period from 2011 to 2015, that price is set each year at 78% of the difference between €180/MWh and the average sales price for electri- city for the preceding year. The green certificates mechanism will be gradually elimina- ted through: Iberian Peninsula Spain Voluntary Price for Small Consumers > the progressive reduction of the mandatory share to zero On June 4, 2015, the operating rules for hourly billing of cu- by 2015; stomers that use the “Precio Voluntario del Pequeño Consu- > the provision of incentives to plants already participating midor” (PVPC, Voluntary Price for Small Consumers) were in the green certificate system through rates equivalent to published. Accordingly, as from July 1, 2015, the bills of con- the current withdrawal value of certificates (as from 2015). sumers with remotely readable meters will be calculated on In order to ensure control of incentive costs, the decree of the basis of the actual hourly consumption rather than on the July 6, 2012 sets a ceiling of €5.8 billion on aggregate annual basis of an estimated consumption profile. cost – including plants already receiving incentives through As from October 1, 2015, nearly six million customers in- the green certificate system – of incentives for resources cluded under the regulated rate system (PVPC) with a re- other than solar power. Imbalancing for non-schedulable plants In addition to direct incentives (special rates and green cer- motely managed smart meters were included in the hourly rate system, where prices are determined on the basis of the outcomes of the day-ahead market. Social bonus tificates), non-schedulable renewable resources (NSRRs) Law 24/2013 introduced the social bonus as a public service were exempt from fees for imbalancing (the difference obligation, the cost of which is borne by the parent compa- between actual power delivered to the grid and planned po- nies of companies that generate, distribute and sell electricity wer deliveries defined on the basis of energy markets). With in proportion to the sum of connection points and number of the increase in non-schedulable renewable resource plants customers served. – essentially photovoltaic and wind – the Authority, with Re- With Orden IET/2182/2015 of October 15, the percentage solution 281/2012/R/efr, decided to eliminate the previous shares for 2015 were established. Endesa’s share was set at exemption from imbalancing payments as from January 1, 41.26%. 109 Report on operationsAnnual Report 2015Voluntary service interruptions Other regulatory changes Voluntary service interruption is a compensated service, On October 15, 2014, Law 18/2014 concerning urgent me- provided by those consumers who are to reduce their con- asures for expansion, competition and efficiency enhance- sumption when the system is under stress, making it possi- ment was approved. Among other things, the law reforms ble to efficiently manage demand. the methods for remunerating the gas system with the goal Orden IET/2013/2013 requires that voluntary service inter- of making it economically sustainable and of minimizing the ruption be assigned through an auction managed by the costs for the end consumer. Furthermore, the law introdu- System Operator so as to ensure effective performance of ces the National Energy Efficiency Fund to help achieve the the service and to minimize the costs to the system. During energy efficiency targets. August and September 2015, auctions were held to assign the service for 2016, with a total value of €503 million for the system. Distribution Allocation mechanism for remuneration of new wind and photovoltaic installation in the extra-peninsular system Royal Decree 1048/2013 establishes the principles for the re- Orden IET/1953/2015 amends Orden IET/1459/2014, which muneration of the distribution of electricity which incorpora- developed the exceptions provided for by the Electricity tes factors that will guide future compensation for this activi- Sector Act and exempted a maximum of 450 MW of wind ty. The principles set out in the decree are as follows: power in the Canary Islands from the use of auction pro- > only the costs required to provide distribution service are cedures, as well as postponing deadlines for entry in the remunerated; register of specific remuneration. > mechanisms for controlling investments are established; In addition, the order: (i) eliminates the need to post gua- > investments that have not yet been amortized or depre- rantees; (ii) requires only a favorable environmental impact ciated are remunerated on the basis of the net value of decision; (iii) requires only a communication from the grid the asset and the rate of remuneration is equal to the operator describing delivery capacity or the expected date average yield on Spanish government securities plus 200 the capacity will be available; and (iv) establishes that to re- basis points; ceive the investment incentive to reduce generation costs, > in order to improve quality and reduce losses and fraud, the plant must enter service within 24 months of the notifi- the regulation includes incentive and penalty mechanisms; cation of entry in the register (preallocation status). > during 2014 and lasting until the new regulatory period be- gins, the remuneration for distribution was calculated by applying the methodology envisaged in the second annex to Royal Decree Law 9/2013. Royal Decree 1073/2015 of November 27, concerning the Regulation of electricity generation and dispatching in electricity systems in extra-peninsular areas remuneration of distribution services, was published. An- The Royal Decree on generation in extra-peninsular areas nual discounting based on inflation in unit values was eli- was published on August 1, 2015. It establishes a system minated. similar to the existing arrangements, which include remune- In addition, on December 12, Orden 2660/2015 was publi- ration of fixed costs, which considers all fixed investment, shed. It establishes the unit values for investment and for operation and maintenance costs, and remuneration of va- operation and maintenance used in determining the remu- riable costs, which considers the cost of fuel, grants under neration of distribution services in accordance with the rele- Law 15/2012 and tax measures for energy sustainability. vant method for the 2016-2019 regulatory period. Certain aspects of the method were modified in order to improve the efficiency of the system. The method is ap- plicable as from its entry into force, albeit with a transition period as from January 1, 2012. The Royal Decree also de- velops aspects of Law 17/2013 on guaranteeing supply and increasing competition in electrical systems. In accordance with Law 24/2013 governing the electricity 110 Annual Report 2015industry, the net financial remuneration rate is connected with the secondary market yield on 10-year Spanish go- vernment securities, increased by an appropriate spread. For the first regulatory period, which ends in December 2019, the net rate will be equal to the average yield on the secondary market in April, May and June 2013 plus a spread of 200 basis points. Self-consumption France Law 344/2014 - Suspension of regulated electricity and gas rates for industrial customers In 2015, Law 344/2014 was implemented. It calls for the gra- dual abolition of regulated electricity and gas rates for indu- strial consumers, starting from January 1, 2015 for the gas sector and from January 1, 2016 for the electricity sector. In Royal Decree 900/2015 was approved on October 9, 2015. addition, the measures give alternative suppliers access to The measure governs the administrative, technical and fi- the data of consumers who still use regulated rates, impro- nancial conditions of supply and generation with self-con- ve switching procedures and set out a temporary offer for sumption. The decree defines the fixed and variable-rate customers who have not selected a supplier at the time the components due from self-producing installations to cover regulated rate system comes to an end. system costs (energy policy, renewable energy and coge- neration incentives, capacity payments, voluntary service interruption and auxiliary services). Electricity rates National energy transition act On August 17, 2015, Law 992/2015 on the energy transition was published in the official journal. It sets out the basic guidelines for the new national energy strategy: Royal Decree Law 9/2015 was published. The legislation con- > cutting greenhouse gases by 40% by 2030 compared with cerns urgent measures to reduce the tax burden, which re- 1990 levels; duced by 40% the fees paid by consumers to cover capacity > achieving a renewable energy target of 32% of overall payments between August 1 and December 31, 2015. gross energy consumption by 2030 (around 40% of overall Orden IET/2735/2015 of December 17 was published. It sets electricity consumption); access rates for 2016, maintaining those in effect in 2015 > reducing final energy consumption by 50% by 2050, with a with the exception of customers with connections of betwe- focus on the building sector; en 30 kV and 36 kV (-6.7%). The unit components covering > capping nuclear capacity at 63.2 GW and limiting the share the capacity payment were also reduced by 21%. of nuclear power to 50% of domestic generation in 2025, Gas rates Orden IET/2736/2015 was published. It establishes the tolls with a cap of 63 GW. Belgium for third-party access to natural gas transport and distribution With a decree of March 31, 2015, the Belgian government can- infrastructure. More specifically, rates for 2016 are unchanged celled the tender called for the construction of two gas-fired po- with the exception of raw material component, which has wer plants. been increased by 10%. Despite the moratorium on nuclear power plants provided for in Energy efficiency a law of January 31, 2003, with a law enacted on June 28, 2015, Belgium postponed the closure of the Doel 1 and 2 plants by 10 years. Orden IET/289/2015 of February 20 set out the methodology On November 30, 2015, agreement was reached between the for defining energy efficiency obligations, those required to government and Engie on the definition of an annual fee as from participate and their share of such amounts as well as their 2016 of €20 million for Doel 1 and 2 and a nuclear tax of about economic equivalence for 2015. €150-200 million/year for other nuclear power facilities. The agre- ement must be approved by the Belgian parliament. Belgium’s Nuclear Safety Agency finally approved the restart of Doel 3 and Tihange 2 in November 2015 (the two plants were first 111 Report on operationsAnnual Report 2015closed in 2012 after an inspection had found hydrogen flaking). 50,000 gigacalories (GCal) (including residential customers). Romania Distribution rates On December 7, 2015, the national regulatory, ANRE, mo- dified the method used to set distribution rates that had been approved in 2013 for the third regulatory period cove- ring the years from 2014 to 2018. A cap of 10% was intro- duced on the annual increase in distribution rates. On December 14, 2015, ANRE published distribution rates for 2016, with a reduction of about 15% on the previous year. Supplier-of-last-resort rates On December 24, 2015, ANRE published the rates for sup- pliers of last resort in force as from January 1, 2016. The rates applicable to residential customers were reduced by 5.36%. The rates provide for a supply cost of 4.7 lei/month and ensure suppliers of last resort a regulated profit of 1.5%. Smart metering In 2015, the Enel Group distribution companies in Roma- nia completed the installation of 30,000 digital meters and submitted a plan to ANRE for the mass roll-out of an ad- ditional 2.7 million digital meters in the 2016-2020 period. Installation is subject to approval of the plan by ANRE, which is expected to be granted on March 15, 2016. Russia Heat market On December 1, 2014, Federal Law 404/2014 concerning heat supplies was enacted. It represents one of the first im- plementing acts of the reform of the heat market, which was initiated with government Decree 1949/2014 of October 2, 2014. The law introduces, with effect from January 1, 2015, the possibility of entering into bilateral contracts for heat Start of trading on gas exchange On October 24, 2014, trading began on the first gas exchange in Russia, established by the St. Petersburg International Mer- cantile Exchange (SPIMEX). For now, the only contracts traded are for volumes to be delivered in the subsequent month, but in the near future the exchange will also offer weekly and daily products. Gazprom and other independent gas producers are being encouraged to channel some of their output through the trading platform. The exchange rules give Gazprom the right to handle half of the volumes, with independent suppliers handling the remainder. For 2015, the goal is to achieve a tra- ding volume of at least 35 billion cubic meters. The volumes of gas traded on the exchange have priority in transportation. The launch of the gas exchange is a key stage in the liberalization of the gas market and enhancing price transparency. Temporary suspension of the system of guarantees for electricity purchases On December 24, 2014, the Market Council published a number of amendments to the market operating rules, by which it: (i) increased the penalties that apply in the event of late payments; (ii) extended the period for temporary exemption from the requirement to furnishing guarantees for electricity purchases until the end of May 2015 (original- ly running from December 21, 2014 to the end of February 2015), which applies to operators with no payment arrears for an amount of up to 30% of the volumes purchased on the market monthly. On May 18, 2015, the Market Council: (i) further extended the period of temporary exemption until August 31; and (ii) reduced to 20% the minimum debt threshold for purchasers beyond which financial guarantees are triggered (instead of the 30% currently in effect). On September 22, 2015, the Supervisory Board again extended the exemption to Decem- ber 28, 2015. producers and consumers of steam and/or industrial users Indexing of natural gas rates of directly connected heat, with prices being negotiable up to a ceiling determined on the basis of the relevant tariffs. As from January 1, 2018, it will also be possible to use bilateral contract for the supply of steam and/or heat at fully libera- lized prices for directly connected industrial users, with the exception of users with an annual consumption of less than On June 28, 2015, the Federal Tariff Service (FTS) approved the indexing of 7.5% of the natural gas rates charged to indu- strial users (in effect as from July 1, 2015). The increase is in line with the outlook for the socio-economic development of the Russian Federation for the years 2015-2017, published by the Ministry for Economic Development in 2014. 112 Annual Report 2015Update of the legislative framework for renewables Long-term reserve capacity With a government decree published on November 5, 2015, On July 28, 2015, the government published Decree 1472, an auction system was introduced for 15-year purchase con- with which it introduced a number of modifications of the tracts. The goal is to promote the building of new generation auction mechanism for the capacity of new renewables plants in areas with a capacity shortfall. The decree envisages plants: for 2016-2018 it reduced the mandatory share of local that: component content for wind plants (from 65% to 25-55%); > the list of such areas shall be determined by the Minister it increased the maximum amount of eligible capital expen- of Energy and the system operator by February 1, 2016; diture by 70%; and it extended the period of validity of the > the auctions will only be held in the case of actual need. support system from 2020 to 2024, with a consequent redi- The first auctions, to be held by July 1, 2016, will take stribution across the years of the total volume of capacity to place on the basis of a government decision; be awarded through auctions for wind plants (3,600 MW). > bids will be selected on the basis of the capacity price Reform of the capacity market requested, as calculated by the Market Council on the basis of the bids received; > a cap is imposed on the unit CAPEX of the projects On August 31, 2015 the government published Decree 893 submitted. and government Order 1561-p launching the reform of the capacity market (KOM). The following are the main aspects of the reform: Essential plants > as from 2016, selection of capacity four years in advan- On January 1, 2015, government Decree 2578-p came into ce of the one-year period covered by the contract; the force, providing for: (i) the recognition of essential power previous mechanism had provided for selection only one plants with a total capacity of up to 7.5 GW (including the Ne- year in advance. Accordingly, the auction for delivery in vinnomysskaya plant with a capacity of 1.1 GW) for the period 2020 will be held in 2016; from January 1, 2015 to November 30, 2015 (11 months); (ii) > revision of the mechanism for establishing KOM prices: the recognition of essential plants to supply heat with a total a decreasing elastic demand function is defined for each capacity of up to 3.2 GW for the period from January 1, 2015 of the two price zones depending on the volume of capa- to June 30, 2015 (six months); (iii) the establishment of the city offered. This is used as the basis for calculating the regulated rates that apply to essential plants. universal price applied to all selected plants. Under the previous mechanism, the price was determined by the With two subsequent government decrees, the status of market on the basis of the last bid accepted; essential plant assigned to the Nevinnomysskaya plant was > the KOM price is adjusted annually by real inflation for the extended first from January 1, 2016 to December 31, 2019 previous year less 1% (as from January 1, 2017); (four years) and then to the final month of December 2015. > an increase in penalties for “unreliable plants” (plants The rate paid to that plant for 2015 and 2016 is equal to with a usage factor of less than 30% and unavailability 132,999 RUB/MW. of more than 10% in the 12 months prior to the KOM auction) and for new plants in the case of unscheduled unavailability; possible decreases in maximum penalties Payment rules for other plants (pending approval of the methodology for On November 5, 2015 the federal law governing the streng- revising penalties). thening of payment rules for consumers of energy resources was published. It provides for: (i) an increase in penalties for On November 2, 2015 the results of the capacity auction for users with poor payment records in the retail markets for 2016 were published: all of the capacity of Enel Russia bid electricity, heat, gas and water; (ii) a requirement for certain (7.5 GW) was selected at a price of 112,624 RUB/MW/month. groups of such users to provide bank guarantees. On December 18, 2015 the results of the capacity auctions for 2017 to 2019 were published: the resulting KOM prices were: 113,208 RUB/MW/month for 2017, 100,993 RUB/MW/ month for 2018 and 110,451 RUB/MW/month for 2019. 113 Report on operationsAnnual Report 2015Slovakia Nováky power plant Latin America The Group operates in Latin America in Argentina, Brazil, Chi- le, Colombia and Peru. Each country has its own regulatory With regard to the Nováky thermal power plant (ENO), which framework, the main features of which are described below is regulated under a special system (since it is fueled by ligni- for the various business activities. te), the local regulatory authority (URSO) recognizes the costs incurred by the plant in an annual decree. With its decision Under the regulations established by the competent autho- of April 24, 2015, URSO set the amount payable to ENO at rities (regulatory authorities and ministries) in the various €66.3112/MWh for 2015 and €70.7113/MWh for 2016. With countries, operators are free to make their own decisions a decision of the Minister for the Economy of September 2, concerning investment in generation. Only in Argentina, fol- 2015, the termination of the special system, initially schedu- lowing the change in energy policy in recent years, is there a led for 2020, was postponed until 2030. The annual volumes regulatory framework that envisages greater public control of of electricity generation and delivery that the plant must gua- investments. In Brazil plans for new generation capacity are rantee between 2017 and 2030 were set at 1,584 GWh and imposed by ministerial order, and this capacity is developed 1,350 GWh respectively. In order to ensure compliance with through auctions open to all. the ministerial decision, it will be necessary to carry out in- All of the countries have a centralized dispatching system vestments at the plant. with a system marginal price. Usually, the merit order is cre- ated based on variable production costs that are measured periodically, with the exception of Colombia, where the merit order is based on the bids of market operators. Currently in Argentina and Peru, regulatory measures are in place governing the formulation of the spot market price. In Argentina, the measure, adopted in 2002 following the eco- nomic and energy crisis that affected that country, is based on the assumption that there are no restrictions on the supply of gas in the country. Nevertheless, in view of the current financial challenges faced by the wholesale market, the go- vernment has announced its intention to modify the existing regulatory framework and, in 2013-2014, develop an electrici- ty market based on a cost-plus model. Long-term auction mechanisms are widely used for whole- sale energy and/or capacity sales. These systems guarantee continuity of supply and offer greater stability to generation companies, with the expectation that this encourages new investments. Long-term sales contracts (up to 30 years) are used in Chile, Brazil, Peru and Colombia. In Brazil, the price at which electricity is sold is based on the average long-term auction prices for new and existing energy. In Colombia, the price is set by auction between the operators, which usually enter into medium-term contracts (up to four years). Finally, a regulatory framework recently introduced in Chile and Peru allows distribution companies to sign long-term contracts to sell electricity on regulated end-user markets. Chile, Peru and Brazil have also approved legislation to encou- rage the use of unconventional renewable resources, which sets out the objectives for the contribution of renewable re- sources to the energy mix and governs their generation. 114 Annual Report 2015Distribution and sale and sales markets, while in Brazil, as previously mentioned, there are no explicit restrictions on integration in the electrici- Distribution is performed mainly under concession arran- ty sector, although administrative authorization is required for gements, using long-term contracts (ranging from 30 to 95 business combinations that would result in market share of years or in some cases with unspecified terms), with regu- over 40%, or that involve a company whose annual turnover lations governing prices and network access. Distribution exceeds BRL 400 million (about €177 million). rates are revised every four years (Chile, Peru and the region of Brazil served by Coelce) or five years (Colombia and the region of Brazil served by Ampla). As a result of the Ley de Emergencia Económica (the economic emergency law) of 2002, no rate reviews have yet been conducted in Argenti- Chile Energy Agenda na, despite rules mandating such revisions every five years. On May 15, 2014, President Michelle Bachelet presented the In Chile, Brazil and Peru, distribution companies hold auctions new Energy Agenda containing the primary energy policy to procure electricity for regulated market customers, while targets. The document sets out the timetable and identifies in Colombia sales companies negotiate prices directly with the parties involved in the next regulatory steps to be taken generation companies, passing through the average market and lays out the plans of investments that the government price to end users. In general, all countries have implemen- intends to make by the end of its term. ted a remuneration approach based on the RAB and a rate of More specifically, the Agenda envisages a more active role return tied to the WACC, which ensures remuneration of the by the state and calls for reducing marginal electricity costs capital employed. The liberalization of the end-user market is on Chile’s Sistema Interconectado Central, or “SIC” (30% generally at a fairly advanced stage, though not yet comple- reduction in the 2013 average by 2017), redefining the rules te. Eligibility thresholds are set at 30 kW in Argentina (20% for auctions between generators and distributors in order of volumes in 2010), 3 MW in Brazil (30% of volumes), 0.3 to reduce the resulting price (25% reduction over the next MW in Chile (40% of volumes), 0.1 MW in Colombia (35% 10 years as compared with the 2013 price), setting a target of volumes in 2010) and 0.2 MW in Peru (44% of volumes). for 45% of new installed capacity to be supplied by uncon- Free-market customers can sign bilateral contracts with ge- ventional renewable energy (ERNC) by 2025, establishing neration companies for electricity. The regulatory authorities the target of cutting energy consumption by 20% by 2020, set the rates for regulated market customers. establishing a system for participation in energy planning, Limits on concentration and vertical integration In principle, existing legislation permits companies to take part in a variety of activities in the electricity sector (gene- ration, distribution, sales). Usually, greater restrictions are imposed on participation in transmission activities so as to ensure that all operators have adequate access to the net- developing interconnection projects between the SIC and the SING (Sistema Interconectado del Norte Grande) and, fi- nally, introducing a new law for the promotion of geothermal power by 2015. Furthermore, the Agenda contains both short-term mea- sures (aimed at making access to regasification structures more transparent) and long-term measures (aimed at expan- ding current capacity) for encouraging the use of natural gas in generating electricity. work. There are special restrictions on generation and distri- Law on interconnection bution companies holding stakes in transmission companies in Argentina, Chile and Colombia. Furthermore, in Colombia companies formed after 1994 may not adopt or maintain a vertically-integrated structure. As to concentration within the industry, Argentina, Brazil and Chile have not set any specific restrictions on vertical or hori- zontal integration, while in Peru business combinations requi- re prior authorization above certain thresholds. In Colombia, no company may control more than 25% of the generation On January 30, 2014, a law on interconnection derogating from the provisions of the General Law on electricity servi- ces was promulgated. Under the new provisions, the state may promote interconnection projects between the northern interconnected system (SING) and the central interconnected system (SIC). 115 Report on operationsAnnual Report 2015Law on the sale of electricity on the regulated end market Secretaría de Energía Note 4012 On June 24, 2014 the Secretaría de Energía approved Note On January 29, 2015, an amended law was published in the 4012, which establishes the inflation rate (“MMC” index) for official journal concerning the process of bidding to supply EDESUR for the period between October 2013 and March electricity to regulated market customers. Among the chan- 2014 and allows it to be offset against the corresponding debt ges introduced by this law was the requirement that CNE be in respect of the PUREE program for the same period, as was more involved in these processes, the increase in the dura- previously allowed for the period between February 2013 and tion of public tendered contracts from three to five years, the September 2013 by Note 6852. inclusion of a reserve price as the maximum limit for each bid, the possibility for the winning bidder to delay delivery in the event of force majeure, the addition of short-term bids, Resolution 529/2014 as well as an increase in the eligibility threshold for regulated On May 20, 2014 the Secretaría de Energía published Reso- market customers from 2,000 to 5,000 kW. lution 529/2014, which updated, retroactively from February Argentina Resolution 32/2015 2014, the remuneration received by generation companies, previously established by Resolution 95/2013. In addition to raising the remuneration for fixed and variable costs, the new resolution introduces a new item intended to cover extraordinary maintenance costs, which will be paid In March 2015, the Secretaría de Energía issued Resolution through the issuance of LVFVDs (Liquidaciones de Venta con 32/2015, which establishes the introduction, starting from Fe- Fecha de Vencimiento a Definir). bruary 1, 2015, of a theoretical new regulatory framework that will have no impact on the rates charged to end users. The difference between the theoretical framework and that appli- Brazil cable to end users consists of a temporary additional income component for distributors, to be set by ENRE and CAMME- SA. The two entities are also responsible for the associated Technical note 112/2014-SRE-ANEEL - Revision of 2014-2018 Ampla rates transfer of the funds. The resolution confirms that these tran- On April 7, 2014, the regulator, ANEEL, approved technical sfers are to be treated as payments on account in anticipation note 112/2014-SRE-ANEEL concerning the revision of the ra- of the general rate revision to be undertaken by ENRE in the tes applied by electricity distributor Ampla, taking effect as next few months. from March 15, 2014. It ensures recognition of all capital ex- Likewise, and starting from the same date, the resolution penditure and operating costs incurred by the distributor. The establishes that the funds collected through the Programa de average increase for consumers will be equal to 2.64%, appli- Uso Racional de la Energía Eléctrica (PUREE) be treated at a cable starting from April 8, 2014. true rate component for distribution companies, in recogni- tion of the higher costs that they incur. The resolution exten- ded the compensation under the Mecanismo de Monitoreo de Costos and of PUREE beyond that in the situation prior to Involuntary exposure of distributors to the spot market January 31, 2015, allowing the receivables accrued under the- On March 7, 2014, the government published Decree 8.203, se two instruments to be set off against the trade payables which permits distributors to turn to the Conta de Desenvolvi- due to CAMMESA. The balance will be paid in accordance mento Energético (CDE) to cover additional costs arising from with a payment schedule yet to be determined. their involuntary exposure to the spot market and from ther- The regulations require every company to submit a plan of mal dispatching. The Brazilian regulation guarantees full cove- investments to be made by 2015, an agreement on the use of rage during the subsequent rate cycle. the supplemental funds transferred (including the prohibition Also for this purpose, on April 2, 2014, the government publi- on the payment dividends), as well as the withdrawal of legal shed Decree 8.221, which, as an alternative to the recovery action for the recovery of receivables. of additional costs through the rate cycle, envisages providing immediate financial coverage for distributors by setting up a new regulated environmental trading account (Conta ACR), 116 Annual Report 2015which will be managed by the Câmara de Comercialização that would have to be repaid over the next two years as a re- de Energia Elétrica (CCEE). On April 28, 2014, following the sult of rate increases to be introduced. In 2014, Brazilian distri- receipt of bank financing, the CCEE reimbursed Ampla and butors drew a total of 18 billion real (around €5.7 billion) on the Coelce for a part of the higher costs incurred as a result of this RCE account; however, they were unable to cover the entire involuntary exposure to the spot market price and the covera- deficit. In March 2015, a new loan through the RCE account ge of the higher costs of transporting the electricity from the was approved to cover the deficit for November and Decem- generation plant. ber 2014. The term of payment for all loans was extended to On November 25, 2014, ANEEL approved the new ceiling and 54 months starting from November 2015. floor on the differences settlement price (Precio de Liquidación de las Diferencias - PLD) for 2015. The decision has genera- ted a great deal of debate, beginning with public consultation 09/2014 and subsequently at the public hearing 54/2014. The main effect of the new limits is that of reducing the finan- cial impact of possible future risks associated with contractual exposure on the spot market on distributors, as well as mitiga- Renewable Energy Greece ting the irreversible risk of business and financial exposure if The Greek incentive system uses a feed-in tariff differentia- production falls below contractual requirements on producers. ted by renewable energy resource. In the 2012-2014 period, This settlement mechanism ensures that the 2014 deficit is a range of measures were introduced to reduce the budget offset by appropriate rates in 2015. deficit, decreasing incentives. A new mechanism, based on Finally, on December 10, 2014, an addendum to the conces- premiums and tenders, should replace the current one, but sion contract for Brazilian distributors (Ampla and Coelce) was the timing of its introduction is not known owing to political signed permitting the recognition of receivables associated uncertainty. with the 2014 deficit, ensuring their recovery through recogni- The Wholesale Electricity Market and the Capacity Assuran- tion of the regulated assets as part of the capital that can be ce Mechanism (CAM) are undergoing reform. offset at the end of the concession period, in the event it is Under the proposed changes, the wholesale system will be not possible to offset it during the contract period via the rate. composed of four separate markets: the Forward Market, Full recognition of ICMS costs the Day-Ahead Market (the only one currently operating), the Intra-day Market and the Balancing Market. The CAM will be based on four pillars: capacity availability, On March 11, 2014, ANEEL, during the 7th ordinary meeting flexibility, strategic reserve and demand-side response. On of its board, approved Coelce’s request to fully recognize both December 28, 2015, the government sent its proposal for future and past (from 2003 to 2013) sales tax (ICMS) paid to the CAM to the European Commission. The proposal re- generators. Recovery of the amounts through rates will take flects the European Commission’s indication to not introdu- place over four years, starting from April 2014. ce retroactive payments for 2015. On May 20, 2014, the federal public prosecutor’s office re- quested that the adjustment of Coelce’s rates be suspended. The action is aimed at stopping the recovery of ICMS through Romania the rate, as established by ANEEL, thereby limiting the rate The main form of incentive in Romania for all renewable increase to 13.68% (rather than 16.77%). energy resources is the green certificates system. The only Compensation for the effects of the drought 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 purcha- Brazil continued to suffer from a severe drought in 2014. In se of green certificates on the basis of annual targets set November, the system hit its highest risk of having to ration by law for the share of gross generation from renewables. electricity. To cover the supplemental cost of electricity for the Each year, the Romanian regulator publishes the mandatory distribution companies, the government created the Regula- share, recalculated to balance supply and demand. The value ted Contracting Environment (RCE) account using bank loans of the green certificates varies on the basis of coefficients 117 Report on operationsAnnual Report 2015that differ by generation technology. More specifically, these are 2 green certificates per MWh of generation from bio- Germany mass, geothermal and wind until 2017 (after 2017, 1 green Three support mechanisms are in place: certificate), 6 green certificates per MWh of generation from > a feed-in tariff, applicable for plants in differing amounts photovoltaic, and 3 green certificates per MWh of genera- depending on the date of entry into service; tion from hydroelectric for new plants. The price of the green > a feed-in premium, calculated as the difference between certificates is determined by law within a specified range the “applicable value” (ct/kWh) for each form of renewa- (cap & floor). Sellers are subject to penalties in the event of ble energy and the monthly average electricity price; non-compliance. > auctions: to be implemented from 2017, replacing the The ordinance EGO 57/2013 temporarily modifying the gre- feed-in-premium. en certificate system established the temporary suspen- sion (from July 1, 2013 to March 31, 2017) of trade in part of the green certificates due to renewables generators (1 Spain green certificate per MWh for wind and mini-hydro and 2 The Spanish incentive system for renewables was mainly green certificates per MWh for photovoltaic). Trading in the based on feed-in tariff and feed-in premium mechanisms. deferred green certificates could gradually resume after The energy policies for both 2012 and 2013 mainly fo- April 1, 2017 for photovoltaic and mini-hydro and after Ja- cused on the need to resolve the “rate deficit” problem. nuary 1, 2018 for wind, continuing until December 2020. That is why, with Royal Decree Law 1/2012, the Spanish On December 31, 2015, the government published the sha- government suspended the pre-register procedures and eli- re of electricity generated from renewables that will receive minated incentive mechanisms for new renewable energy incentives for 2016, which is now equal to 12.15%; in 2015 projects not already entered in the register. Law 15/2012 it was equal to 11.9% (Decision 1110/2014 published on De- introduced a tax of 7% on electricity generated with any cember 19, 2014). Bulgaria technology and a royalty of 22% for the use of water for electricity generation (reduced by 90% for plants with a ca- pacity of less than 50 MW). In 2013, Royal Decree 2/2013 eliminated the option of remu- The Bulgarian incentive system is mainly characterized by neration based on the market price plus a feed-in premium, a feed-in tariff differentiated by resource. The mechanism leaving only the feed-in tariff option (price of energy inclu- is open to on-shore wind plants, photovoltaic plants, hydro- ded) or the market price, with no premium, and modified electric plants with a capacity of less than 10 MW and bio- the basis of the indexing used for the feed-in tariff for rene- mass plants with a capacity of less than 5 MW. wables and cogeneration. Between 2012 and 2014 many regulatory changes were in- As part of the reform of the electricity sector begun in July troduced, including a local tax of 20% (later cancelled by 2013 through the adoption of Royal Decree Law 9/2013, on the courts), an access fee and limitations on subsidized pro- June 6, 2014 Royal Decree 413/2014, regulating production duction. All of these were intended to reduce the system from renewable energy resources, co-generation and residual deficit created by the incentives. waste, was approved. The decree introduces a new remu- Turkey neration system based on the concept of “reasonable pro- fitability”, which is equal to the yield on 10-year government securities plus 300 basis points. For the first regulatory pe- The Turkish renewable energy system provides for a feed-in riod, lasting six years starting from June 2013, the return on tariff mechanism denominated in US dollars, guaranteed for investment is expected to be 7.4% in real terms before taxes. 10 years, with the option of transferring to the open mar- The new system calls for remuneration based on the sale ket each year until 2020. If local components are used in of electricity at the market price, to which supplemental an- construction, the system establishes a further five years of nual remuneration is added only in the event the market guaranteed incentives. 118 price is not enough to ensure the established reasonable profitability. Any supplemental remuneration is calculated based upon the standard operating and investment costs of an efficient, well-run company and for clusters of plants. Annual Report 2015These standard parameters were determined on June 20, must pass to be considered eligible to participate in system 2014 with the approval of Ministerial Order IET/1045/2014. adjustment services, which to date have only been open to On July 8, 2014, Enel Green Power filed an administrati- conventional power plants. ve appeal of Royal Decree 413/2014 and Ministerial Order IET/1045/2014. As to the appeal of the Royal Decree, the action was submitted and a response from the Supreme Portugal Court is pending. As for the appeal of the Ministerial Or- The rate system for wind farms is primarily based upon a der, in 2015 additional information was requested and, once feed-in tariff mechanism. On June 24, 2014, Decree Law obtained, the action was filed, which is awaiting asses- 94/2014 was published in an effort to increase the capacity sment by the court’s experts. of existing wind farms that meet certain technical require- Two ministerial orders were issued during 2015 that aimed ments and have adequate wind resources. The decree law at improving the new regulatory framework. The first order, governs the conditions for delivering power in excess of the IET/1344/2015, sets the standard remuneration parameters connection capacity to the grid and the associated remu- for certain types of solar and cogeneration facilities not neration. included in Ministerial Order IET/1045/2014 and therefore Decree 102/2015 was published during the year, completing excluded from the incentive system since July 2013. The the regulation of the so-called “over-equipment” of wind second order, IET/1345/2015, updates the values for the farms under Decree Law 94/2014. This decree establishes remuneration of cogeneration and biomass plants for the the procedures and technical requirements for delivering 2nd half of 2015 and defines the mechanisms for reviewing electricity generated in excess of the authorized capacity those values to be applied in subsequent years. to the network. The technical specifications are linked to On July 31, 2015, Royal Decree 738/2015 was issued. It real-time communication and the remote disconnection establishes the regulatory framework and the dispatching functions. mechanism for plants located in the island territories (the Canary Islands, Balearic Islands, Ceuta and Melilla). On August 5, 2014, Ministerial Order IET/1459/2014 was Morocco published. It defined the parameters for remuneration and Morocco is a country with a high percentage of electricity the mechanism for assigning specific remuneration rules to imports. In particular, since 2008 the Moroccan government new wind and photovoltaic plants in the extra-peninsular has been promoting strategies to increase local production electrical systems. In addition, on September 24, 2015, of renewable energy. Wind and solar resources are abun- Ministerial Order IET/1953/2015 was published. It updates dant across the country and for this reason the government IET/1459/2014 with the aim of increasing participation in the has mainly supported the development of renewables mechanism for allocating incentives to wind power plants technologies. The goal for 2020 is for 42% of electricity for a total installed capacity of up to 450 MW. output in the country to come from renewable resources. In the final months of 2015 the criteria for awarding incen- In order to manage and govern the development of rene- tives to new renewable energy plants were defined, in line wable resources in Morocco, the government has created with the new regulatory framework. This voided the mora- two institutions: ADEREE, the National Agency for the De- torium imposed with Royal Decree Law 1/2012. The criteria, velopment of Renewable Energy and Energy Efficiency; and which provide for the award to be made through an auc- MASEN, the Moroccan Agency for Solar Energy. tion system, had already been envisaged in the new law on The first approach to the development of renewables is ba- electricity supply, although the details of application had not sed on competitive auctions. The government guarantees yet been specified. These were defined with Royal Decree a power purchase agreement (PPA) with the single buyer 947/2015, Ministerial Decree IET/2212/2015 and the Reso- ONEE, the national electricity sector agency. In this context, lution of November 30 of the Secretary of Energy. The first in 2015 the government is allocating 850 MW of wind po- auction, scheduled for January 14, 2016, involves 500 MW wer and has launched the first phase of competitive bidding of wind capacity and 200 MW of biomass. to allocate 170 MW of solar energy (the NOOR PV program On December 19, the Resolution of December 18 of the run by MASEN). Secretary of Energy was published. It sets out the crite- In addition to this first approach to renewables deve- ria and the qualification tests that renewable energy plants lopment, two additional approaches are also being used: 119 Report on operationsAnnual Report 2015self-production and liberalization of high-voltage customers In early 2015, NERSA, the national electricity regulator, ini- provided they are supplied from renewable resources. tiated two reviews of the rules applicable to distributed ge- This latter system is based on opening the market for high- neration and the use of the national grid for electricity tran- voltage customers. Law 09/13 allows a renewable energy sport (wheeling). The rules governing distributed generation producer to build a new plant with the purpose of selling to will allow all end users the option of installing photovoltaic high-voltage customers. systems and to export their excess power to the grid (net Morocco intends to create a new agency called ANRE to metering). The rules governing wheeling will permit the sale act as an independent national energy regulator to ensure of electricity through bilateral contracts between a private compliance with regulations and competitiveness between generator and end users (commercial or industrial enterpri- operators in the electricity and gas markets, and to set pri- ses; residential customers are not eligible). The dates for ces and conditions of access to the transmission and inter- completion of those reviews have not been announced of- connection network. To this end, in 2015 the government ficially. began drafting a new law. In 2015, the government endorsed Bill 58 of 2015 amending Finally, on the basis of the long-term rate planning mecha- some aspects of Law 09/13. The bill establishes that produ- nism, South African electricity rates should increase by an cers of renewable energy can also access low voltage grids. average of 8% a year until 2018. The specific conditions will be defined and regulated subse- quently. The bill also regulates aspects concerning the delive- ry of excess renewable energy to the high-voltage network. India South Africa India is a federal republic composed of 29 states, each of which has specific responsibilities in various sectors as well as shared responsibility with the federal government in the In May 2011, South Africa approved a target of 17.8 GW of electricity sector. installed renewable capacity by 2030 based upon the long- The Ministry of New and Renewable Energy (MNRE) defi- term energy strategy set out in the 2010-2030 Integrated nes and implements policy for the development of renewa- Resource Plan. The primary tool to be used in achieving this ble energy at the national level. In addition to the Ministry, target is the Renewable Energy Independent Power Produ- the power market is supervised at the federal level by the cer Procurement Programme (REIPPPP), an auction system Central Energy Regulatory Commission (CERC), which sets launched in 2011 that seeks to install around 13 GW in new guidelines and standard rates, and by the State Energy Re- renewable capacity between 2014 and 2020 (hydroelectric gulatory Commissions (SERC), which implement them at <40 MW, concentrated solar and photovoltaic, wind, bio- the state level. mass, biogas and landfill gas power). Currently, five rounds In June 2015 the government headed by Prime Minister Na- (bid windows) are scheduled, four of which have already rendra Modi approved a target of 175 GW of renewables been held, with the award of more than 5,000 MW of ca- capacity by 2022, including 100 GW from solar, about 60 pacity. In 2015 an additional round – called the Expedited GW from wind and about 10 GW from other technologies. Round, or Round 4.5 – was added and held for an additional The renewables industry is characterized by a high degree 1,800 MW, which have not yet been assigned. of fragmentation, as each state has introduced its own re- After a pre-qualification phase, which is concerned with gulatory system for the development of new capacity. In technical and financial issues, qualified projects are chosen general, the main support mechanisms for the development based upon two criteria: the bid price (weighted 70%) and of wind and solar are: the economic development content of the project (weighted > federal and state auctions (solar); 30%). The latter is based upon a series of parameters focu- > feed-in tariffs at the state level (wind); sing on the economic development of the country, including > generation-based incentives at the federal level (wind); local content and the creation of jobs for South Africans, > Renewable Energy Certificates (REC) based on state-level especially non-whites. Renewable Portfolio Obligations (RPO) (wind and solar); The winners will be invited to enter into a 20-year PPA with > specific tax incentives. the national utility, Eskom, with payments guaranteed by The most widely adopted incentive plan for wind power is the government. based on Preferred Feed-In Tariffs, defined by the SERC at 120 Annual Report 2015the state level and implemented through PPAs with state of major hydroelectric plants, although in the last few years a distribution companies with terms varying between 10 and gradual diversification has been under way. The main remu- 25 years depending on the state. nerative approach involves long-term power purchase agree- As concerns developing the solar energy sector, in 2010 a ments (PPAs), tax incentives and facilitated transport rates. federal program called the Jawaharlal Nehru National So- lar Mission (JNNSM) was launched, based on an auction system managed at the federal level but implemented at Brazil the state level. The program is structured into three phases, The incentive system for renewable energy in Brazil was of which the second is currently under way. The winning created in 2002 with the implementation of a feed-in me- bidders are awarded a 25-year PPA at a fixed rate with the chanism (PROINFA), and was then harmonized with the National Thermal Power Corporation (NTPC), the leading na- sales system for conventional power using competitive tional electricity company. auctions. The system envisages different types of auction Kenya depending on whether participation is reserved to new plants or existing plants and primarily comprise: > Leilão Fontes Alternativas, reserved to renewable wind, While Kenya has not set official installed capacity targets for biomass and hydroelectric technologies up to 50 MW; renewable energy, it strongly supports their development, > Leilão Energia de Reserva, for which all projects that will mainly in order to reduce its dependence on hydroelectric enter operation within three years of the date on which power, seeking to attract private investors. the auction is held are eligible. These auctions are normal- The main incentive mechanism for renewables, in use sin- ly organized to increase reserve capacity and/or promote ce 2008 and revised in 2012, is the feed-in tariff system the development of certain technologies (such as rene- (FiT), with a specified value determined by law by the Ener- wables); gy Regulatory Commission (ERC) for plants with a capacity > Leilão de Energia Nova, for which all projects that will of less than 10 MW and by auction for larger facilities. The enter operation more than three years after the date on support mechanism provides for 20-year power purchase which the auction is held are eligible. These auctions are agreements (PPA) with Kenya Power and Lighting Company divided into A-3 and A-5 auctions on the basis of the ge- (KPLC), the national operator in charge of transmission, di- nerator’s obligation to supply the energy awarded after stribution and supply of end users. Rates are differentiated three or five years. by technology (wind, biomass, solar, mini-hydro and geo- An auction typically has two phases: the descending-clock thermal) and size of the plant. They are partly indexed to US phase in which the auction organizer establishes the ope- inflation (US CPI). ning price for the auction and the generators submit de- In 2012 a ceiling was set for the maximum capacity of re- creasing bids; and the pay-as-bid phase in which the remai- newables plants that could be built with a FiT contract. The ning generators further reduce the price until the supply of FiT support mechanism is reviewed every three years, in- power covers all the demand up for auction. The winning cluding a revision of rates. The new measures only apply to bidders are granted long-term contracts whose term varies new plants, however. by resource: 15 years for thermal biomass plants, 20 years The country has a rate of electrification of just 23%, making for wind plants, 25 years for solar plants and 30 years for an increase in the rate of rural electrification through the hydroelectric plants. extension and increasing the density of the national grid, During 2015, eight auctions were held for the supply of re- the development of mini-grids and off-grid projects a major gulated customers, of which five involved the participation priority. Latin America of renewables projects. Contracts for a total of about 5.5 GW in new capacity were awarded. In November, the fe- deral government also held an auction for the reallocation of about 6 GW of expiring hydroelectric concessions, with 30-year contracts that provide for remuneration of operating The development of renewable energy resources in Latin costs for 70% of the capacity and the possibility of alloca- America is less diversified than in Europe. In particular, the ter- ting the remaining 30% on the free market. ritory has historically had electric matrixes with a large number In September, the Ministry approved a decree that will al- 121 Report on operationsAnnual Report 2015low wind turbines that have been operational for at least be installed between 2014-2025 be supplied by renewable 24 months and have undergone technical alterations du- power plants. ring project development to recalculate the value of their On January 29, 2015, Law 20.805 was approved, introdu- “Garantia Física”, i.e. the maximum capacity with which a cing changes to the system of auctions for the supply of system can participate in an auction to supply regulated customers on the regulated market. The primary changes customers. Under the approved methodology, plants that involve increasing the term of the contract (from 15 to 20 record a positive differential can sell it through A-0 and A-1 years), as well as the range within which customers are allo- auctions or to free-market customers. wed to remain within the regulated market (from a range of In December, Law 13.203 was approved. Among other 0.5-2 MW to a range of 0.5-5 MW), introducing short-term changes, it introduced a new mechanism for managing the auctions and, finally, offering new plants the option of delay- hydrological risk, which allows hydroelectric generators the ing the date at which they are to begin supplying electricity. option of transferring that risk to end users in exchange for The new rules will be in effect for all contracts signed as a a price reduction in contracts signed. It also increased, from result of auctions organized as from 2016. 30 MW to 300 MW, the threshold for renewables plants to In April 2015, the Ministry published the decree approving benefit from tax incentives and allows plants that won in the Plan for the Expansion of the National Electrical System previous auctions to participate with any surplus capacity in for 2014-2015. The plan include the construction of an in- future auctions for the supply of regulated customers. terconnection between the country’s two main electrical Chile systems (SIC and SING), which should enter service by the end of 2019. In September 2015 the document “Hoja de Ruta al 2050: Chile has a system mandating achievement of specified re- Hacia una Energía Sustentable e Inclusiva” was published, newable energy targets for those who withdraw power for defining guidelines for the long-term evolution of the ener- sale through distributors or sales companies. The law sets gy industry in Chile and setting a number of industry tar- two different targets based upon the date the contract is gets. The document constitutes one of the foundations of signed: the energy policy to be developed by the Energy Ministry > for all power under contract between August 31, 2007 and introduces, among other things, the goal of generating and June 30, 2013, renewable resources are to account 70% of power from renewable resources by 2050, most of for 5% of the electricity starting from 2014, an amount which should be obtained by using wind and solar capacity. that will increase by 0.5 points per year to reach a share of 10% by 2024; > for all contracts signed starting from July 1, 2013, Law Colombia 20698 of 2013 sets a target of 20% by 2025 to be achie- On May 14, 2014 the President of Colombia promulgated ved by gradually raising the initial share of 6% in 2014. Law 1715 concerning the promotion of electricity genera- All renewable energy resources are eligible for the purpo- tion from renewable resources, the reduction of greenhou- ses of meeting the requirement. For hydroelectric plants se gas emissions and ensuring the country’s energy secu- with a capacity of up to 40 MW, the system provides for rity. In addition to introducing a variety of tax incentives for a corrective factor which counts all of the first 20 MW and renewable resources, the law provides for the creation of a declining proportion of the capacity between 20 and 40 a fund to finance non-conventional renewables plants and MW. The mechanism also establishes penalties for failure energy efficiency initiatives. to achieve the mandatory share. In 2015, the drafting of second level legislation continued, In May 2014, the country’s new Energy Agenda was pre- with the approval of a decree formalizing the tax incentives sented by President Michelle Bachelet, setting out the envisaged in the law for renewables plants. More specifi- primary energy policy targets, the next regulatory steps to cally, such plants will be exempt from VAT and duties and be taken and laying out the plans of investments that the benefit from accelerated depreciation and a 50% tax de- government intends to make in its next term. Specifically, duction. with regard to renewables, the Agenda confirms the tar- In February 2016, the Ministry of Mines and Energy pu- get of cutting energy consumption by 20% by 2025 and blished the new plan for the 2015-2029 period (“Plan de introduces an additional target that 45% of new capacity to Expansión de Referencia Generación - Transmisión 2015- 122 Annual Report 20152029”), officially beginning the construction of the connec- June the Ministry of Energy (SENER) presented the electri- tion of the peninsula of La Guajira to the national electrical city sector planning document for 2015-2029 (PRODESEN). system, which should enter service by the end of 2022. The document sets out to identify the electricity generation, The area, in the north of the country, is currently isolated transmission and distribution projects necessary to meet but is one of the areas of greatest wind potential in Colom- demand over the period. According to ministry estimates, bia. In the coming months, the final design of the project demand is expected to rise by between 3% and 4%, which will be completed, setting out the detailed timetable for will require about 60 GW of additional capacity, of which construction, so as to take account of the development about 32 GW of renewables capacity in order to meet the plans of local generators. target of 35% of generation from renewables by 2024. Mexico Finally, in December the Energy Industry Transition Act was approved, defining and formalizing the medium and long- term objectives for the incorporation of generation from The year 2015 saw the progressive approval and publica- non-fossil resources into the electricity system (25% by tion of a series of laws and regulations to restructure the 2018, 30% by 2021 and 35% by 2024). energy and oil sector. With specific regard to the electricity industry, the legislative process, which began with consti- tutional amendments approved in December 2013 and con- Peru tinued in 2014 with the enactment of the legal framework The Peruvian renewables incentive system, introduced with for the electricity industry (Ley de la Industria Eléctrica, Ley Legislative Decree 1002 of 2008 (Decreto Legislativo de de Energía Geotérmica and Ley de la Comisión Federal de Promoción de la Inversión para la Generación de Electrici- Electricidad), culminated in 2015 with the publication of the dad), is a system of competitive auctions open to all rene- Electricity Market Guidelines. wable generation technologies (with the sole exception of The document, published in September, describes the rules hydroelectric plants, which are eligible up to a limit of 20 governing the operation and organization of, as well as the MW), usually differentiated by resource at the time of the criteria for participation in, the new market. The system pro- publication of the associated decree by the Ministry. vides for mechanisms for short and long-term transactions The auctions provide for a maximum bid price and a pay-as-bid in electricity, capacity and “clean energy” certificates, inclu- mechanism. The winning renewables plants also benefit from ding a real-time market, a day-ahead market and auctions dispatching priority and a variety of tax incentives, including ac- for the supply of customers in the regulated market. celerated amortization and early reimbursement of sales taxes. On the basis of the announced calendar, as from January In December, the fourth renewables auction was held as 27, 2016, operators can participate in the wholesale market, part of the effort to achieve the 5% target introduced with while the first long-term auction will be held in March 2016, the 2008 law. The winning bidders will sign 20-year con- at which distributors can purchase the power and certifica- tracts to supply electricity from wind, photovoltaic, mini- tes necessary to achieve the target of 25% of generation hydro and biomass resources totaling about 2.2 TWh a year, from non-fossil resources by 2018. January 27, 2016 also with supply to begin in January 2018. The winners will be saw the launch of the real-time wholesale market. announced in February or March 2016. In January, the Ministry also initiated the unbundling of the As regards legislation governing the development of gene- former market monopolist (Comisión Federal de Electricidad ration, in February 2015, the regulator OSINERGMIN appro- - CFE) with the publication of the associated decree. That ved the new calculation method for Energía Firme, which in process, which should be completed by the end of 2017, the case of renewables plants will be defined on the basis envisages horizontal and vertical separation and will lead to of the production function, distinguishing between plants in the creation of at least four generation companies, two grid operation, new plants and winners of a renewables auction. operations companies (transmission and distribution), two sales companies (for customers in the free and regulated markets) and two branches to manage commercial relations Panama with generators who opt to maintain the pre-reform market Renewable energy is primarily sold through public auctions arrangements (independent producers and self-generators). organized by distributors and bilateral power purchase agre- As regards the long-term development of the sector, in ements reached on the free market. 123 Report on operationsAnnual Report 2015In February 2015, the Congress approved Law 25, which > introducing a comprehensive planning approach for the authorizes the creation of the Ministry of the Environment. energy system that considers economic, technical, so- The new ministry will be charged with contributing to the cial and environmental aspects as pillars of the system. implementation of environmental policies in collaboration with other ministries and with implementing national deve- lopment projects. Uruguay In May 2015 Resolution 8566 was approved. It changes The country’s energy policy is guided by the 2005-2030 Na- the methodology for the export of electricity during periods tional Energy Policy, approved by the government in order of abundant water availability. The new rule proposed by to reduced Uruguay’s energy dependency and encourage the operator of the Panamanian system, Centro Nacional investment in the energy industry. The policy sets out a se- de Despacho, would reduce the risk of reservoir overflow. ries of short, medium and long-term objectives, including a Guatemala goal of achieving 15% of generation from non-conventional renewables by 2015 (the target was achieved). As regards market access, private operators can participate Renewable energy is primarily sold through public auctions in auctions called by the government, normally differentia- organized by distributors/traders and bilateral power purcha- ted by generation technology, for the award of long-term se agreements on the free market. The country also has contracts for the sale of electricity to the national distributor a system of tax incentives, including a 10-year exemption UTE. from income tax and an exemption from taxes in the import of materials and equipment for renewables plants. In January 2015 the regulator, CNEE, announced that in United States 2014 the country had reached 65% of generation from re- The United States has a two-level renewables incentive sy- newable resources, an increase of about 15% compared stem. The federal level envisages various types of support, with 2007, the year in which the government approved including tax incentives for production and investment (the the country’s long-term targets for renewables generation. production tax credit - PTC and the investment tax credit More specifically, the numbers confirmed that the country - ITC), accelerated depreciation and federal subsidies. At had achieved the target of 60% set for 2015 and was on the state level, the main incentive is a Renewable Portfo- the way to achieving the subsequent target (80% by 2026). lio Standard (RPS) mechanism, i.e. a system of mandato- Costa Rica ry percentages of generation from renewables for utilities, with targets differing from state to state. Most states have adopted systems of tradable certificates but there is no cor- Renewable energy is primarily sold through IPPs (≤20 MW) responding platform active at the federal level. with rates set by the regulator (ARESEP) and BOT public auc- The production tax credit (PTC), the tax incentive to encou- tions (≤50 MW) with prices set for long-term PPAs with ICE. rage renewable electricity generation from wind, geother- In September 2015, the President signed the “Plan Nacio- mal, hydroelectric and biomass plans, which expired at the nal de Energía 2015-2030”, which sets out short, medium end of 2015, while the investment tax credit (ITC), the tax and long-term objectives for energy sector planning. For incentive for solar energy, which is expiring at the end of the electricity industry, four objectives have been defined 2016, were both recently renewed. and will be addressed by specific measures in the coming The wind PTC is granted in an amount equal to: years: > 100% if construction begins before January 1, 2017; > improving energy efficiency through a reduction of ener- > 80% if construction begins after December 31, 2016 and gy intensity and emissions associated with energy con- before January 1, 2018; sumption; > 60% if construction begins after December 31, 2017 and > ensuring optimal distributed generation, allowing the di- before January 1, 2019; rect use of renewable resources; > 40% if construction begins after December 31, 2018 and > optimizing the country’s generation matrix by assessing before January 1, 2020. the available resources and their combination in terms of The solar ITC is granted in an amount equal to: quality, availability and price; > 30% if construction begins before January 1, 2020; 124 Annual Report 2015 > 26% if construction begins after December 31, 2019 and before January 1, 2021; > 22% if construction begins after December 31, 2020 and before January 1, 2022. Finally, the geothermal, hydroelectric and biomass PTC is granted in an amount equal to 100% if construction begins before January 1, 2017, establishing a two-year extension with no period of gradual elimination of the incentive. Additional guidance on the definition of “construction be- gins” and “continuous efforts” required for eligibility is ex- pected to be issued by the Internal Revenue Service in the 1st and 2nd Quarters of 2016. In August 2015, the Environmental Protection Agency (EPA) announced the Clean Power Plan for cutting emissions by 32% by 2030 and established a specific reduction target for each state. However, on February 9, 2016, the US Supreme Court ordered the suspension of the measure while fede- ral courts are examining the issue. The validity of the EPA’s deadlines for the states now hangs on the outcome of the legal proceedings. Previously, each state had to present an appropriate reduction plan to the EPA by 2016. States will need to start cutting emissions by 2022, with an incentive system in place starting in 2020. 125 Report on operationsAnnual Report 2015Main risks and uncertainties Due to the nature of its business, the Group is exposed to In order to mitigate its exposure to these risks, the Group a variety of risks, notably market risks, credit risk, liquidity conducts specific analysis, monitoring, management and risk, industrial and environmental risks and regulatory risk. control activities, as described in this section. Risks connected with market liberalization and regulatory developments The energy markets in which the Group operates are cur- tion 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 The Group often operates in regulated markets or regulated increasing competition from new entrants and the deve- regimes, and changes in the rules governing operations in lopment of 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 integra- impact our operations and performance. ting along the value chain, with a greater drive for technolo- In order to mitigate the risks that such factors can engender, gical innovation, diversification and geographical expansion. Enel has forged closer relationships with local government More specifically, the initiatives taken have increased the and regulatory bodies, adopting a transparent, collaborative customer base in the free market, with the aim of integra- and proactive approach in tackling and eliminating sources of ting downstream into final markets, optimizing the genera- 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 dio- gate the risk factors associated with CO2 regulations, the Group monitors the development and implementation of EU xide (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 EU legislation governing the emissions trading scheme im- focus 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 difficulties plants, increasing their energy efficiency. of managing and monitoring the situation. In order to miti- 126 Annual Report 2015Market risks As part of its operations, Enel is exposed to a variety of control processes, ensuring compliance with the principle of market risks, notably the risk of changes in interest rates, organizational separation of units responsible for operations exchange rates and commodity prices. and those in charge of managing risk. The financial risk governance system also defines a system The financial risk governance arrangements adopted by the of operating limits at the Group and individual Region/Count- Group establish specific internal committees responsible ry/global business line levels for the various types of risk, for policy setting and supervision of risk management, as which are monitored periodically by risk management units. well as specific policies at the Group and individual Region/ To maintain market risk within the limits set out in the Country/global business line levels that establish the roles Group’s risk management policies, Enel uses derivatives and responsibilities for risk management, monitoring and obtained in the market. Risks connected with commodity prices and supply continuity Given the nature of its business, Enel is exposed to changes risk, the specification of a ceiling for maximum acceptable in the prices of fuel and electricity, which can have a signifi- risk and the implementation of a hedging strategy using de- cant impact on its results. rivatives on regulated or over-the-counter (OTC) markets. To mitigate this exposure, the Group has developed a stra- For a more detailed examination of commodity risk manage- tegy of stabilizing margins by contracting for supplies of fuel ment and the outstanding derivatives portfolio, please see and the delivery of electricity to end users or wholesalers in note 41 of the consolidated financial statements. advance. In order to limit the risk of interruptions in fuel supplies, the The Group has also implemented a formal procedure that Group has diversified fuel sources, using suppliers from dif- provides for the measurement of the residual commodity ferent geographical areas. Exchange risk The Group is exposed to the risk that changes in the exchan- other than the currency of account or functional currency ge rates between the euro and the main other currencies of the company holding the liability; could give rise to adverse changes in the euro value of per- > financial assets/liabilities measured at fair value. formance and financial aggregates denominated in foreign The consolidated financial statements are also exposed to currencies, given the Group’s geographical diversification the exchange risk associated with the consolidation values and the access to international markets connected with the of equity investments denominated in currencies other than issue of debt instruments and transactions in commodities. the euro (translation risk). Accordingly, the exposure to exchange risk, which is mainly The policy for managing exchange risk is designed to ensure denominated in US dollars, is attributable to: the systematic hedging of exposures, with the exclusion of > cash flows in respect of the purchase or sale of fuel or translation risk, through operational processes that ensure electricity; the implementation of appropriate hedging strategies, which > cash flows in respect of investments in foreign currency, typically involve the use of financial derivatives on over-the- dividends from foreign subsidiaries or the purchase or counter (OTC) markets. sale of equity investments; For more details, please see note 41 of the consolidated > financial liabilities assumed by the holding company or financial statements. the individual subsidiaries denominated in currencies 127 Report on operationsAnnual Report 2015Interest rate risk The Group is exposed to the risk that changes in interest le established within the framework of the formal risk gover- rates could give rise to increases in net financial expense or nance procedures of the Group, curbing funding costs over adverse changes in the value of assets/liabilities measured time and limiting the volatility of results. This goal is also at fair value. pursued through the use of financial instruments on over- The main source of exposure to interest rate risk is the varia- the-counter markets. bility of financial terms in the case of new debt or fluctuation For more details, please see note 41 of the consolidated in the interest flows associated with floating-rate debt. financial statements. The risk management policy seeks to maintain the risk profi- Credit risk The Group’s commercial, commodity and financial opera- Country/global business line level and at the consolidated tions expose it to credit risk, i.e. the possibility that an unex- level. pected change in the creditworthiness of a counterparty could impact the creditor position, in terms of insolvency As part of the management of credit risk even more effec- (default risk) or changes in its market value (spread risk). tively, for a number of years the Group has carried out non- Beginning in the last few years, with the instability and recourse assignments of receivables for specific segments uncertainty of the financial markets and the global econo- of the commercial portfolio. Partly in view of the macroeco- mic crisis, average payment times for trade receivables by nomic environment, as from 2011 the use of assignments counterparties have increased. In this general environment, was extended both geographically and to invoiced receiva- in order to minimize credit risk, the credit risk management bles and receivables to be invoiced of companies operating policy calls for the preliminary assessment of the credit- in other segments of the electricity industry than retail sales worthiness of counterparties in the main portfolios and the (such as, for example, receivables from generation activities, use of risk mitigation techniques, such as the acquisition sales of electricity as part of energy management opera- of secured or unsecured guarantees and, for financial and tions, the sale of green certificates or electricity transport commodities transactions in particular, standard contractual services). frameworks. All of the above transactions are considered as non-recourse In addition, the general Group policy provides for application transactions for accounting purposes and therefore involved of uniform criteria in all the main Regions/Countries/global the full derecognition of the corresponding assigned assets business lines for monitoring and controlling credit risk in from the balance sheet, as the risks and rewards associated order to promptly identify any deterioration in credit quality with them have been transferred. and determine any mitigation actions to implement. As regards credit risk in respect of commodities transac- tions, credit risk limits specified by the competent units of the Region/Country/global business line involved are applied. As to credit risk in respect of financial transactions, including those involving derivatives, risk is minimized by selecting counterparties with high credit ratings from among leading Italian and international financial institutions, portfolio diver- sification, entering into margin agreements for the exchan- ge of cash collateral, or the use of netting arrangements. In 2015, operating limits on credit risk approved by the Group Risk Committee were again applied and monitored, using an internal valuation system, at both the individual Region/ 128 Annual Report 2015Liquidity risk the expansionary monetary policies of the European Central Bank (ECB) and low oil prices, the European economy was Liquidity risk is the risk that the Group, while solvent, would sluggish and still far from its pre-crisis levels, a crisis worse- not be able to discharge its obligations in a timely manner ned by the unresolved Greek impasse. Growth prospects for or would only be able to do so on unfavorable terms owing all of Europe are still held back by an environment uncondu- to situations of tension or systemic crises (credit crunches, cive to investment and by high unemployment. By contrast, sovereign debt crises, etc.) or changes in the perception of the United States recorded strong economic performance, Group riskiness by the market. surpassing its pre-crisis levels due to higher levels of dome- The Group’s risk management policies are designed to main- stic demand and consumption and the revival of the services tain a level of liquidity sufficient to meet its obligations over a sector thanks to the massive monetary policy intervention specified time horizon without having recourse to additional by the Federal Reserve (Fed). Unemployment figures remain sources of financing as well as to maintain a prudential liquidity very positive as is core inflation, which is close to the Fed’s buffer sufficient to meet unexpected obligations. In addition, in target level, while headline inflation (including the more vo- order to ensure that the Group can discharge its medium and latile components such as energy) is still far from the target long-term commitments, Enel pursues a borrowing strategy and it is difficult to discern a clear trend towards recovery. that provides for a diversified structure of financing sources to The recovery in private consumption, sustained by the im- which it can turn and a balanced maturity profile. provement in the labor market, however, has been accompa- Rating risk Credit ratings, which are assigned by rating agencies, impact the possibility of a company to access the various sources of financing and the associated cost of that financing. Any re- duction in the rating could limit access to the capital market and increase finance costs, with a negative impact on the performance and financial situation of the company. In the first half of 2015, Standard & Poor’s and Moody’s re- vised their outlooks for Enel upwards, bringing them from stable to positive and from negative to stable, respecti- vely, mainly owing to the resilience the Group has shown in tackling adverse market conditions (the slowdown in the economy and the fall in commodity prices) and changes in the regulatory systems of the markets in which it operates, thanks to the flexibility of the range of strategic options avai- lable to the Group, such as asset disposals, containment of operating costs and optimization of the debt exposure. Accordingly, at the end of the year Enel’s rating was: (i) “BBB” for Standard & Poor’s with a positive outlook; (ii) “BBB+”, with a stable outlook for Fitch; and (iii) “Baa2”, with a stable outlook for Moody’s. Country risk nied by less than exuberant performance in manufacturing and industry in general as well as a deterioration in the trade balance. The latter was affected by the strong appreciation of the dollar (which has helped buoy demand for imports of consumer goods and made goods with prices denominated in dollars less competitive) as a result of divergent expecta- tions (initially more restrictive, but later attenuating) in the financial markets concerning the monetary policy stance of the US central bank. Another factor was the decline in global demand, which was exacerbated in particular by the econo- mic slowdown in China. Last year China’s role as the driver of growth grew increasingly shaky after ensuring outstan- ding economic performance for more than a decade, led pri- marily by exports and high levels of domestic investment. The real challenge facing policy makers will be to revive growth through the development of an internal market and the rise of the services sector. The situation in other large emerging countries differs considerably: on one hand, the Indian economy, thanks to the central bank’s monetary poli- cies, seems poised for a strong recovery, while on the other, Brazil is struggling with record levels of inflation, a series of mistaken policy decisions and internal scandals. Once again the Russian economy is trending downwards in the wake of the geopolitical tensions with Ukraine and, especially, low oil prices, which have tipped the country into recession with double-digit inflation. Concern remains high in the Middle East and North Africa in response to developments in Sy- ria and Libya, respectively, which present risks that could In 2015 growth performance differed sharply between OECD trigger a lasting alteration of regional and global balances, and non-OECD countries. Despite benefiting from a highly fa- and massive refugee flows and the attendant uncertainties, vorable international macroeconomic environment thanks to which could impact the overall macroeconomic situation. 129 Report on operationsAnnual Report 2015Industrial and environmental risks ctions in the storage, movement, transport and treatment of nuclear substances and materials. In the countries where Enel has nuclear operations, specific laws based on interna- tional conventions require operators to obtain insurance co- Industrial and environmental risks are managed by the verage for liability for risks associated with the use and tran- Global Generation business line using statistical modeling sport of nuclear fuel, with coverage ceilings and other terms techniques, which assess risks in probabilistic and moneta- and conditions set by law. Other mitigating measures have ry terms for each plant/grid/project. In addition to typically been taken in accordance with international best practice. industrial risk models (business interruption, operation and maintenance), Enel has developed models to measure di- saster risks linked to seismic events, a model for assessing fire risks and environmental models to assess the exposure of each plant to risks involving all possible segments of the environment, such as the air, water, land and underground. All of this is done with the objective of identifying the most critical areas and preparing appropriate instruments to safe- guard the industrial value of plants. Breakdowns or accidents that temporarily interrupt opera- tions at Enel’s plants represent an additional risk associated with the Group’s business. In addition, we also conducted exercises to assess risks associated with the operation of the distribution networks managed by the Infrastructure and Networks business line. In order to mitigate such risks, the Group adopts leading prevention and protection strategies, including preventive and predictive maintenance techniques and technology sur- veys to identify and control risks. In the environmental area, plants undergo certification under international standards (ISO 14001 and EMAS) and the use of environmental mana- gement systems to monitor potential sources of risk in order to identify any threats promptly. The Group also uses the Mapping of Environmental Com- pliance approach (MAPEC), which with regard to the ope- ration of electricity generation and distribution systems (excluding nuclear plants) makes it possible to identify envi- ronmental risks to the strategy and reputation of the organi- zation and to the environment itself. Any residual industrial and environmental risk is managed using specific insurance policies to protect corporate assets and provide liability coverage in the event of harm caused to third parties by accidents, including pollution, that may occur during the production and distribution of electricity and gas. With regard to nuclear power generation, Enel operates in Slovakia through Slovenské elektrárne and in Spain throu- gh Endesa. In relation to its nuclear activities, the Group is exposed to operational risk and may face additional costs because of, inter alia, accidents, safety violations, acts of ter- rorism, natural disasters, equipment malfunctions, malfun- 130 Annual Report 2015Outlook The strategic plan, presented in November 2015, is focused Group more closely with the sector average. closely on long-term industrial growth, especially in renewa- In 2016, the full integration of Enel Green Power and the bles and networks. It sets out an ambitious program for en- corporate reorganization in Latin America will be completed. hancing efficiency through the reduction of maintenance and The year will also see the launch of the smart meter installa- operating costs in all global business lines. tion campaign and the development of the strategic plan of The plan also envisages the simplification of the Enel Enel Open Fiber. Group’s corporate structure, which began in 2014 with the separation of the two subsidiaries Endesa and Enersis. It Based on the key pillars outlined above, the following table also seeks to manage the Enel asset portfolio actively with a sets out the performance and financial targets on which the view to creating value through the strategic repositioning of 2016-2019 strategic plan is founded, aiming to boost cash ge- the Group. Finally, it provides for focusing growing attention neration to support the increase in dividends to the benefit of on shareholder remuneration, thanks to a gradual increase in shareholders. dividends distributed through 2019 in order to align the Enel Recurring EBITDA Net ordinary income Minimum dividend Pay-out FFO/Net financial debt billions of euros billions of euros euro/share % % 2016 ~14.7 ~3.1 0.18 55 23 2017 CAGR 2015-2019 ~15.5 ~3.4 60 26 ~4% ~10% ~17% ~6% The Enel strategic plan is a synthesis of the long-term vision dialogue with the communities in which the Group operates; of the Company: a new strategic direction called “Open Po- openness within the Group, which means leveraging the ta- wer”, which represents a new approach involving all of the lents and diversity among our people; and finally, openness as Group’s industrial processes and commercial initiatives, gui- the capacity to listen to the world around us and to seize the ding investments and the relationship with stakeholders. It is opportunities and meet the needs we find. in fact based on the concept of openness in terms of sustai- Consistent with this innovative approach, on January 26, 2016 nability and, hence, innovation and technological innovation at Enel presented the new Group logo, a global brand that repre- a time when the Enel Group is opening its infrastructure to a sents openness to change, listening and innovation. variety of other uses: openness with stakeholders, through 131 Report on operationsAnnual Report 2015Other information Non-EU subsidiaries At the date of approval by the Board of Directors of the finan- Enersis Group); 15) Endesa Brasil SA (a Brazilian company cial statements of Enel SpA for 2015 – March 22, 2016 – the belonging to the Enersis Group); 16) Enel Brasil Partici- Enel Group meets the “conditions for the listing of shares of pações Ltda (a Brazilian company belonging to the Enel companies with control over companies established and re- Green Power Group); 17) Enel Fortuna SA (a Panamanian gulated under the law of non-EU countries” (hereinafter “non- company belonging to the Enel Green Power Group); 18) EU subsidiaries”) established by CONSOB with Article 36 of Enel Green Power Chile Ltda (a Chilean company belon- the Market Rules (approved with Resolution 16530 of June ging to the Enel Green Power Group); 19) Enel Green Po- 25, 2008, as amended). Specifically, we report that: wer North America Inc. (a US company belonging to the Enel Green Power Group); 20) Enel Green Power North > in application of the materiality criteria for the purposes America Development LLC (a US company belonging to of consolidation provided for in Article 36, paragraph 2, the Enel Green Power Group); 21) Enel Kansas LLC (a US of the CONSOB Market Rules, 23 non-EU subsidiaries of company belonging to the Enel Green Power Group); 22) the Enel Group have been identified to which the rules in Enersis SA (a Chilean company); and 23) PJSC Enel Rus- question apply on the basis of the consolidated accounts sia (a Russian subsidiary of Enel Investment Holding BV); of the Enel Group at December 31, 2014. > the balance sheet and income statement for the 2015 fi- They are: 1) Ampla Energia e Serviços SA (a Brazilian com- nancial statements of the above companies included in pany belonging to the Enersis Group); 2) Buffalo Dunes the reporting package used for the purpose of preparing Wind Project LLC (a US company belonging to the Enel the consolidated financial statements of the Enel Group Green Power Group); 3) Chilectra SA (a Chilean company will be made available to the public by Enel SpA (pursuant belonging to the Enersis Group); 4) Compañía Distribui- to Article 36, paragraph 1a) of the CONSOB Market Ru- dora y Comercializadora de Energía - Codensa SA ESP (a les) at least 15 days prior to the day scheduled for the Or- Colombian company belonging to the Enersis Group); 5) dinary Shareholders’ Meeting called to approve the 2015 Companhia de Interconexão Energética SA - CIEN (a Bra- financial statements of Enel SpA together with the sum- zilian company belonging to the Enersis Group); 6) Com- mary statements showing the essential data of the latest pañía Eléctrica do Tarapacá SA - Celta (a Chilean company annual financial statements of subsidiaries and associa- belonging to the Enersis Group); 7) Companhia Energéti- ted companies (pursuant to the applicable provisions of ca do Ceará - Coelce SA (a Brazilian company belonging Article 77, paragraph 2-bis, of the CONSOB Issuers Regu- to the Enersis Group); 8) Edegel SA (a Peruvian company lation approved with Resolution 11971 of May 14, 1999, belonging to the Enersis Group); 9) Emgesa SA ESP (a as amended); Colombian company belonging to the Enersis Group); 10) > the articles of association and composition and powers Empresa de Distribución Eléctrica de Lima Norte - Edel- of the control bodies from all the above subsidiaries have nor SAA (a Peruvian company belonging to the Enersis been obtained by Enel SpA and are available in updated Group); 11) Empresa Distribuidora Sur - Edesur SA (an form to CONSOB where the latter should request such Argentine company belonging to the Enersis Group); 12) information for supervisory purposes (pursuant to Article Empresa Eléctrica Panguipulli SA (a Chilean company 36, paragraph 1b) of the CONSOB Market Rules); belonging to the Enel Green Power Group); 13) Empresa > Enel SpA has verified that the above subsidiaries: Eléctrica Pehuenche SA (a Chilean company belonging to - provide the auditor of the Parent Company, Enel SpA, with the Enersis Group); 14) Empresa Nacional de Electricidad information necessary to perform annual and interim au- - Endesa Chile SA (a Chilean company belonging to the dits of Enel SpA (pursuant to Article 36, paragraph 1, lett. 132 Annual Report 2015c-i) of the CONSOB Market Rules); sheet and financial data necessary for preparation of the - use an administrative and accounting system appropriate consolidated financial statements (pursuant to Article 36, for regular reporting to the management and auditor of the paragraph 1, lett. c-ii) of the CONSOB Market Rules). Parent Company, Enel SpA, of income statement, balance Approval of the financial statements The Shareholders’ Meeting to approve the financial state- limit of 120 days from the close of the financial year, permitted ments, as provided for by Article 9.2 of the bylaws of Enel under Article 2364, paragraph 2, of the Italian Civil Code, is SpA, shall be called within 180 days of the close of the finan- justified by the fact that the Company is required to prepare cial year. The use of that time limit rather than the ordinary consolidated financial statements. Disclosures on financial instruments The disclosures on financial instruments required by Article ment”, note 33 “Derivatives and hedge accounting” and note 2428, paragraph 2, no. 6-bis of the Civil Code are reported 34 “Fair value measurement” to the separate financial state- in note 31 “Financial instruments”, note 32 “Risk manage- ments of Enel SpA. Transactions with related parties For more information on transactions with related parties, please see note 35 to the separate financial statements of Enel SpA. Own shares The company does not hold treasury shares nor did it engage in transactions involving own shares during the year. Atypical or unusual operations Pursuant to the CONSOB Notice of July 28, 2006, Enel did lating the transfer price or timing could give rise to doubts not carry out any atypical or unusual operations in 2015. concerning the propriety and/or completeness of disclosure, Such operations include transactions whose significance, conflicts of interest, preservation of company assets or pro- size, nature of the counterparties, object, method for calcu- tection of minority shareholders. Subsequent events Significant events following the close of the year are discussed in note 50 to the consolidated financial statements. 133 Report on operationsAnnual Report 2015134 Annual Report 2015Sustainability 135 Report on operationsAnnual Report 2015How we operate At Enel, sustainability is a strategic, integrated part of busi- The integration of sustainability factors into business pro- ness management, development and growth with a view cesses is based on and extends the lessons learned within to creating value over the medium to long term, both for the Group in developing operations management models the Company and for all of our stakeholders. (for Business Development, Engineering & Construction, In 2015, Enel ranked fifth in Fortune magazine’s Change the and Operation & Maintenance) aimed at creating shared World list. It was the only Italian company of the 50 com- and inclusive value in the medium/long term. Indeed, the panies on the list that are contributing to change the world, efficacy and efficiency of business processes, during both which is a challenge and great responsibility towards its development and operations, highly depend on establi- shareholders, stakeholders and, above all, towards future shing stable, constructive relationships with stakeholders generations. and on the ability of becoming a synergistic part of the local To be sustainable means to be competitive today and to- communities, preventing and addressing potential adverse morrow and environmental, social and economic sustai- social and environmental impacts. nability is the key to growth in the energy sector. This is More specifically, in 2015, 633 sustainability projects were why the Group is developing a strategy that combines developed regarding access to energy, social and economic business and sustainability, that balances the interests of development of the communities, support to local com- stakeholders and the demands of local communities and munities and Company initiatives for fostering sustainable that fosters the development of renewable technologies in working practices that have benefited 6.14 million people an environmentally-friendly manner. The aim is to achieve a for a total investment of around €67 million, around 41% of complete vision based on listening and on the involvement which were contributions from outside the Company, from of populations on the rational use of resources that does other project partners, loans and tax incentives. not separate social progress from economic progress. Framing this entire process are the principles of ethics, Under Enel’s organizational model, a dedicated Innovation transparency, anti-corruption, human rights and safety that and Sustainability unit reports directly to the Chief Execu- have always been a distinctive feature of Enel’s operations tive Officer in order to stress how much these two areas and which are a part of policies and standards of conduct and their specific activities complement each other and that are applicable throughout the Group. contribute to the creation of a new model of business and This model is fully in line with the indications of the United competitiveness for the Company. At the Country level, Su- Nations Global Compact, of which Enel has been an acti- stainability Managers report directly to the Country Mana- ve member since 2004, reiterating the importance of an ger in order to implement the Group’s strategic guidelines increasing integration of sustainability within a company’s and policies at the local level and to develop sustainability strategic decision-making processes. As of June 1, 2015, projects and other activities specific to each area. Enel’s Chief Executive Officer is a member of the Board of Sustainability is integrated in the business model throu- the United Nations Global Compact, the first representative ghout the value chain and the Group’s strategy is interpre- of an Italian company and the only Chief Executive Officer ted and converted into concrete actions through a rigorous, of an utility to be appointed to this position. challenging and shared Sustainability Plan. This ensures Enel undertakes to constantly manage and measure its periodic disclosures of important information, both inside sustainability performance by using and developing me- and outside the Company, and increases its capability of chanisms that allow for an integrated, standardized system attracting long-term socially responsible investors. Essen- of projects, information and consistent data that are kept tially this approach is based on the implementation of envi- constantly up to date based on developments in the scope ronmental, social and governance sustainability indicators of operations and relevant standards, while promoting the (ESG) throughout the value chain, not only for ex-post as- sharing of best practices and lessons learned. sessments but above all to anticipate decision-making and Among these, Enel has developed systems for analyzing privilege a proactive, not reactive, stance. priorities, managing and reporting on performance, as well Enel wants to drive change and anticipate new market op- as mapping and monitoring sustainability projects. portunities and is aware that it must begin by understan- With a view to increasing transparency with stakeholders, ding the context in which it operates. the Group monitors and actively participates in the deve- 136 Annual Report 2015lopment of new frontiers in reporting towards integrated ronmental and social sustainability, in accordance with the communication of financial and non-financial performance: GRI international standards and the Electric Utility Sector for example, in 2015, it supported the Global Reporting Ini- Supplement (EUSS), as well as with the principles of ac- tiative (GRI) in defining the Reporting 2025 project in order countability of the United Nations Global Compact. The Su- to promote international dialogue on the future of sustaina- stainability Report 2015 also includes Enel’s commitment bility reporting. to achieving the United Nations’ post- 2015 Sustainable De- The reporting process involves collecting and calculating velopment Goals (SDGs) as announced in September 2015. specific key performance indicators of economic, envi- Enel’s commitment to the United Nations’ Sustainable Development Goals On September 25, 2015, the United Nations formally adopted the new Sustainable Development Goals (SDGs) 2030 that were officially launched the next day at the Private Sector Forum held in New York City. Through the SDGs, the United Nations called on companies to be creative and innovative in addressing the challenges of sustainable development, such as poverty, gender equality, clean water, clean energy, and climate change. The success in achieving the new goals will rely heavily on the policies that will be implemented by all actors involved. At the UN summit, Enel announced the Group’s intention to contribute to four of the UN’s 17 Sustainable Development Goals. More specifically, the Group will contribute by: > ensuring access to affordable, sustainable and modern energy through its ENabling ELectricity initiative, which will benefit three million people in Africa, Asia and Latin America (SDG 7); > supporting education initiatives for 400,000 people by 2020 through projects similar to those already un- der way, such as Powering Education in Kenya, Ubuntu in South Africa, and scholarship programs in Latin America (SDG 4); > promoting sustained, inclusive and sustainable economic growth and employment for 500,000 people through initiatives such as coffee cultivation and marketing in Peru and greenhouse farming in Chile (SDG 8); and > working towards becoming carbon neutral by 2050 (SDG 13). Projects, activities, performance, and main results, inclu- again to the Dow Jones Sustainability Index World and has ding progress towards achieving the SDGs in line with SDG received the prestigious “Silver Class” sustainability reco- Compass, are presented in Enel’s Sustainability Report. The gnition in the 2016 Sustainability Yearbook published by Ro- completeness and reliability of the report are verified by an becoSAM, who assesses the sustainability performance of accredited external auditing firm, by the Group Risk Com- the largest global companies. Enel has also been included in mittee, and by the Corporate Governance Committee. The the STOXX Global ESG Leaders, in the ECPI and NYSE Eu- Board of Directors of Enel SpA then approves the document ronext sustainability indices and is one of the utilities in the before it is presented to the shareholders. prestigious CDP Italy Climate Disclosure Leadership index The report is also analyzed by socially responsible investment for 2015 as a leader in terms of the quality, thoroughness funds, which continue to increase in number. As of Decem- and transparency of greenhouse gas emission data and of ber 31, 2015, 132 socially responsible investors held shares its commitment to mitigating climate change. in Enel capital (134 in 2014) for a total interest held of around Enel was again included in the FTSE4Good index, which 7.7% in Enel shares in circulation (5.9% in 2014), equal to measures environmentally sustainable corporate practices, 10% of the float (8.6% in 2014). relations with stakeholders, respect for human rights, the The Group has been named to the Dow Jones Sustainability quality of working conditions and tools that companies em- Index for the twelfth consecutive year as industry leader in ploy to fight corruption. the Electric Utilities sector. In 2015, Enel has been named 137 Report on operationsAnnual Report 2015Priority analysis and Sustainability Plan For several years, Enel has conducted materiality analyses The materiality analysis, which is conducted with increasin- – based on the guidelines of the most widely spread stan- gly greater detail, in terms both of issues and geographical dards such as GRI-G4 – in order to identify the Group’s in- scope, makes it possible to obtain the Company and sta- tervention priorities, the issues to consider for disclosure keholder priorities for the entire Group and for each count- and which stakeholder engagement activities to strengthen. ry of operations. It is also possible to obtain results with The aim is to map and assess the priority of the issues of a specific focus such as the matrix for the sole stakehol- interest to stakeholders, integrating them into the Group’s der category of “Financial community“, which is useful for business strategy and priorities for action. identifying issues to be discussed in the Annual Report that Through this analysis, the main stakeholders of the Group is particularly of interest to this type of stakeholder. More are identified, assessed according to their importance to specifically, priority issues such as the creation of econo- the Company and to their priorities on the various issues mic and financial value, innovation and operating efficiency, approached in the numerous engagement activities. This in- occupational health and safety and climate strategy have formation is then crosschecked with the assessments of the emerged from the analysis. issues on which Enel intends to focus its efforts, with the Based on the material analysis results, the issues to be in- respective priority value. cluded in the reports are defined and the specific targets By observing the two perspectives together, it is possible to and objectives of the 2016-2020 Sustainability Plan are set. identify the issues, which, due to their relevance and priority, Operations and projects regarding various functions and bu- are essential to Enel and its stakeholders. Consequently, it is siness lines of the Group contribute towards achieving these possible to verify the degree of alignment or misalignment targets and objectives. between external expectations and internal priorities. The four pillars of corporate ethics For over 10 years, Enel has had a solid system of ethics that nal best practices that everyone who works for and with underlies its sustainability efforts. This system has become Enel must respect and apply in their daily activities. a dynamic set of rules constantly incorporating internatio- Code of Ethics In 2002, Enel adopted the Code of Ethics, which expresses and traceability, and to harmonize the assessment systems the commitments and ethical responsibilities in conducting at the Group level in order to ensure timely assessments. business and in Company activities. This Code is applicable In the new process the performance of the preliminary in Italy and abroad while taking into account the cultural, analyses of the violation reports received has been impro- social and economic diversity of the various countries in ved, 124 alleged violations were reported over the past which Enel operates. The Code of Ethics is binding for all year, of which 32 were classified as violations of the Code Enel employees and collaborators and all of the companies of Ethics. In order to continue improving the preliminary in which Enel has an equity interest; the Group’s major sup- analyses process, as of January 2016, a new, online com- pliers are also required to adhere to the general principles munications channel for the entire Group is available for contained therein. reporting any violation or suspicion of a violation of Enel’s In 2015, the process of managing the reports of alleged Compliance Programs, which have been adopted in the va- violations has been revised to ensure greater transparency rious countries in which Enel operates. 138 Annual Report 2015Other indices No. Confirmed violations of the Code of Ethics (1) 2015 32 2014 31 Change 1 3.2% (1) In 2015, an analysis was performed of the violations reported in 2014. As a result, the number of verified violations for 2014 was reclassified from 27 to 31. Compliance Model (Legislative Decree 231/2001) - Model 231 The Compliance Model pursuant to Legislative Decree tion in both the public and private sectors, manslaughter or 231/2001 (which was revised in 2015 in response to the assault causing severe, or very severe, injury, committed in introduction of new crimes envisaged under applicable law) breach of workplace health and safety provisions as well as supplements the rules of conduct of the Code of Ethics and environmental offences. The principles found in the model is aimed at preventing the risk of the commission of the cri- extend to all of the Group’s foreign subsidiaries through the mes specified under the decree, including those of corrup- adoption of specific guidelines. Zero-Tolerance-of-Corruption Plan The Zero-Tolerance-of-Corruption Plan supplements the adopted in 2006 as a concrete move marking Enel’s parti- Code of Ethics and the Compliance Model and assigns spe- cipation in the Global Compact and the Partnering Against cific responsibilities for monitoring corruption risks and for Corruption Initiative (PACI) promoted by the World Econo- appropriately handling any suspected case. The plan was mic Forum in Davos in 2005. Policy on Business and Human Rights In order to give effect to the guidelines of the UN Forum on the part of the employees of Enel SpA and its subsidiaries, Business and Human Rights, in 2013, the Board of Directors whether they be directors or employees in any manner of of Enel SpA approved the Human Rights Policy, which was those companies. Similarly, with this formal commitment, subsequently extended to all of the Group’s subsidiaries. In Enel explicitly becomes a promoter of the observance of line with the Code of Ethics, this policy sets out the com- such rights on the part of contractors, suppliers and busi- mitments and responsibilities in respect of human rights on ness partners as part of its business relationships. 139 Report on operationsAnnual Report 2015Creating value for stakeholders Enel’s stakeholders are individuals, groups or institutions good indication of how the Group has created wealth for the whose contribution is needed to achieve its mission or who following stakeholders: shareholders, lenders, employees have a stake in its pursuit. and government. The economic value created and shared by Enel gives a Millions of euro Revenue Income/(Expense) from commodity risk External costs Gross global value added from continuing operations Gross value added from discontinued operations 2015 75,658 168 53,323 22,503 - 22,503 1,316 2,848 5,314 3,369 9,656 2014 75,791 (225) 53,390 22,176 - 22,176 1,222 3,007 4,864 654 12,429 Gross global value added distributed to: Shareholders Lenders Employees Government Enterprises Towards sustainable innovation Enel has always considered innovation as a key part of its the INternet Cleantech ENablers Spark (INCENSe) project, strategy and culture of enterprise for adopting cutting-edge which is funded with €8 million by the European Union. Enel methods, models and technologies. also launched the Energy Start project in South America. In 2015, the Enel Group carried out research and innovation Another cornerstone of the Open Innovation strategy is activities with over 250 projects throughout the value chain, the involvement of all Group employees in the innovation that is, from conventional power generation to renewable process. Accordingly, significant emphasis is placed on the energy, from smart grids to energy efficiency, and from elec- development of instruments that stimulate creativity, facili- tric mobility to energy storage. tate participation, develop innovation and entrepreneurship In order to find, develop and capitalize on the best solutions competences, and strengthen the culture of innovation. The available, Enel has adopted an Open Innovation principle Enel Idea Factory project draws inspiration from these ele- whereby, in order to create more value and better compete ments to turn workplaces into creative brainstorming labora- on the market, it is not enough only to rely on in-house ideas tories and promote integration among the various company and company human resources, but other companies, start- units, open up towards the outside, and foster dialogue with ups and universities must also be involved. several internal and external interlocutors. In this spirit, in The Endesa 2244 channel, dedicated to companies that 2015, corporate entrepreneurship initiatives such as Enel In- wish to propose ideas and projects, was launched in Spain. novation World Cup and the Inspire Empreendedores were Various activities were also launched on the Endesa Energy launched. Challenges platform. In addition, Enel has established several partnerships with leading companies and increased its exposure to start-ups Renewable energy in order to develop new business models and foster the de- During the year, the Group’s commitment to innovation fo- velopment and implementation of new technologies (1,200 cused on various areas, including improving technological start-ups were analyzed and 13 collaborations launched). performance, an area in which Enel Green Power has tradi- As regards incubation and acceleration programs aimed at tionally been present. Enel Green Power intends to increase supporting the most promising start-ups, Enel coordinates the people’s access to energy through improved technologi- 140 Annual Report 2015cal performance by combining the use of various power ge- as reduced carbon dioxide emissions and noise pollution as neration technologies with electrochemical energy storage well as the possibility of using the vehicles, through their systems in order to build off-grid plants. batteries, as distributed energy storage systems. Enel also focused on developing renewable energy in urban Over the past year, Enel has intensified its commitment environments by using small-scale plants that have a low to electric mobility by developing various projects, among visual impact such as cutting-edge wind power generators which an agreement signed in December 2015 with Nissan and small-scale thermodynamic solar systems, which are to develop a new business based on vehicle-to-grid (V2G) better suited for architectural integration. technology, which Enel has been developing since 2011. This The use of new renewable resources that are not exploited technology allows drivers as well as energy users to operate yet is another area of strong interest, in particular energy as individual “energy hubs“ with the ability to use, store and from the sea and high-altitude wind energy. return electricity in excess to the grid. Aggregating the distri- Among Enel’s various start-up partners, i-EM, which opera- bution loads allows using vehicles for providing grid-balan- tes in the renewable energy sector, has developed a sophi- cing services thus promoting the penetration of renewables. sticated software that, using artificial intelligence algorithms, Various projects have also been implemented in Spain and can forecast and control the output of solar and wind plants. South America such as Zero Emissions Mobility to All (Ze- It has also developed a solution for the remote monitoring m2All), which introduced a fleet of 200 electric vehicles and and maintenance of power plants. the development of the necessary charging infrastructure Energy storage in Malaga, Spain, and the Electric Mobility program in San- tiago, Chile for the installation of recharging infrastructures with the collaboration of public authorities in order to pro- Energy storage continued to be an important sector in 2015. mote electric technology and the development of ambitious In addition to continuing with the installation of energy sto- business models in the public transport sector. rage systems on wind power plants, Enel is focusing on re- sidential energy storage systems. Partnership agreements were signed with the sector’s leading companies towards Grid services developing integrated energy storage and photovoltaic sy- Enel has always been committed to numerous initiatives ai- stems, testing them on the market and then selling them to med at innovating energy distribution systems in order to countries with a high business potential for these systems, constantly improve grid efficiency. starting from South Africa. Residential energy storage sy- Among some of the most interesting initiatives in this field stems allow consumers to store their self-produced energy is the collaboration with Athonet Smartgrid, a start-up that (from systems such as photovoltaic) in batteries for later developed a system capable of creating a high-speed, low domestic use when the home is not connected to the grid latency private data network. Enel uses this technology to or in the event of a power blackout. provide telecommunications coverage to plants that are lo- The advantages of integrating energy storage systems into cated in areas that are not served by other operators and to conventional energy generation, albeit on a larger scale, manage mission critical communications (management of have also been tested. Recently, on the island of Ventotene, reserved data), including at a number of generation plants a lithium ion battery (300 kW/600 kWh) was installed and such as the Federico II facility at Brindisi. This solution gene- fully integrated into the existing diesel generator system rates considerable positive externalities because, in addition paired with an ad hoc optimization and control system. to serving Enel’s plants, it serves their surrounding area. Electric mobility infrastructure Electric mobility represents an increasingly important sector to be developed, above all for its numerous benefits such Also, in its plan to become a virtual telecommunications network operator, the Group selected Athonet Smartgrid’s technology for more competitive – in terms of costs and performance – communications to and between millions of Enel’s machines and sensors throughout the area and will create a new generation Industrial Internet of Things. 141 Report on operationsAnnual Report 2015Customers In 2015, Enel confirmed its status as a Company that pays community. EnelPremia 3.0 is the new version that rewards particular attention to customers and to the quality of ser- sustainable behavior such as recycling, awareness of power vice, aspects that concern more than just the provision of consumption and commitment to the community. electricity and natural gas, extending, above all, to intangible Finally, 2015 was the year of Expo 2015, which saw the Com- aspects of the service involving the perception and satisfac- pany involved as Lighting Solutions Partner contributing to tion of customers. The Group has also launched programs the creation of the first smart city in the world comparable and other initiatives for people with disabilities in order to to a city of 100,000 inhabitants. ensure the effective communication of important informa- In order to provide the best support and assistance to its tion to customers. clients in Romania, Enel launched offerings for energy pro- In December 2015, the ISO 9001 certification for both mar- vision that included insurance packages and also launched a kets, electricity and gas, was confirmed with 100% com- pilot project aimed at improving access to electricity to the pliance with respect to customer relations management vulnerable groups living in deprived areas of Bucharest. through the Contact Center, Punti Enel and online channels. In order to provide our customers with the best support pos- In 2015, various communications campaigns were also car- sible, since 2003, in Spain and Portugal, Endesa has adopted ried out so that customers would better understand infor- the Plan de Excelencia en la Atención Comercial (the Excel- mation regarding the energy sector, including the campaign lence in Customer Service Plan), which seeks to improve to help customers understand the new Bolletta 2.0 utility customer satisfaction indicators year after year. In 2015, bill launched in January 2016. Enel’s new gas and electricity efforts under the plan focused on improving the quality of bill has a new layout, its content has been rationalized and customer service (both via phone and online), handling com- organized, simpler language is used, and personalized custo- plaints on the free market, flexibility in billing services, and mer information is included; new services are also available analyses of consumption patterns. In addition the portfolio through the Enel Energia app. of value added products and services continued to expand During the year, new electricity and gas offerings were laun- and new business models and sales channel to be develo- ched, which included ENERGIAX65 and ENERGIA XOGGI ped. In the residential sector, new solutions were developed that adopt sustainability as a marketing driver. Indeed, both to promote energy efficiency and proactively manage ener- plans concern the provision of green energy and have a gre- gy consumption. at social impact: ENERGIAX65 is reserved for customers As regards the Latin America area, significant activities for over 65 years of age, who will enjoy a fixed price for three promoting energy efficiency were launched, in particular years including a Health and Wellbeing insurance policy for in Argentina, where technologies for efficient lighting and them and their family. While for each subscription to ENER- heating continued to be sold, and in Brazil, where projects GIA XOGGI, Enel Energia is committed to donating €2 throu- were launched for promoting awareness of responsible con- gh Enel Cuore to support digital education in kindergartens sumption in deprived areas in which the Group companies and primary schools. Moreover, the dissemination of LED Ampla and Coelce operate. Over 13,000 people benefited technology continued throughout 2015 with over 800,000 from initiatives aimed at improving energy efficiency, which light bulbs sold. led to a significant 18% reduction of energy use in the two As of December 2015, the EnelPremia program for Enel areas concerned. customers was completely renewed in an even more su- stainable form with respect to the environment and the 142 Annual Report 2015Customers by geographical area Average no. Electricity Italy Latin America Iberian Peninsula Romania Other countries Total electricity customers Natural gas Italy Spain Total natural gas customers Society 2015 2014 Change 27,072,083 27,207,897 15,074,266 14,633,393 11,150,886 11,290,283 2,691,849 2,670,892 7,275 5,985 55,996,359 55,808,450 3,711,422 1,246,662 4,958,084 3,470,692 1,205,463 4,676,155 (135,814) 440,873 (139,397) 20,957 1,289 187,909 240,730 41,199 281,929 -0.5% 3.0% -1.2% 0.8% 21.5% 0.3% 6.9% 3.4% 6.0% The intrinsic nature of the electricity business, in which power Partnerships between the private sector and non-profit or- plants and distribution networks are built to last several deca- ganizations are an important means of promoting social and des and the service provided is an essential part of social and economic growth in the communities, while also generating economic development, requires that we establish a lasting long-lasting, shared value. With a view towards innovation relationship with the communities in which we operate. and decentralization and in order to support local small bu- Creating shared value means knowing your stakeholders, siness and socio-economic development generally, we have giving a voice and listening to them all in order to promote entered into numerous partnerships with NGOs and non- constant constructive dialog, to be aware of the needs and profit organizations throughout the world. priorities of the community, and to compare them with the needs of our business while minimizing impacts. Enel makes a concrete contribution to social and economic Access to energy development in these communities through various types of Currently, there are over a billion people around the world initiatives, such as the expansion of infrastructures, educa- that have no access to electricity, and over 2 billion are being tion and training programs, projects of social inclusion, and served by inadequate infrastructures or are unable to pay support for local cultural and economic activities. In 2015, for their utilities due to financial hardship. Given this con- we conducted over 600 projects and other initiatives in the text, the fight against energy poverty is the focus of one nations in which we have a presence. of the United Nations Millennium Development Goals, as These projects and initiatives are selected by way of reaffirmed by the UN General Assembly, which unanimously analyses of materiality and in line with our Sustainability declared the period 2014-2024 as the Decade of Sustainable Plan, which takes account of detailed peer benchmarking Energy for All. and studies of trends in sustainability, while also adapting Within this context, Enel launched the Enabling Electricity to the needs of the various countries in which we opera- program with the goal of creating a new business model te, whether they have mature or emerging economies. In based on the access to energy, one which targets both pe- order to create value in our areas of business, Enel turns ople living in isolated rural areas and those who live in the to partners in the local communities, which bring innovative outskirts of major metropolitan areas. Projects under this ideas to be turned into concrete action. This constant dialog program seek to: with the communities is at the heart of our business model, > eliminate financial barriers to accessing electricity; and the presence of NGOs with in-depth knowledge of the > develop technologies that facilitate access to infrastructures; local contexts throughout out territories enables us to gui- > promote technical training and capacity building; de and implement innovative actions that target the needs > promote energy efficiency; of our stakeholders and contribute to local development. > promote energy awareness. 143 Report on operationsAnnual Report 2015In 2015, 124 projects benefitting 1.5 million people were im- change has begun. The divestment plan came to a close plemented in line with the goals of the Sustainability Plan. with the agreement to sell off the Slovakian assets, and a Examples include: plan was begun to bring Enel Green Power back within the > Cosciencia Ampla in Brazil, an integrated program to Enel Group. combat energy poverty aimed at promoting social in- The introduction of the new organization was supported by clusion in the favelas and other high-risk areas. Through numerous global training initiatives to accompany this chan- projects of waste exchange, social tariffs, business deve- ge. This training targeted both the various cross-functional lopment, and education, it has been possible to recover levels of management and new global teams within the bu- up to 70% of energy theft in the areas affected; siness lines and the corporate and service functions. These > Ralco Electrification Plan in Chile, a hybrid electrifica- actions helped to promote reflection, disseminate Enel’s tion project in a hard-to-access area not covered by the new values (responsibility, innovation, proaction, and trust), grid. It is a public-private partnership integrated with a and promote proper conduct throughout the organization in project for the collection of drinking water for the indige- line with the strategic concept of Open Power. nous community of Allin Mapu; Health and safety training plays a key role in ensuring that > Cátedra Chilectra in Chile, a program that seeks to en- our business brings results while respecting individuals and hance the employability of students through the deve- the organization’s new values, and investment in language lopment of specialist electrical skills in both middle and training is an important means of supporting integration, secondary school. Cátedra Chilectra is being developed particularly within the global functions. Another necessary with the help of company employees as voluntary edu- part of employee development is represented by technical cators; and professional training, which is further enhanced by op- > PlayEnergy, a fun, educational project that Enel has been portunities arising from the sharing of knowledge and best pursuing for several years with the goal of disseminating practices that emerge within the global functions. a culture of responsible energy use among young people, beginning with free courses that provide the knowledge needed to promote responsible energy decisions. Our people Human resource selection, management and development As at December 31, 2015, the total workforce of the Enel In 2015, the new strategic direction for the Group led to a Group numbered 67,914 employees, divided roughly equally redefinition of the values and conduct expected of everyone between Italy (49%) and abroad (51%). working with Enel, a process that involved contributions by over 8,000 people by way of workshops, focus groups, quick The net effect of new hires and terminations of employment polls and interviews. during the year has resulted in a reduction in the total work- In line with these new values (of responsibility, innovation, pro- force (1,316 fewer employees). The changes may be broken action and trust), we have radically transformed processes that down geographically as follows: 5% of the new hires were concern human resources and overhauled the entire system of in Italy, with the remaining 95% being distributed across hiring, managing, and developing our people. the other nations (mainly in Latin America and including are- Our strategies for selecting and developing talent has also as in which Enel Green Power has a presence); 19% of the been revised in order to better serve the specific needs of terminations were in Italy, while the remaining 81% were our business. This has also involved the design and imple- abroad. mentation of new development processes based both on In 2015, the Enel organizational model was updated in or- challenging projects and other priority business activities der to support global development and sustainable business and on taking advantage of individual differences throughout management, and roles and responsibilities were rewritten the workforce. In 2015, we launched an international mo- where necessary in order to optimize resources and make bility plan that seeks to promote skills development and existing processes more efficient. We have completed the integration in a manner that engages the youngest emplo- process of separating Endesa, in Spain, from the various yees within the Group. This program gives participants the companies in Latin America, where a process of corporate opportunity to experience international contexts in positions 144 Annual Report 2015of responsibility over specific processes in order to learn cru- functions. These initiatives helped to stimulate reflection and to cial skills more quickly and to prepare themselves for the disseminate Enel’s new Open Power vision, as can be seen in complex challenges of the future through proper coaching the implementation of a training program that makes use of “in- and tutoring. cubators” in order to bring out the talents and skills in new hires Individual development plans, based on a range of training me- that they are expected to demonstrate in the new Enel. thods (e.g. mentoring, coaching, mobility, etc.) suited to the specific development needs at hand, have also been defined for people who demonstrate the greatest potential. Diversity and inclusion The performance appraisal process has been handled in line Integration of the various contexts throughout the Group has with previous years, but we have also worked to overhaul made it necessary to assess and take advantage of the we- the entire process in order to make it more accessible at all alth of cultural differences found here. levels of the organization, more focused on feedback, and We have also continued working on the diversity and inclu- more in line with our new values, expectations of conduct, sion project. In January 2015, we began conducting dedica- and the new organization. ted focus groups, interviews with senior management, and The hiring process and related tools have also been revised a survey that focuses on diversity and inclusion in order to in light of the profound transformation that is under way, gather information on issues such as our internal climate and while also adapting them to specific targets and local practi- to monitor employee satisfaction. A sample population of ce. We have introduced innovating hiring systems that ena- employees in the various countries in which Enel operates, ble us to determine whether candidates are a good cultural selected using statistical parameters (such as geography, or- fit and to assess their cross-functional skills, which, together ganizational unit, age, professional category, etc.), was invol- with technical knowledge, are of strategic importance in me- ved in the survey. eting future business challenges. The overall results have led to local initiatives and the prepara- In 2015, we worked to strengthen strategic partnerships in these policies establish a series of actions to be taken that academia and with other centers of excellence of particular will have an immediate impact on the issues encountered. importance to the future of our business, and we have re- At the same time, each country has defined numerous local defined our employer branding policies in order to promote initiatives that better focus on the needs that have emerged tion of specific policies for the Group. For each area studied, Enel’s image within a globally recognized business commu- within their own local contexts. nity, policies that take advantage of a new digital strategy adopted throughout the Group. As concerns training and development in 2015, we confir- Labor relations med the central importance of specialist technical training – Enel complies with the labor laws of the various countries in including both mandatory programs and structured programs which we operate and with the International Labor Organiza- within the academies – together with occupational health tion (ILO) conventions on labor rights (freedom of association and safety training in line with the significant investments and of collective bargaining, consultation, the right to strike, in this direction in previous years. Particular emphasis has etc.), while systematically promoting dialog between the par- been placed on cross-functional training to help facilitate ties and seeking an adequate level of agreement on and parti- the significant strategic and organizational changes and on cipation in Company strategies by employees. language training to support integration within the global Labor relations efforts at the Group level continue to be con- functions in particular. At the same time, training campaigns ducted in accordance with the model established under Enel’s concerning ethics and sustainability were extended to Latin Global Framework Agreement (GFA) signed in Rome in 2013 America and the Enel Green Power Group in 2015. with the Italian federations and with the global federations In particular, the introduction of the new matrix-based organi- IndustriAll and Public Services International. This agreement zation and the profound transformation of HR policies and is based on the principles of human rights, of labor rights and strategies were supported by numerous global training initiati- of the best, most advanced systems of transnational labor ves to accompany this change. This training targeted both the relations for multinational corporations and international orga- various cross-functional levels of management and new global nizations, including the ILO. teams within the business lines and the corporate and service In 2015, we intensified our efforts with regard to information 145 Report on operationsAnnual Report 2015and consultation for both the European and Global Works meeting in Milan in July 2015 at the same time as Enel’s tour Council as concerns the Group’s new organization and the of the national pavilions. At the various meetings of the Select scheduled meetings with the heads of the global business Committee, we also defined joint training efforts on sustaina- lines. The organization of the 2015 Milan Expo and Enel’s ac- bility and economics in November in conjunction with the se- tivities both in our own pavilion and in management of the cond EWC/GWC meeting, which was well received by the va- Expo’s smart city gave us the opportunity to hold the plenary rious members of the Group’s worker-representation bodies. Workplace health and safety The constant commitment of us all, the integration of safety both in our processes and in our training, the reporting and analysis of near misses, rigor in the selection and manage- Enel considers employee health, safety, and general well- ment of contractors, constant control over quality, the sha- being to be the most valuable asset, one to be protected ring of experience throughout the Group, and benchmarking both at work and at home, and we are committed to deve- against the leading international players are all cornerstones loping and promoting a strong culture of safety throughout to Enel’s culture of safety. the world. Safety rates No. Injury frequency rate - Enel Injury severity rate - Enel Serious and fatal injuries at Enel Serious injuries (1) Fatal injuries Total Serious and fatal injuries at contractors Serious injuries (1) Fatal injuries Total 2015 1.27 0.05 3 4 7 24 9 33 2014 1.32 0.07 1 3 4 22 16 38 Change (0.05) (0.02) 2 1 3 2 (7) (5) -3.8% -33.4% - 33.3% 75.0% 9.1% -43.8% -13.2% (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 pro- gnosis 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. Workplace accident statistics reporting of accidents, analysis of their cause, and definition and monitoring of improvement plans. The new version of In 2015, the lost time injury frequency rate (LTIFR) and lost these policies also details the procedures for disclosing and day rate (LDR) for Enel Group employees settled at 0.255 analyzing near misses that could have resulted in serious (down 3% from 2014) and 9.44 (down 33% from 2014), re- harm. spectively. These rates for contractors came to 0.302 (down In accordance with these policies, all serious and fatal in- 28% from 2014) and 10.89 (down 21% from 2014), respec- juries to Enel employees and the employees of Enel con- tively. tractors and other significant, non-serious events have been In 2015, there were 13 fatal accidents for the Enel Group (6 investigated by a team of experts. fewer than in 2014), of which 4 were Enel employees and 9 These investigations have found the causes of the injuries were employees of Enel contractors. to be due, first and foremost, to unsafe conduct, followed In 2015, we updated our policies for the classification, by deficiencies in work planning, management and super- communication, analysis and reporting of incidents, which vision. establish the roles and procedures that ensure the timely Actions for improvement emerging from this analysis are 146 Annual Report 2015constantly monitored until their completion. Steps have also order to minimize or eliminate risks both to workers and to been taken in relation to companies found to be in breach the local communities. Plant, machinery and equipment are of contract (e.g. contract termination or suspension of cer- systematically controlled and periodically maintained in order tification). to ensure they function properly in accordance with applicable For the purpose of prevention, we have also defined and laws and regulations and with industry best practice. implemented country-level improvement plans, which have reduced injury rates in all geographical areas compared to 2014. Infrastructure safety and technological innovation Safety in tender processes New projects launched in 2015 concerning innovation in sa- Enel follows companies closely, from the selection process and on through execution of the given project. The new model of vendor qualification for 2015 features a stricter selection process based on health and safety performance, including an in-depth pre-qualification audit for the vendor categories that present the greatest safety risks. In 2015, a global model was added to the vendor rating system which establishes the impact on vendor rating of significant injury to contractor employees. In October 2015, the fifth edition of the General Contracting Conditions (GCC) for the Enel Group went into effect. The main changes in this edition include an updated list of health and safety violations and the classification of these violations into three levels of severity, as well as the inclusion of sub- contracting guidelines in the general section. These guide- lines establish the conditions under which subcontracting is allowed, the minimum safety requirements to be possessed by subcontractors used when executing contracts with Enel Group companies, and the safety requirements that the con- tractors and any subcontractors must observe. In 2015, Contractor Safety Day was observed throughout the Group, which featured the organization of contractor workshops designed to discuss and promote health and safety improvement efforts. In concert with the activities aimed at increasing contrac- tor awareness of health and safety issues, Enel has conti- nued with field inspections and monitoring of works done by contractors. During the year, over 350,000 contractor audits were conducted throughout the Group, an increase of 32% compared to the previous year. Safety for the community and other third parties fety included: > “Virtual Reality 3D Simulator for Health and Safety Training”, a project to increase employee awareness of safe, responsible conduct by learning from their mista- kes. The virtual-reality 3D simulator was developed by a cross-functional working group consisting of R&D, H&S and ICT, together with the Sant’Anna School of Advanced Studies, Pisa; > “Intrinsic Safety”, a project focused on the analysis of existing machinery and the design of new technologies in order to reduce employee exposure to risk in the workplace. The project emphasizes the sharing of infor- mation and coordination between the H&S and Engine- ering units in order to define, validate and disseminate a method for identifying latent risks in machinery, systems or equipment; > “Virtual Check Point Contractors”, an application used to monitor contractor employees and equipment during on-site inspections. Using ID badges provided to contrac- tor employees, we can determine whether people found on site are those specified by the contractor and, more specifically, if they have the qualifications needed for the activities assigned; > pilot projects at production facilities concerning the use of inspection drones in flues, furnaces and ducting in order to prevent risks related to human workers accessing the- se areas directly; > implementation in Spain of the smartphone and tablet app APP5RO, which is used to provide photographic do- cumentation of the proper execution of the various steps of electrical work in accordance with Enel’s five golden ru- les (namely: 1. Completely isolate the system; 2. Protect against reconnection and place warning signs; 3. Ensure there is no current in the system; 4. Ensure proper groun- ding and short-circuiting; 5. Mark off the working area and Enel facilities throughout our territory have been constructed ensure the protection of nearby workers); in accordance with applicable laws and regulations and are > testing in Spain of a special helmet sensor that can de- equipped with health and safety management systems in tect a current (MV) prior to entering a hazardous area 147 Report on operationsAnnual Report 2015and individual wearable sensors in Latin America that conduct self-checks for breast cancer. sound an alarm when detecting a current during schedu- Given the healthcare crises around the world, we have also laun- led dead-circuit activities. ched awareness campaigns to protect employees traveling to In 2015, we completed the New Hybrid Portable Lad- countries at risk. der project in Romania to develop (electrically) safer, more In 2015, as a part of our health culture, we conducted the People comfortable ladder technology. This new ladder is a first for Care global assessment based in international standards, which Enel in that it features (non-conducting) glass-resin upper looked at the state of implementation of programs, projects and section and two aluminum sections that reduce the ladder’s policies in the countries in which we operate and in a range of weight from 55 kg to 32. We have also developed a special areas, including organizational health and wellbeing. system for anchoring the ladder to pylons (regardless of their In 2015, within the scope of efforts to enhance the Company’s shape) and for anchoring the worker to the ladder. Also in Ro- culture of work-life balance, work continued on implementation mania, we have developed a custom approach to working on of the Parental Program to optimize maternity management, pylons on which fiber-optic cables have been installed below which, in Italy, also expanded the provision of in-house daycare electrical lines. facilities in order to assist employees with children between the For a number of years now, we have also been pursuing ages of 3 to 12 during periods in which schools are closed. a plan to improve the infrastructure standards of the Com- The course Mamme in equilibrio (Balanced Mothers) also conti- pany’s vehicle fleet, which has included the adoption of new nued in 2015. This program is designed for employees returning safety systems and devices, such as a black box that ma- from maternity leave in order to help them reflect on ways of kes it possible to provide driver assistance and support both balancing their professional and personal lives. when driving and in the event of an emergency. Country-specific health initiatives have also been launched alongside the various global activities. Development of the Culture of Safety: communication and training The seventh edition of International Health and Safety Week was held from June 15 to 21, 2015. This event represents a global opportunity for Enel to reflect on issues of health and safety for all our employees. There were also several communication campaigns concer- ning health and safety during the year, focusing on areas of particular importance to the organization. The Listentothesigns road-safety campaign, featuring the di- rect involvement of the Group’s CEO, began in September in order to promote safe driving. In 2015, we provided nearly 900,000 hours of safety training and awareness activities in order to increase the specific skills and knowledge of workers throughout the Group. Health In October 2015, in conjunction with the efforts of the World Health Organization to prevent breast cancer, we launched a global awareness campaign featuring examinations with spe- cialist physicians and talks with women who have been cured of cancer, as well as the distribution of useful advice and other information, free screenings, and videos demonstrating how to 148 Annual Report 2015Climate strategy and the environment Net efficient capacity by primary energy source 2015 2014 Change GW Net efficient thermal capacity: - coal - CCGT - fuel oil/gas Total Net efficient nuclear capacity Net efficient renewable capacity: - hydroelectric - wind - geothermal - biomass and co-generation - other Total Total net efficient capacity 16,841 16,099 14,637 47,577 5,132 29,046 6,653 833 99 402 37,033 89,742 Net efficient capacity by geographical area GW Italy Iberian Peninsula Latin America Russia Slovakia North America Romania Belgium Greece Bulgaria India South Africa 2015 30,715 22,912 19,179 8,944 4,032 2,506 534 406 290 42 172 10 17,048 16,112 21,018 54,178 5,132 29,653 5,774 833 100 442 36,802 96,112 2014 36,823 23,549 18,300 9,107 4,968 2,083 534 406 290 42 - 10 (207) (13) (6,381) (6,601) - (607) 879 - (1) (40) 231 (6,370) Change (6,108) (637) 879 (163) (936) 423 - - - - 172 - -1.2% -0.1% -30.4% -12.2% - -2.0% 15.2% - -1.0% -9.0% 0.6% -6.6% -16.6% -2.7% 4.8% -1.8% -18.8% 20.3% - - - - 100.0% - -6.6% 149 Total net efficient capacity 89,742 96,112 (6,370) Report on operationsAnnual Report 2015Net electricity generation by primary energy source 2015 2014 Change GWh Net thermal electricity generation: - coal - CCGT - fuel oil/gas Total Net nuclear electricity generation Net renewable generation: - hydroelectric - wind - geothermal - biomass and co-generation - other Total Total net electricity generation 85,677 40,542 28,682 154,901 39,837 65,939 16,204 6,205 241 685 89,274 284,012 81,991 37,395 29,654 149,040 39,182 74,315 14,054 5,954 166 390 94,879 283,101 2014 71,824 74,040 64,753 42,376 20,550 6,674 1,268 690 488 347 83 8 - Net electricity generation by geographical area GWh Italy Iberian Peninsula Latin America Russia Slovakia North America Romania Belgium Greece France Bulgaria South Africa India 2015 68,519 77,444 67,114 42,090 18,292 7,368 1,330 1,150 549 - 90 18 48 Total net electricity generation 284,012 283,101 Other generation ratios Generation from renewable resources (% of total) “Zero-emission” generation (% of total) ISO 14001-certified net efficient capacity (% of total) Average efficiency of thermal plants (%) (1) Specific emissions of CO2 from net generation (gCO2/kWheq) (2) Specific water withdrawal (l/kWheq) 2015 31.4 45.5 97.6 38.1 409 0.60 2014 33.5 47.4 94.3 37.8 395 0.64 3,686 3,147 (972) 5,861 655 (8,376) 2,150 251 75 295 (5,605) 911 (3,305) 3,404 2,361 (286) (2,258) 694 62 460 61 (347) 7 10 48 911 (2.1) (1.9) 3.3 0.3 14 (0.04) Change Change 4.5% 8.4% -3.3% 3.9% 1.7% -11.3% 15.3% 4.2% 45.2% 75.6% -5.9% 0.3% -4.6% 4.6% 3.6% -0.7% -11.0% 10.4% 4.9% 66.7% 12.5% -100.0% 8.4% - - 0.3% -6.3% -4.0% 3.5% 0.8% 3.5% -6.3% (1) Percentages calculated using a new approach that does not include the oil and gas plants in the 2015-2016 disposal program or heat. (2) Specific emissions have been calculated by taking account of the total emissions from simple thermal generation, combined electrical and heat, 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). 150 Annual Report 2015In 2015, the 21st edition of the Paris Climate Conference luntary emissions reduction market, which is intended for (COP21), a part of the United Nations Framework on Cli- parties (e.g. companies, institutions, end users, etc.) who mate Change, had the goal of involving the signing nations intend to monitor or neutralize the carbon footprint of their in joint efforts to reduce climate-changing emissions over various (internal and external) activities (e.g. publications, the long term. The agreement reached among the nations calls for main- taining the temperature increase to within 2 °C above pre- products and services, events, etc.). All of these initiatives are associated with the “CO2 NEUTRAL” trademark that Enel registered in 2011. industrial levels and seeking to remain below 1.5 °C, which In 2015, specific emissions of nitrogen oxides remained vir- could be achieved by reaching peak emissions as soon as tually constant, while particulates and specific water con- possible and achieving carbon neutrality by the second half sumption declined by 30% and 6.3%, respectively, from of this century. 2014, both of which are levels reached five years ahead of For the occasion, Enel promoted numerous initiatives in the targets set for 2020. Given this encouraging performan- support of the agreement and in recognition of the central ce, Enel will now be considering setting new medium-term importance for global energy companies to take responsibi- targets in these areas. lity for combatting climate change. For years now, we have In 2015, we posted a 10.4% increase in specific emissions worked to reduce greenhouse-gas emissions in Europe and of sulfur dioxide, mainly attributable to our Slovakian faci- in all nations in which we operate and have implemented lities. a long-term strategy to achieve carbon neutrality by 2050, A key element of our environmental policy is the gradual thereby helping to achieve the UN’s 13th Sustainable De- application of our internationally recognized Environmental velopment Goal (SDG) by taking urgent action to combat Management Systems to all Enel Group operations. climate change and its effects. This includes ISO 14001 certification, which currently co- Enel is seeking to achieve long-term decarbonization by vers roughly 97.6% of net efficient capacity, increasing continuing to develop renewable energy as a part of our from 2014 thanks to the installed capacity of the Enel Green generation mix. Power Group and the divestment of marginal plants mainly In 2015, on the back of the positive results achieved in the in Italy. The remaining 2.4% is attributable to a number of reduction of CO2 emissions in previous years, Enel has set new targets for 2020 as a part of our 2016 plan, making plants being added to the long-term divestment program and to new installed capacity in India and Uruguay in 2015, the shift from a reduction of 18% to the more challenging which will be added to the certification program in 2016. target of 25% compared to 2007 (thereby lowering the th- In addition to the environmental management systems, reshold from <380 CO2 g/kWh to <350 CO2 g/kWh). Compared to 2014, 2015 saw an increase of 3.5% in CO2 emissions, a temporary phenomenon caused by a greater opportunities for improvement and priority areas for action are identified with the help of the Mapping of Environmen- tal Compliance (MAPEC) methodology, which makes it use of thermal-power generation made necessary in order possible to map the main areas of development in envi- to offset, together with wind power, a decline in hydroelec- ronmental governance. tric power due to low levels of rain during the year. In the nuclear power field, Enel is publicly committed to Today, over 45% of the power Enel generates comes from ensuring that our plants adopt a clear nuclear safety policy zero-emission sources. and that those facilities are operated so as to ensure ab- In 2015, Enel Green Power installed approximately 870 solute priority for safety and protection of employees, the MW of new wind-power capacity, primarily in the United general public, and the environment. States, Mexico, Brazil and, more recently, in Uruguay, to Enel’s nuclear safety policy, which was approved in 2010 reach a total installed renewable-energy capacity of 37,033 and is published on the corporate website, promotes excel- MW, which represents 41% of the total capacity of our ge- lence in all plant operations, adopting a rationale that goes neration assets. beyond mere regulatory compliance and seeks instead to This confirms the Group’s ongoing commitment to deve- ensure the adoption of management approaches that incor- loping carbon-free power generation, as presented in our porate the principles of continuous improvement and safe strategic plan in November, and to reaching 52% of total management of risks. capacity by 2019. For a number of years, Enel has also been active on the vo- 151 Report on operationsAnnual Report 2015Water resource management Vendor management Water is an essential part of electricity generation, and Enel In conducting business and managing relationships with is fully aware that the availability of this resource is seen suppliers, Enel is inspired by the principles contained in the as being a critical part of future energy scenarios. Enel has Code of Ethics, the Zero-Tolerance-of-Corruption Plan, the long sought to enhance the efficiency of its management Compliance Model under Legislative Decree 231/2001, and of the water we use, and we conduct ongoing monitoring our Human Rights Policy. of all power plants located in areas threatened by water Enel awards procurement contracts for works, services scarcity at the following levels of analysis: and supplies in accordance with the provisions of law and > mapping of the production sites located in vulnerable with the principles of cost-effectiveness, fairness, compe- areas in terms of water availability; titiveness, and disclosure and following procurement pro- > identification of “critical” production sites, i.e. those cedures that ensure the utmost transparency, objectivity, with fresh water supplies; and equality of treatment for all participating firms. Speci- > adaptations to plans or processes aimed at maximizing fic standards of sustainability are also called for within the the use of waste water and sea water; qualification process, in procurement decisions, in contract > monitoring of climate and vegetation data for each site. language, and in the procedures for verifying the perfor- Globally, Enel returns roughly 99% of the water used, and mance of vendors. only about 5% of the Group’s total production uses and/or In 2015, we defined and adopted new procedures for ve- consumes fresh water in water-stressed areas. rifying the “requirements of professionalism” of suppliers In 2015, in line with the goal of reducing consumption by aimed at strengthening the existing system of controls by 10% by 2020, overall water consumption totaled 174 million way of more incisive efforts to combat corruption, specific cubic meters, a reduction of 6% compared to 2014 due to criteria for analyzing documentation, verification procedu- an increase in operations for more efficient thermal power res, and the promotion of a culture of respecting rules and plants. Specific consumption in 2015 came to 0.60 l/kWh, of ethical conduct. a reduction of 6.3% from 2014, thereby reaching, ahead Enel has implemented a supplier-qualification system that of schedule, Enel’s goal of reducing water consumption by includes a detailed assessment of companies wanting to 10% from its 2010 level by 2020. participate in provisioning processes. This system is a sort Preserving biodiversity of guarantee for Enel in that it provides an up-to-date list of suppliers with a certain (legal, financial, technical, organiza- tional, ethical, and safety-related) reliability, and it enables Preserving biodiversity is one of the strategic objectives of suppliers, in accordance with applicable laws and regula- Enel’s environmental policy. tions, to be involved in the Group’s calls for tender. Worker The Group promotes projects in the various areas in which health and safety and respect for the environment are im- we operate in order to help protect local species, their natu- portant requirements within the supplier qualification pro- ral habitats, and the local ecosystems in general. cess. In particular, for all product groups involved in works These projects cover a vast range of areas, including: mo- to be contracted out, suppliers are assessed on the basis of nitoring; programs and projects to protect specific species; the Safety Index, which considers the organizational arran- methodological research and other studies; repopulation gements of the supplier that are intended to ensure com- and reforestation; the construction of infrastructure sup- pliance with the relevant standards and oversight (including port to promote the presence and activities of various spe- OHSAS 18001 certification). For product groups with an cies (e.g. artificial nests along power-distribution lines). environmental impact, suppliers must also implement an In 2015, Group biodiversity policies were established which ISO 14000-compliant environmental management system. define a number of principles to be followed during project In 2015, we launched Project Sustainable Supply Chain in selection and execution throughout the various levels in the collaboration with the Procurement and Sustainability areas chain of responsibility. 152 in order to standardize supplier selection and assessment throughout the Enel Group in terms of environmental im- pact, safety, and the respect of human rights. In our procurement contracts for works, services and Annual Report 2015supplies, Enel requires contractors and subcontractors, reserves the right to carry out control and monitoring activi- through specific conditions in Group contracts, to respect ties in relation to vendors and to terminate contracts in the and protect internationally recognized human rights and event of violations. to respect ethical and social obligations concerning: child Finally, in January 2015, Enel established a single, global re- labor and protection of women, equal treatment, non-di- gistration point for suppliers and for all Enel Group compa- scrimination, freedom to unionize, freedom of association nies. This represents a single interface for the entire global and representation, prevention of forced labor, safety and procurement community (PortalOne). This system enables environmental protection requirements, health and sanitary suppliers to interact with all companies of the Enel Group conditions and conditions concerning work rules, pay, so- in real time and to access all available services, including: cial security contributions, insurance and taxes. responding to invitations to tender, managing their qualifi- In order to ensure compliance with these obligations, Enel cation process, viewing their own vendor rating, etc. 153 Report on operationsAnnual Report 2015Related parties As an operator in the field of generation, distribution, tran- directly or indirectly controlled by the Italian State, the sport 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 Relationship Nature of main transactions Acquirente Unico - Single Buyer Fully controlled (indirectly) by the Ministry for the Economy and Finance Purchase of electricity for the enhanced protection market GME - Energy Markets Operator Fully controlled (indirectly) 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 GSE - Energy Services Operator Fully controlled (directly) by the Ministry for the Economy and Finance Sale of subsidized electricity Payment of A3 component for renewable resource incentives Terna Eni Group Finmeccanica Group Poste Italiane Group Indirectly controlled by the Ministry for the Economy and Finance Sale of electricity on the Ancillary Services Market Purchase of transport, dispatching and metering services Directly controlled by the Ministry for the Economy and Finance Sale of electricity transport services Purchase of fuels for generation plants, storage services and natural gas distribution Directly controlled by the Ministry for the Economy and Finance Purchase of IT services and supply of goods Fully controlled (directly) by the Ministry for the Economy and Finance Purchase of postal services Finally, Enel also maintains relationships with the pension are determined by the Authority for Electricity, Gas and the funds FOPEN and FONDENEL, Fondazione Enel and Enel Water System. Cuore, an Enel non-profit company devoted to providing social and healthcare assistance. For more details on transactions with related parties, plea- All transactions with related parties were carried out on se see the discussion in note 47 to the consolidated finan- normal market terms and conditions, which in some cases cial statements. 154 Annual Report 2015Reconciliation of shareholders’ equity and net income of Enel SpA and the corresponding consolidated figures Pursuant to CONSOB Notice DEM/6064293 of July 28, results for the year and shareholders’ equity with the corre- 2006, the following table provides a reconciliation of Group sponding figures for the Parent Company. Millions of euro Income statement Shareholders’ equity Income statement Shareholders’ equity at Dec. 31, 2015 at Dec. 31, 2014 Financial statements - Enel SpA 1,011 24,880 558 25,136 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 Translation reserve Consolidation differences at the Group consolidation level 13,510 (69,180) (3,211) (82,169) (9,287) - (13) 67,680 (1,956) 9,281 20,710 - (890) Intercompany dividends (2,737) - (15,715) Elimination of unrealized intercompany profits, net of tax effects and other minor adjustments TOTAL SHAREHOLDERS OF THE PARENT COMPANY NON-CONTROLLING INTERESTS CONSOLIDATED FINANCIAL STATEMENTS (288) 2,196 1,176 3,372 1,671 32,376 19,375 51,751 (935) 517 255 772 79,257 (1,321) 9,294 - 1,309 31,506 19,639 51,145 155 Report on operationsAnnual Report 2015156 Annual Report 2015Consolidated financial statements 157 Report on operationsAnnual Report 2015Financial statements Consolidated income statement Millions of euro Notes 2015 2014 of which with related parties of which with related parties 5,751 367 7,595 2,440 53 46 23 28 7.a 7.b [Subtotal] 8.a 8.b 8.c 8.d 8.e 8.f [Subtotal] 9 10 11 10 11 12 13 14 14 14 14 73,076 2,582 75,658 37,644 16,457 5,313 7,612 2,654 (1,539) 68,141 168 7,685 2,455 1,563 1,505 4,969 52 5,281 1,909 3,372 - 3,372 2,196 1,176 0.23 0.23 0.23 0.23 5,583 314 7,089 2,431 54 (24) 15 29 73,328 2,463 75,791 36,928 17,179 4,864 12,670 2,362 (1,524) 72,479 (225) 3,087 2,078 1,248 916 5,540 (35) (78) (850) 772 - 772 517 255 0.05 0.05 0.05 0.05 Revenue Revenue from sales and services Other revenue and income Costs Electricity, gas and fuel purchases Services and other materials Personnel Depreciation, amortization and impairment losses Other operating expenses Capitalized costs Net income/(expense) from commodity contracts measured at fair value Operating income Financial income from derivatives Other financial income Financial expense from derivatives Other financial expense Share of income/(losses) of 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) Attributable to shareholders of the Parent Company Attributable to non-controlling interests Basic earnings/(loss) per share attributable to shareholders of the Parent Company (euro) Diluted earnings/(loss) per share attributable to shareholders of the Parent Company (euro) Basic earnings/(loss) per share from continuing operations attributable to shareholders of the Parent Company (euro) Diluted earnings/(loss) per share from continuing operations attributable to shareholders of the Parent Company (euro) 158 Annual Report 2015          Statement of consolidated comprehensive income for the year 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 the other comprehensive income of equity investments accounted for using the equity method Change in the fair value of financial assets available for sale Change in translation reserve Other comprehensive income not recyclable to profit or loss Remeasurement of net employee benefit liabilities/(assets) Total other comprehensive income/(loss) for the year 32 Total comprehensive income/(loss) for the year Attributable to: - shareholders of the Parent Company - non-controlling interests 2015 3,372 359 29 25 (1,743) 184 (1,146) 2,226 2,191 35 2014 772 (347) (13) (23) (717) (307) (1,407) (635) (205) (430) 159 Consolidated financial statementsAnnual Report 2015      Consolidated balance sheet at Dec. 31, 2015 at Dec. 31, 2014 of which with related parties of which with related parties Notes 15 18 19 20 21 22 23 24 25 73,307 144 15,235 13,824 7,386 607 2,343 3,274 877 [Total] 116,997 26 27 23 28 29 [Total] 30 2,904 12,797 636 5,073 2,381 2,898 10,639 37,328 6,854 161,179 937 2 135 73,089 143 16,612 14,027 7,067 872 1,335 3,645 885 117,675 3,334 12,022 788 5,500 3,984 3,465 13,088 42,181 6,778 166,634 1,220 142 Millions of euro ASSETS Non-current assets Property, plant and equipment Investment property Intangible assets Goodwill Deferred tax assets Equity investments accounted for using the equity method Derivatives Other non-current financial assets Other non-current assets Current assets Inventories Trade receivables Income tax receivables Derivatives Other current financial assets Other current assets Cash and cash equivalents Assets classified as held for sale TOTAL ASSETS 160 Annual Report 2015      Millions of euro Notes LIABILITIES AND SHAREHOLDERS’ EQUITY at Dec. 31, 2015 at Dec. 31, 2014 of which with related parties of which with related parties Equity attributable to the shareholders of the Parent Company Share capital Reserves Retained earnings/(Loss carried forward) Non-controlling interests Total shareholders’ equity Non-current liabilities Long-term borrowings Employee benefits Provisions for risks and charges - non-current Deferred tax liabilities Derivatives Other non-current liabilities Current liabilities Short-term borrowings Current portion of long-term borrowings Provisions for risk and charges - current Trade payables Income tax payable Derivatives Other current financial liabilities Other current liabilities Liabilities included in disposal groups classified as held for sale Total liabilities TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 9,403 3,352 19,621 32,376 19,375 51,751 44,872 2,284 5,192 8,977 1,518 1,549 [Total] 32 33 34 35 21 23 36 [Total] 64,392 2,155 5,733 1,630 33 33 35 37 23 38 40 [Total] 31 9,403 3,362 18,741 31,506 19,639 51,145 48,655 3,687 4,051 9,220 2,441 1,464 69,518 3,252 5,125 1,187 4 24 2 11,775 2,911 13,419 3,159 585 5,509 1,063 11,222 39,672 5,364 109,428 161,179 14 253 5,441 1,177 10,827 40,681 5,290 115,489 166,634 3 161 Consolidated financial statementsAnnual Report 2015       Statement of changes in consolidated shareholders’ equity Share capital and reserves attributable to the shareholders of the Parent Company Share capital Share premium reserve Legal reserve Other reserves Reserve from translation of financial statements in currencies other than euro Reserve from measurement of cash flow hedge financial instruments Reserve from measurement of financial instruments AFS Reserve from equity Reserve from Reserve from investments remeasurement disposal of Reserve from Equity attributable to accounted for of net defined equity interests transactions in Retained the shareholders using the equity benefit plan without loss of non-controlling earnings/(Loss of the Parent Non-controlling shareholders’ method liabilities/(assets) control interests carried forward) Company interests At January 1, 2014 9,403 5,292 1,881 2,262 (1,084) (1,592) 128 (58) (528) 721 62 Dividends and interim dividends Transactions in non-controlling interests Change in scope of consolidation Comprehensive income for the period of which: - other comprehensive income/(loss) for the period - net income/(loss) for the period - - - - - - - - - - - - - - - - - - - - - - - - - 6 (243) (243) - - - 21 (235) (235) - At December 31, 2014 9,403 5,292 1,881 2,262 (1,321) (1,806) Dividends and interim dividends Transactions in non-controlling interests Change in scope of consolidation Comprehensive income for the period of which: - other comprehensive income/(loss) for the period - net income/(loss) for the period - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (635) 465 (635) - 465 - At December 31, 2015 9,403 5,292 1,881 2,262 (1,956) (1,341) - - - (23) (23) - 105 - - - 25 25 - 130 162 - - 3 - - - - (2,831) (255) (3) (19) 59 (202) (19) (202) (74) (671) (2,113) (193) (2) (3) 120 20 - (54) (551) (2,115) (196) - - - - - - - - - - - - - - - - - - - - - - - - - - 19,454 (1,222) - (8) 517 517 18,741 (1,316) - - - - 2,196 19,621 35,941 (1,222) (3,086) 78 (205) - (722) 517 31,506 (1,316) (5) - (5) 2,196 32,376 16,891 (1,541) 5,385 (666) (430) (685) 255 19,639 (767) 469 (1) 35 (1,141) 1,176 19,375 20 120 2,196 2,191 Total equity 52,832 (2,763) 2,299 (588) (635) (1,407) 772 51,145 (2,083) 464 (1) 2,226 (1,146) 3,372 51,751 Annual Report 2015  Share capital and reserves attributable to the shareholders of the Parent Company Reserve from translation Share capital Share premium reserve of financial Reserve from statements measurement Reserve from in currencies of cash flow measurement Legal Other other than hedge financial of financial reserve reserves euro instruments instruments AFS Reserve from equity investments accounted for using the equity method Reserve from remeasurement of net defined benefit plan liabilities/(assets) Reserve from disposal of equity interests without loss of control Reserve from transactions in non-controlling interests Retained earnings/(Loss carried forward) Equity attributable to the shareholders of the Parent Company Non-controlling interests Total shareholders’ equity At January 1, 2014 9,403 5,292 1,881 2,262 (1,084) (1,592) 128 (58) (528) Statement of changes in consolidated shareholders’ equity At December 31, 2014 9,403 5,292 1,881 2,262 (1,321) (1,806) Dividends and interim dividends Transactions in non-controlling interests Change in scope of consolidation Comprehensive income for the period of which: - other comprehensive income/(loss) for the period - net income/(loss) for the period Dividends and interim dividends Transactions in non-controlling interests Change in scope of consolidation of which: - other comprehensive income/(loss) for the period - net income/(loss) for the period - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 6 - - - - - (243) 21 (235) (243) (235) (635) 465 - - - - - - - At December 31, 2015 9,403 5,292 1,881 2,262 (1,956) (1,341) (23) (23) 105 - - - - - - - 25 - 130 Comprehensive income for the period (635) 465 25 20 120 - - 3 (19) (19) - (74) - - - 20 - (54) 721 - 62 - 19,454 (1,222) (671) (2,113) (193) - - 59 (202) (202) - - - - 120 - (2,831) (255) (3) - - - - - - - - (2) - - - - - (3) - - - - (551) (2,115) (196) 35,941 (1,222) (3,086) 78 (205) - (722) 517 31,506 (1,316) (5) - - (8) 517 - 517 18,741 (1,316) - - 2,196 2,191 - 2,196 19,621 (5) 2,196 32,376 16,891 (1,541) 5,385 (666) (430) (685) 255 19,639 (767) 469 (1) 35 (1,141) 1,176 19,375 52,832 (2,763) 2,299 (588) (635) (1,407) 772 51,145 (2,083) 464 (1) 2,226 (1,146) 3,372 51,751 163 Consolidated financial statementsAnnual Report 2015  Consolidated statement of cash flows Millions of euro Notes 2015 2014 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 Financial (income)/expense Interest and other financial income received Interest and other financial expense paid (Gains)/Losses from disposals and other non-monetary items Taxes paid Accruals to provisions Exchange rate adjustments of foreign currency assets and liabilities (including cash and cash equivalents) Changes in net current assets: - inventories - trade receivables - trade payables - provisions - other assets and liabilities 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) Financial debt (repayments and other changes in net financial debt) Transactions in non-controlling interest Transaction costs in the 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 beginning of the period (1) Cash and cash equivalents at the end of the period (2) 5,281 770 6,002 2,246 1,715 (4,326) (412) 8.d 8.d 11 11 11 13 (1,516) 15 (29) 1,448 856 (2,492) 274 (2,329) (581) (1,243) 1,387 9,572 (7,000) (762) (78) 1,350 69 (6,421) 1,474 (5,015) 456 - 26 27 37 35 15 19 5 5 33 33 32 32 (2,297) (5,382) (234) (2,465) 13,255 10,790 23 (28) (78) 1,709 10,212 2,581 1,326 (4,043) (610) (1,396) 911 1,285 (1,839) (102) 283 (1,283) (248) 1,311 58 (549) (1,773) (6) 9 39 10,058 (6,021) (680) (73) 312 325 (6,137) 4,582 (2,400) 1,977 (50) (2,573) 1,536 (102) 5,355 7,900 13,255 (1) Of which cash and cash equivalents equal to €13,088 million at January 1, 2015 (€7,873 million at January 1, 2014), short-term securities equal to €140 million at January 1, 2015 (€17 million at January 1, 2014) and cash equivalents pertaining to “Assets held for sale” equal to €27 million at January 1, 2015 (€10 million at January 1, 2014). (2) Of which cash and cash equivalents equal to €10,639 million at December 31, 2015 (€13,088 million at December 31, 2014), short-term securities equal to €1 million at December 31, 2015 (€140 million at December 31, 2014) and cash equivalents pertaining to “Assets held for sale” equal to €150 million at December 31, 2015 (€27 million at December 31, 2014). 164 Annual Report 2015      Notes to the consolidated financial statements 1 Form and content of the financial statements paragraph 3, of Legislative Decree 38 of February 28, 2005. 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 rela- Enel SpA has its registered office in Viale Regina Margherita ted notes. 137, Rome, Italy, and since 1999 has been listed on the Milan The assets and liabilities reported in the consolidated balance Stock Exchange. Enel is an energy multinational and is one sheet are classified on a “current/non-current basis”, with se- of the world’s leading integrated operators in the electricity parate reporting of assets held for sale and liabilities included and gas industries, with a special focus on Europe and Latin in disposal groups held for sale. Current assets, which include America. cash and cash equivalents, are assets that are intended to The consolidated financial statements for the period ended be realized, sold or consumed during the normal operating December 31, 2015 comprise the financial statements of cycle of the Group or in the 12 months following the balance Enel SpA, its subsidiaries and Group holdings in associates sheet date; current liabilities are liabilities that are expected to and joint ventures, as well as the Group’s share of the as- be settled during the normal operating cycle of the Group or sets, liabilities, costs and revenue of joint operations (“the within the 12 months following the close of the financial year. Group”). A list of the subsidiaries, associates, joint opera- The consolidated income statement is classified on the basis tions and joint ventures included in the scope of consolida- of the nature of costs, with separate reporting of net income/ tion is attached. (loss) from continuing operations and net income (loss) from The consolidated financial statements were approved for pu- discontinued operations attributable to shareholders of the blication by the Board of Directors on March 22, 2016. Parent Company and to non-controlling interests. These financial statements have been audited by Reconta The indirect method is used for the consolidated cash flow Ernst & Young SpA. Basis of presentation statement of cash flows, with separate reporting of any cash flows by operating, investing and financing activities associa- ted with discontinued operations. In particular, although the Group does not diverge from the The consolidated financial statements for the year ended provisions of IAS 7 in the classification of items: December 31, 2015 have been prepared in accordance with > cash flows from operating activities report cash flows international accounting standards (International Accounting from core operations, interest on loans granted and Standards - IAS and International Financial Reporting Stan- obtained and dividends received from joint ventures or dards - IFRS) issued by the International Accounting Stan- associates; dards Board (IASB), the interpretations of the International > investing/disinvesting activities comprise investments in Financial Reporting Interpretations Committee (IFRIC) and property, plant and equipment and intangible assets and the Standing Interpretations Committee (SIC), recognized in disposals of such assets, including the effects of business the European Union pursuant to Regulation 2002/1606/EC combinations in which the Group acquires or loses con- and in effect as of the close of the year. All of these stan- trol of companies, as well as other minor investments; dards and interpretations are hereinafter referred to as the > cash flows from financing activities include cash flows “IFRS-EU”. generated by liability management transactions, dividen- The financial statements have also been prepared in confor- ds paid to non-controlling interests by the Parent Com- mity with measures issued in implementation of Article 9, pany or other consolidated companies and the effects of 165 Consolidated financial statementsAnnual Report 2015transactions in non-controlling interests that do not chan- involves both the current and future periods, the change is ge the status of control of the companies involved; recognized in the period in which the revision is made and in > a separate item is used to report the impact of exchange the related future periods. rates on cash and cash equivalents and their impact on In order to enhance understanding of the financial state- profit or loss is eliminated in full in order to neutralize the ments, the following sections examine the main items af- effect on cash flows from operating activities. fected by the use of estimates and the cases that reflect For more information on cash flows as reported in the state- management judgments to a significant degree, undersco- ment of cash flows, please see the note on “cash flows” in ring the main assumptions used by managers in measuring the report on operations. these items in compliance with the IFRS-EU. The critical The income statement, the balance sheet and the statement element of such valuations is the use of assumptions and of cash flows report transactions with related parties, the de- professional judgments concerning issues that are by their finition of which is given in the next section below. very nature uncertain. The consolidated financial statements have been prepared Changes in the conditions underlying the assumptions and on a going concern basis using the cost method, with the judgments could have a substantial impact on future results. exception of items measured at fair value in accordance with IFRS, as explained in the measurement bases applied to each Use of estimates individual item, and of non-current assets and disposal groups classified as held for sale, which are measured at the lower of their carrying amount and fair value less costs to sell. The consolidated financial statements are presented in euro, the functional currency of the Parent Company Enel SpA. All figures are shown in millions of euro unless stated otherwise. The consolidated financial statements provide comparative information in respect of the previous period. 2 Accounting policies and measurement criteria Use of estimates and management judgment Revenue recognition Revenue from sales to customers is recognized on an accruals basis on the basis of the fair value of the services provided. Revenue from sales of electricity and gas to retail customers is recognized at the time the electricity or gas is supplied and includes, in addition to amounts invoiced on the basis of periodic meter readings (pertaining to the year), an estimate of the value of electricity and gas sold during the period but not yet invoiced, which is equal to the difference between the amount of electricity and gas delivered to the distribu- tion network and that invoiced in the period, taking account of any network losses. Revenue between the date of the last meter reading and the end of the year is based on esti- mates of the daily consumption of individual customers cal- culated on the basis of their consumption record, adjusted to take account of weather conditions and other factors that may affect estimated consumption. Revenue from the transport of electricity is recognized when Preparing the consolidated financial statements under IFRS- the services are rendered to distribution customers even if EU requires management to take decisions and make esti- they have not yet been invoiced. That revenue is determi- mates and assumptions that may impact the value of reve- ned on the basis of the amounts that have actually transi- nues, costs, assets and liabilities and the related disclosures ted along the distribution network, net of estimated losses. concerning the items involved as well as contingent assets Where provided for in the specific local regulations, such and liabilities at the balance sheet date. The estimates and revenue is adjusted to take account of the restrictions and management’s judgments are based on previous expe- mandatory rates established by the Authority for Electricity, rience and other factors considered reasonable in the cir- Gas and the Water System in Italy or the equivalent national cumstances. They are formulated when the carrying amount organizations in other countries. Where the inclusion of in- of assets and liabilities is not easily determined from other vestments in rates, which gives rise to the operator’s right sources. The actual results may therefore differ from these to receive the amount, in the year in which they are carried estimates. The estimates and assumptions are periodically out is already virtually certain, the corresponding revenue is revised and the effects of any changes are reflected through recognized on an accrual basis on the basis of a preliminary profit or loss if they only involve that period. If the revision estimate of the investments carried out during the year. 166 Annual Report 2015Pension plans and other post-employment benefits Depreciable value of certain elements of Italian hydroe- Some of the Group’s employees participate in pension plans lectric plants subsequent to enactment of Law 134/2012 offering benefits based on their wage history and years of Law 134 of August 7, 2012 containing “urgent measures for service. growth” (published in the Gazzetta Ufficiale of August 11, Certain employees are also eligible for other post-em- 2012, introduced a sweeping overhaul of the rules governing ployment benefit schemes. hydroelectric concessions. Among its various provisions, the The expenses and liabilities of such plans are calculated on law establishes that five years before the expiration of a ma- the basis of estimates carried out by consulting actuaries, jor hydroelectric water diversion concession and in cases of who use a combination of statistical and actuarial elements lapse, relinquishment or revocation, where there is no prevai- in their calculations, including statistical data on past years ling public interest for a different use of the water, incompati- and forecasts of future costs. ble with its use for hydroelectric generation, the competent Other components of the estimation that are considered in- public entity shall organize a public call for tender for the award clude mortality and withdrawal rates as well as assumptions for consideration of the concession for a period ranging from concerning future developments in discount rates, the rate 20 to a maximum of 30 years. of wage increases, the inflation rate and trends in the cost In order to ensure operational continuity, the law also governs of medical care. the methods of transfer ownership of the business unit neces- These estimates can differ significantly from actual deve- sary to operate the concession, including all legal relationships lopments owing to changes in economic and market con- relating to the concession, from the outgoing concession hol- ditions, increases or decreases in withdrawal rates and the der to the new concession holder, in exchange for payment lifespan of participants, as well as changes in the effective of a price to be determined in negotiations between the de- cost of medical care. parting concession holder and the grantor agency, taking due Such differences can have a substantial impact on the quan- account of the following elements: tification of pension costs and other related expenses. > for intake and governing works, penstocks and outflow channels, which under the consolidated law governing Recoverability of non-current assets waters and electrical plants are to be relinquished free of The carrying amount of non-current assets is reviewed perio- charge (Article 25 of Royal Decree 1775 of December 11, dically and wherever circumstances or events suggest that a 1933), the revalued cost less government capital grants, review is necessary. Goodwill is reviewed at least annually. also revalued, received by the concession holder for the Such assessments of the recoverable amount of assets are construction of such works, depreciated for ordinary wear carried out in accordance with the provisions of IAS 36, as and tear; described in greater detail in note 20 below. > for other property, plant and equipment, the market va- In particular, the recoverable amount of non-current assets lue, meaning replacement value, reduced by estimated and goodwill is based on estimates and assumptions used in depreciation for ordinary wear and tear. order to determine the amount of cash flow and the discount While acknowledging that the new regulations introduce im- rates applied. Where the value of a group of non-current as- portant changes as to the transfer of ownership of the bu- sets is considered to be impaired, it is written down to its siness unit with regard to the operation of the hydroelectric recoverable value, as estimated on the basis of the use of concession, the practical application of these principles faces the assets and their possible future disposal, in accordance difficulties, given the uncertainties that do not permit the for- with the Company’s most recent approved plan. mulation of a reliable estimate of the value that can be recove- The factors used in the calculation of the recoverable amount red at the end of existing concessions (residual value). are discussed in more detail in the section “Impairment of Accordingly, management has decided to not attempt to for- non-financial assets”. Nevertheless, possible changes in the mulate an estimate of residual value. estimation of the factors on which the calculation of such The fact that the legislation requires the new concession hol- values is performed could generate different recoverable der to make a payment to the departing concession holder values. The analysis of each group of non-current assets is prompted management to review the depreciation schedules unique and requires management to use estimates and as- for assets classified as to be relinquished free of charge prior sumptions considered prudent and reasonable in the speci- to Law 134/2012 (until the year ended on December 31, 2011, fic circumstances. given that the assets were to be relinquished free of charge, 167 Consolidated financial statementsAnnual Report 2015the depreciation period was equal to the closest date betwe- the generation, transport and distribution of electricity. In view en the term of the concession and the end of the useful life of the nature of such litigation, it is not always objectively pos- of the individual asset), calculating depreciation no longer over sible to predict the outcome of such disputes, which in some the term of the concession but, if longer, over the economic cases could be unfavorable. and technical life of the individual assets. If additional informa- Provisions have been recognized to cover all significant liabili- tion becomes available to enable the calculation of residual ties for cases in which legal counsel feels an adverse outcome value, the carrying amounts of the assets involved will be is likely and a reasonable estimate of the amount of the loss adjusted prospectively. can be made. Determining the fair value of financial instruments Obligations associated with generation plants, inclu- The fair value of financial instruments is determined on the ding decommissioning and site restoration basis of prices directly observable in the market, where availa- Generation activities may entail obligations for the operator ble, or, for unlisted financial instruments, using specific valua- with regard to future interventions that will have to be perfor- tion techniques (mainly based on present value) that maximi- med following the end of the operating life of the plant. ze the use of observable market inputs. In rare circumstances Such interventions may involve the decommissioning of were this is not possible, the inputs are estimated by mana- plants and site restoration, or other obligations linked to the gement taking due account of the characteristics of the in- type of generation technology involved. The nature of such struments being measured. obligations may also have a major impact on the accounting In accordance with IFRS 13, the Group includes a measure- treatment used for them. ment of credit risk, both of the counterparty (Credit Valuation In the case of nuclear power plants, where the costs regard Adjustment or CVA) and its own (Debit Valuation Adjustment both decommissioning and the storage of waste fuel and or DVA), in order to adjust the fair value of financial instru- other radioactive materials, the estimation of the future cost ments for the corresponding amount of counterparty risk, is a critical process, given that the costs will be incurred over using the method discussed in note 45. Changes in the as- a very long span of time, estimated at up to 100 years. sumptions made in estimating the input date could have an The obligation, based on financial and engineering as- impact on the fair value recognized for those instruments. sumptions, is calculated by discounting the expected future cash flows that the Group considers it will have to pay to Recovery of deferred tax assets meet the obligations it has assumed. At December 31, 2015, the consolidated financial statements The discount rate used to determine the present value of the report deferred tax assets in respect of tax losses to be re- liability is the pre-tax risk-free rate and is based on the econo- versed in subsequent years and income components whose mic parameters of the country in which the plant is located. deductibility is deferred in an amount whose recovery is con- That liability is quantified by management on the basis of the sidered by management to be highly probable. technology existing at the measurement date and is reviewed The recoverability of such assets is subject to the achieve- each year, taking account of developments in storage, decom- ment of future profits sufficient to absorb such tax losses and missioning and site restoration technology, as well as the on- to use the benefits of the other deferred tax assets. going evolution of the legislative framework governing health Significant management judgement is required to determine and environmental protection. the amount of deferred tax assets that can be recognized, Subsequently, the value of the obligation is adjusted to reflect based upon the likely timing and the level of future taxable the passage of time and any changes in estimates. profits together with future tax planning strategies and the tax rates applicable at the date of reversal. However, where Other the Group should become aware that it is unable to recover In addition to the items listed above, the use of estimates all or part of recognized tax assets in future years, the conse- regarded the fair value measurement of assets acquired quent adjustment would be taken to the income statement in and liabilities assumed in business combinations. For these the year in which this circumstance arises. items, the estimates and assumptions are contained in the discussion of the accounting policies adopted. Litigation The Enel Group is involved in various legal disputes regarding 168 Annual Report 2015Management judgments Identification of cash generating units (CGUs) In application of “IAS 36 - Impairment of assets”, the go- odwill recognized in the consolidated financial statements of the Group as a result of business combinations has been al- located to individual or groups of CGUs that will benefit from the combination. A CGU is the smallest group of assets that generates largely independent cash inflows. In identifying such CGUs, management took account of the specific nature of its assets and the business in which it is involved (geographical area, business area, regulatory fra- mework, etc.), verifying that the cash flows of a given group of assets were closely independent and largely autonomous of those associated with other assets (or groups of assets). The assets of each CGU were also identified on the basis of the manner in which management manages and monitors those assets within the business model adopted. For a more extensive discussion, please see notes 4 and 5 below and the discussion in the section on “Results by business area” in the report on operations. The CGUs identified by management to which the goodwill recognized in these consolidated financial statements has been allocated are indicated in the section on intangible as- sets, to which the reader is invited to refer. The number and scope of the CGUs are updated systema- tically to reflect the impact of new business combinations and reorganizations carried out by the Group, and to take account of external factors that could impact the ability of groups of assets to generate independent cash flows. Determination of the existence of control Under the provisions of IFRS 10, control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Power is defined as the current ability to direct the relevant activities of the investee based on existing substantive rights. The existence of control does not depend solely on owner- ship of a majority shareholding, but rather it arises from sub- stantive rights that each investor holds over the investee. Consequently, management must use its judgment in as- sessing whether specific situations determine substantive rights that give the Group the power to direct the relevant activities of the investee in order to affect its returns. For the purpose of assessing control, management analyses all facts and circumstances including any agreements with other investors, rights arising from other contractual arrange- ments and potential voting rights (call options, warrants, put options granted to non-controlling shareholders, etc.). These other facts and circumstances could be especially significant in such assessment when the Group holds less than a majo- rity of voting rights, or similar rights, in the investee. Following such analysis of the existence of control, which had already been done in previous years under the provi- sions of the then-applicable IAS 27, the Group consolidated certain companies (Emgesa and Codensa) on a line-by-line basis even though it did not hold more than half of the vo- ting rights. That approach was maintained in the assessment carried out in application of IFRS 10 on the basis of the re- quirements discussed above, as detailed in the attachment “Subsidiaries, associates and other significant equity in- vestments of the Enel Group at December 31, 2015” to the- se financial statements. The Group re-assesses whether or not it controls an inve- stee if facts and circumstances indicate that there are chan- ges to one or more of the elements considered in verifying the existence of control. Finally, the assessment of the existence of control did not find any situations of de facto control. Determination of the existence of joint control and of the type of joint arrangement Under the provisions of the new IFRS 11, a joint arrange- ment is an agreement where two, or more parties, have joint control. Joint control exists when the decisions over the relevant ac- tivities require the unanimous consent of at least two parties of a joint arrangement. A joint arrangement can be configured as a joint venture or a joint operation. Joint ventures are joint arrangements whe- reby the parties that have joint control have rights to the net assets of the arrangement. Conversely, joint operations are joint arrangements whereby the parties that have joint con- trol have rights to the assets and obligations for the liabilities relating to the arrangement. In order to determine the existence of the joint control and the type of joint arrangement, management must apply judgment and assess its rights and obligations arising from the arrangement. For this purpose, the management con- siders the structure and legal form of the arrangement, the terms agreed by the parties in the contractual arrangement and, when relevant, other facts and circumstances. Following that analysis, the Group has considered its interest in Asociación Nuclear Ascó-Vandellós II as a joint operation. The Group re-assesses whether or not it has joint control if facts and circumstances indicate that changes have occur- 169 Consolidated financial statementsAnnual Report 2015red in one or more of the elements considered in verifying ling entity as Enel SpA, companies that directly or indirectly the existence of joint control and the type of the joint arran- through one or more intermediaries control, are controlled or gement. are subject to the joint control of Enel SpA and in which the latter has a holding that enables it to exercise a significant Determination of the existence of significant influence influence. Related parties also include entities that operate over an associate post-employment benefit plans for employees of Enel SpA Associated companies are those in which the Group exerci- or its associates (specifically, the FOPEN and FONDENEL ses significant influence, i.e. the power to participate in the pension funds), as well as the members of the boards of au- financial and operating policy decisions of the investee but ditors, and their immediate family, and the key management not exercise control or joint control over those policies. In personnel, and their immediate family, of Enel SpA and its general, it is presumed that the Group has a significant in- subsidiaries. Key management personnel comprises mana- fluence when it has an ownership interest of 20% or more. gement personnel who have the power and direct or indirect In order to determine the existence of significant influence, responsibility for the planning, management and control of management must apply judgment and consider all facts the activities of the company. They include directors. and circumstances. The Group re-assesses whether or not it has significant in- fluence if facts and circumstances indicate that there are Subsidiaries changes to one or more of the elements considered in ve- The Group controls an entity when it is exposed/has rights rifying the existence of significant influence. to variable returns deriving from its involvement and has the ability, through the exercise of its power over the investee, Application of “IFRIC 12 - Service concession arrange- to affect its returns. Power is defined as when the investor ments” to concessions has existing rights that give it the current ability to direct the “IFRIC 12 - Service concession arrangements” applies to relevant activities. “public-to-private” service concession arrangements, which The figures of the subsidiaries are consolidated on a full line- can be defined as contracts under which the grantor tran- by-line basis as from the date control is acquired until such sfers to a concession holder the right to deliver public servi- control ceases. ces that give access to the main public facilities for a speci- fied period of time in return for managing the infrastructure used to deliver those public services. Consolidation procedures More specifically, IFRIC 12 applies to public-to-private servi- The financial statements of subsidiaries used to prepare ce concession arrangements if the grantor: the consolidated financial statements were prepared at De- > controls or regulates what services the operator must cember 31, 2015 in accordance with the accounting policies provide with the infrastructure, to whom it must provide adopted by the Parent Company. them, and at what price; and If a subsidiary uses different accounting policies from those > controls – through ownership or otherwise – any signifi- adopted in preparing the consolidated financial statements cant residual interest in the infrastructure at the end of for similar transactions and facts in similar circumstances, the term of the arrangement. appropriate adjustments are made to ensure conformity In assessing the applicability of these provisions for the with Group accounting policies. Group, management carefully analyzed existing conces- Assets, liabilities, revenue and expenses of a subsidiary sions. acquired or disposed of during the year are included in or On the basis of that analysis, the provisions of IFRIC 12 are excluded from the consolidated financial statements, re- applicable to some of the infrastructure of a number of com- spectively, from the date the Group gains control or until the panies in the Latin America Region that operate in Brazil (es- date the Group ceases to control the subsidiary. sentially Ampla and Coelce). Profit or loss and the other components of other comprehen- Related parties sive income are attributed to the owners of the Parent and non-controlling interests, even if this results in a loss for non- controlling interests. Related parties are mainly parties that have the same control- All intercompany assets and liabilities, equity, income, ex- 170 Annual Report 2015penses and cash flows relating to transactions between en- The financial statements of the associates or joint ventures tities of the Group are eliminated in full. are prepared for the same reporting period as the Group. Changes in ownership interest in subsidiaries that do not When necessary, adjustments are made to bring the ac- result in loss of control are accounted for as equity tran- counting policies in line with those of the Group. sactions, with the carrying amounts of the controlling and After application of the equity method, the Group determi- non-controlling interests adjusted to reflect changes in their nes whether it is necessary to recognize an impairment loss interests in the subsidiary. Any difference between the fair on its investment in an associate or joint venture. If there is value of the consideration paid or received and the corre- such evidence, the Group calculates the amount of impai- sponding fraction of equity acquired or sold is recognized in rment as the difference between the recoverable amount of consolidated equity. the associate or joint venture and its carrying amount. When the Group ceases to have control over a subsidiary, If the investment ceases to be an associate or a joint venture, any interest retained in the entity is remeasured to its fair the Group recognizes any retained investment at its fair value, value, recognized through profit or loss, at the date when through profit or loss. Any amounts previously recognized in control is lost. In addition, any amounts previously recogni- other comprehensive income in respect of the former asso- zed in other comprehensive income in respect of the former ciate or joint venture are accounted for as if the Group had subsidiary are accounted for as if the Group had directly di- directly disposed of the related assets or liabilities. sposed of the related assets or liabilities. If the Group’s ownership interest in an associate or a joint Investments in joint arrangements and associates venture is reduced, but the Group continues to exercise a significant influence or joint control, the Group continues to apply the equity method and the share of the gain or loss that had previously been recognized in other comprehensive inco- A joint venture is an entity over which the Group exercises me relating to that reduction is accounted for as if the Group joint control and has rights to the net assets of the arrange- had directly disposed of the related assets or liabilities. ment. Joint control is the sharing of control of an arrange- When a portion of an investment in an associate or joint ment, whereby decisions about the relevant activities requi- venture meets the criteria to be classified as held for sale, re unanimous consent of the parties sharing control. any retained portion of an investment in the associate or An associate is an entity over which the Group has significant joint venture that has not been classified as held for sale is influence. Significant influence is the power to participate in accounted for using the equity method until disposal of the the financial and operating policy decisions of the investee portion classified as held for sale takes place. without having control or joint control over the investee. Joint operations are joint arrangements whereby the parties The Group’s investments in its joint ventures and associates that have joint control have rights to the assets and obliga- are accounted for using the equity method. tions for the liabilities relating to the arrangement. For each Under the equity method, these investments are initially re- joint operation, the Group recognized assets, liabilities, costs cognized at cost and any goodwill arising from the difference and revenue on the basis of the provisions of the arrange- between the cost of the investment and the Group’s share ment rather than the participating interest held. of the net fair value of the investee’s identifiable assets and liabilities at the acquisition date is included in the carrying amount of the investment. Goodwill is not individually te- sted for impairment. Translation of foreign currency items After the acquisition date, their carrying amount is adjusted Transactions in currencies other than the functional currency to recognize changes in the Group’s share of profit or loss of are recognized in these financial statements at the exchan- the associate or joint venture. The OCI of such investees is ge rate prevailing on the date of the transaction. Monetary presented as specific items of the Group’s OCI. assets and liabilities denominated in a foreign currency other Distributions received from joint venture and associates re- than the functional currency are later adjusted using the ba- duce the carrying amount of the investments. lance sheet exchange rate. Non-monetary assets and liabi- Profits and losses resulting from transactions between the lities in foreign currency stated at cost are translated using Group and the associates or joint ventures are eliminated to the exchange rate prevailing on the date of initial recognition the extent of the interest in the associate or joint venture. of the transaction. Non-monetary assets and liabilities in fo- 171 Consolidated financial statementsAnnual Report 2015reign currency stated at fair value are translated using the the fair value of the net assets acquired previously was re- exchange rate prevailing on the date that value was determi- cognized in equity; the amount of goodwill was determined ned. Any exchange rate differences are recognized through for each transaction separately based on the fair values of profit or loss. the acquiree’s net assets at the date of each exchange tran- saction. Translation of financial statements denominated in a foreign currency Business combinations carried out as from January 1, 2010 are recognized on the basis of IFRS 3 (2008), which is refer- For the purposes of the consolidated financial statements, red to as IFRS 3 Revised hereafter. all profits/losses, assets and liabilities are stated in euro, More specifically, business combinations are recognized which is the functional currency of the Parent Company, using the acquisition method, where the purchase cost Enel SpA. (the consideration transferred) is equal to the fair value at In order to prepare the consolidated financial statements, the purchase date of the assets acquired and the liabilities the financial statements of consolidated companies in fun- incurred or assumed, as well as any equity instruments is- ctional currencies other than the presentation currency sued by the purchaser. The consideration transferred inclu- used in the consolidated financial statements are translated des the fair value of any asset or liability resulting from a into euro by applying the relevant period-end exchange rate contingent consideration arrangement. to the assets and liabilities, including goodwill and consoli- Costs directly attributable to the acquisition are recognized dation adjustments, and the average exchange rate for the through profit or loss. period, which approximates the exchange rates prevailing This cost is allocated by recognizing the assets, liabilities at the date of the respective transactions, to the income and identifiable contingent liabilities of the acquired com- statement items. pany at their fair values as at the acquisition date. Any po- Any resulting exchange rate gains or losses are recognized sitive difference between the price paid, measured at fair as a separate component of equity in a special reserve. value as at the acquisition date, plus the value of any non- The gains and losses are recognized proportionately in the controlling interests, and the net value of the identifiable income statement on the disposal (partial or total) of the assets and liabilities of the acquiree measured at fair value subsidiary. is recognized as goodwill. Any negative difference is reco- Business combinations gnized in profit or loss. The value of non-controlling interests is determined either in proportion to the interest held by minority shareholders Business combinations initiated before January 1, 2010 and in the net identifiable assets of the acquiree or at their fair completed within that financial year are recognized on the value as at the acquisition date. basis of IFRS 3 (2004). In the case of business combinations achieved in stages, at Such business combinations were recognized using the the date of acquisition of control the previously held equity purchase method, where the purchase cost is equal to the interest in the acquiree is remeasured to fair value and any fair value at the date of the exchange of the assets acquired positive or negative difference is recognized in profit or loss. and the liabilities incurred or assumed, plus costs directly Any contingent consideration is recognized at fair value at attributable to the acquisition. This cost was allocated by the acquisition date. Subsequent changes to the fair va- recognizing the assets, liabilities and identifiable contingent lue of the contingent consideration classified as an asset liabilities of the acquired company at their fair values. Any or a liability that is a financial instrument within the scope positive difference between the cost of the acquisition and of IAS 39 is recognized either in profit or loss or in other the fair value of the net assets acquired pertaining to the comprehensive income. If the contingent consideration is shareholders of the Parent Company was recognized as go- not within the scope of IAS 39, it is measured in accor- odwill. Any negative difference was recognized in profit or dance with the appropriate IFRS-EU. Contingent considera- loss. The value of non-controlling interests was determined tion that is classified as equity is not re-measured, and its in proportion to the interest held by minority shareholders in subsequent settlement is accounted for within equity. the net assets. In the case of business combinations achie- If the fair values of the assets, liabilities and contingent ved in stages, at the date of acquisition any adjustment to liabilities can only be calculated on a provisional basis, the 172 Annual Report 2015business combination is recognized using such provisional maximizing the use of relevant observable inputs and mini- values. Any adjustments resulting from the completion of mizing the use of unobservable inputs. the measurement process are recognized within 12 months of the date of acquisition, restating comparative figures. Fair value measurement Property, plant and equipment Property, plant and equipment is stated at cost, net of accu- mulated depreciation and accumulated impairment losses, For all fair value measurements and disclosures of fair va- if any. Such cost includes expenses directly attributable to lue, that are either required or permitted by international bringing the asset to the location and condition necessary accounting standards, the Group applies IFRS 13. for its intended use. Fair value is defined as the price that would be received to The cost is also increased by the present value of the esti- sell an asset or paid to transfer a liability, in an orderly tran- mate of the costs of decommissioning and restoring the saction, between market participants, at the measurement site on which the asset is located where there is a legal or date (i.e. an exit price). constructive obligation to do so. The corresponding liability The fair value measurement assumes that the transaction is recognized under provisions for risks and charges. The to sell an asset or transfer a liability takes place in the prin- accounting treatment of changes in the estimate of these cipal market, i.e. the market with the greatest volume and costs, the passage of time and the discount rate is discus- level of activity for the asset or liability. In the absence of sed under “Provisions for risks and charges”. a principal market, it is assumed that the transaction takes Property, plant and equipment transferred from customers place in the most advantageous market to which the Group to connect them to the electricity distribution network and/ has access, i.e. the market that maximizes the amount or to provide them with ongoing access to a supply of elec- that would be received to sell the asset or minimizes the tricity is initially recognized at its fair value at the time of amount that would be paid to transfer the liability. the transfer. The fair value of an asset or a liability is measured using the Borrowing costs that are directly attributable to the acquisi- assumptions that market participants would use when pri- tion, construction or production of a qualifying asset, i.e. an cing the asset or liability, assuming that market participants asset that takes a substantial period of time to get ready for act in their economic best interest. Market participants are its intended use or sale, are capitalized as part of the cost independent, knowledgeable sellers and buyers who are of the assets themselves. Borrowing costs associated with able to enter into a transaction for the asset or the liability the purchase/construction of assets that do not meet such and who are motivated but not forced or otherwise compel- requirement are expensed in the period in which they are led to do so. incurred. When measuring fair value, the Group takes into account Certain assets that were revalued at the IFRS-EU transition the characteristics of the asset or liability, in particular: date or in previous periods are recognized at their fair value, > for a non-financial asset, a fair value measurement takes which is considered to be their deemed cost at the revalua- into account a market participant’s ability to generate tion date. economic benefits by using the asset in its highest and Where individual items of major components of property, best use or by selling it to another market participant that plant and equipment have different useful lives, the compo- would use the asset in its highest and best use; nents are recognized and depreciated separately. > for liabilities and own equity instruments, the fair value Subsequent costs are recognized as an increase in the reflects the effect of non-performance risk, i.e. the risk carrying amount of the asset when it is probable that future that an entity will not fulfill an obligation; economic benefits associated with the cost incurred to re- > in the case of groups of financial assets and financial liabi- place a part of the asset will flow to the Group and the cost lities with offsetting positions in market risk or credit risk, of the item can be measured reliably. All other costs are managed on the basis of an entity’s net exposure to such recognized in profit or loss as incurred. risks, it is permitted to measure fair value on a net basis. The cost of replacing part or all of an asset is recognized as In measuring the fair value of assets and liabilities, the an increase in the carrying amount of the asset and is de- Group uses valuation techniques that are appropriate in the preciated over its useful life; the net carrying amount of the circumstances and for which sufficient data are available, replaced unit is derecognized through profit or loss. 173 Consolidated financial statementsAnnual Report 2015Property, plant and equipment, net of its residual value, is Assets recognized under property, plant and equipment are depreciated on a straight-line basis over its estimated use- derecognized either at the time of their disposal or when ful life, which is reviewed annually and, if appropriate, adju- no future economic benefit is expected from their use or di- sted prospectively. Depreciation begins when the asset is sposal. Any gain or loss, recognized through profit or loss, is available for use. calculated as the difference between the net consideration received in the disposal, where present, and the net carrying The estimated useful life of the main items of property, plant amount of the derecognized assets. and equipment is as follows: Civil buildings 20-70 years Assets to be relinquished free of charge The Group’s plants include assets to be relinquished free of Buildings and civil works incorporated in plants 20-85 years charge at the end of the concessions. These mainly regard 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 - turbine parts in contact with fluid - mechanical and electrical machinery Wind power plants: - towers - turbines and generators 20-75 years 24-40 years 25-100 years 19-46 years 10-40 years 10-45 years 10-66 years 60 years 10-20 years 20-30 years 10-25 years 20-22 years major water diversion works and the public lands used for the operation of the thermal power plants. For Italy, the con- cessions terminate between 2020 and 2040. Within the Italian regulatory framework in force until 2011, if the concessions are not renewed, at those dates all inta- ke and governing works, penstocks, outflow channels and other assets on public lands were to be relinquished free of charge to the government in good operating condition. Accordingly, depreciation on assets to be relinquished was calculated over the shorter of the term of the concession and the remaining useful life of the assets. In the wake of the legislative changes introduced with Law 134 of August 7, 2012, the assets previously classified as assets “to be relinquished free of charge” connected with the hydroelectric water diversion concessions are now con- 20-25 years sidered in the same manner as other categories of “pro- 20-25 years perty, plant and equipment” and are therefore depreciated - mechanical and electrical machinery 15-25 years over the economic and technical life of the asset (where this Solar power plants: - mechanical and electrical machinery 15-40 years Public and artistic lighting: - public lighting installations - artistic lighting installations Transmission lines Transformer stations Distribution plants: - high-voltage lines - primary transformer stations - low- and medium-voltage lines Meters: - electromechanical meters - electricity balance measurement equipment - electronic meters 18-25 years 20-25 years 20-50 years 10-60 years 30-50 years 10-60 years 23-50 years 2-27 years 2-35 years 10-20 years The useful life of leasehold improvements is determined on the basis of the term of the lease or, if shorter, on the duration of the benefits produced by the improvements themselves. Land is not depreciated as it has an undetermined useful life. 174 exceeds the term of the concession), as discussed in the section above on the “Depreciable value of certain elements of Italian hydroelectric plants subsequent to enactment of Law 134/2012”, which you are invited to consult for more details. In accordance with Spanish laws 29/1985 and 46/1999, hydroelectric power stations in Spanish territory operate under administrative concessions at the end of which the plants will be returned to the government in good operating condition. The terms of the concessions extend up to 2067. A number of generation companies that operate in Argenti- na, Brazil and Mexico hold administrative concessions with similar conditions to those applied under the Spanish con- cession system. These concessions will expire in the period between 2013 and 2088. As regards the distribution of electricity, the Group is a con- cession holder in Italy for this service. The concession, gran- Annual Report 2015ted by the Ministry for Economic Development, was issued > an intangible asset, if the operator receives the right (a free of charge and terminates on December 31, 2030. If the license) to charge users of the public service provided. In concession is not renewed upon expiry, the grantor is requi- such a case, the operator does not have an unconditional red to pay an indemnity. The amount of the indemnity will be right to receive cash because the amounts are contingent determined by agreement of the parties using appropriate on the extent that the public uses the service. valuation methods, based on both the balance-sheet value If the Group (as operator) has a contractual right to receive of the assets themselves and their profitability. an intangible asset (the right to charge users of the public In determining the indemnity, such profitability will be re- service), borrowing costs are capitalized using the criteria presented by the present value of future cash flows. The in- specified in the section “Property, plant and equipment”. frastructure serving the concessions is owned and available During the operating phase of concession arrangements, to the concession holder. It is recognized under “Property, the Group accounts for operating service payments in accor- plant and equipment” and is depreciated over the useful li- dance with criteria specified in the section “Revenue”. ves of the assets. Enel also operates under administrative concessions for the distribution of electricity in other countries (including Spain Leases and Romania). These concessions give the right to build and The Group holds property, plant and equipment and intangible operate distribution networks for an indefinite period of time. assets for its various activities under lease contracts. Infrastructure within the scope of “IFRIC 12 - Service concession arrangements” These contracts are analyzed on the basis of the circumstan- ces and indicators set out in IAS 17 in order to determine whether they constitute operating leases or finance leases. A finance lease is defined as a lease that transfers substan- tially all the risks and rewards incidental to ownership of the Under a “public-to-private” service concession arrangement related asset to the lessee. All leases that do not meet the within the scope of “IFRIC 12 - Service concession arrange- definition of a finance lease are classified as operating leases. ments” the operator acts as a service provider and, in accor- On initial recognition assets held under finance leases are re- dance with the terms specified in the contract, it constructs/ cognized as property, plant and equipment and the related upgrades infrastructure used to provide a public service and liability is recognized under long-term borrowings. At incep- operates and maintains that infrastructure for the period of tion date finance leases are recognized at the lower of the fair the concession. value of the leased asset and the present value of the mini- The Group, as operator, does not recognize the infrastructure mum lease payments due, including the payment required to within the scope of IFRIC 12 as property, plant and equipment exercise any purchase option. and it accounts for revenue and costs relating to construction/ The assets are depreciated on the basis of their useful lives. upgrade services as discussed in the section “Construction If it is not reasonably certain that the Group will acquire the contracts”. In particular, the Group measures the considera- assets at the end of the lease, they are depreciated over the tion received or receivable for the construction/upgrading of shorter of the lease term and the useful life of the assets. infrastructure at its fair value and, depending on the characte- Payment made under operating lease are recognized as a ristics of the service concession arrangement, it recognizes: cost on a straight-line basis over the lease term. > a financial asset, if the operator has an unconditional con- Although not formally designated as lease agreements, cer- tractual right to receive cash or another financial asset tain types of contract can be considered as such if the fulfil- from the grantor (or from a third party at the direction of ment of the arrangement is dependent on the use of a speci- the grantor) and the grantor has little discretion to avoid fic asset (or assets) and if the arrangement conveys a right to payment. In this case, the grantor contractually guaran- use such assets. tees to pay to the operator specified or determinable amounts or the shortfall between the amounts received from the users of the public service and specified or de- Investment property terminable amounts (defined by the contract), and such Investment property consists of the Group’s real estate held payments are not dependent on the usage of the infra- to earn rentals and/or for capital appreciation rather than for structure; and/or use in the production or supply of goods and services. 175 Consolidated financial statementsAnnual Report 2015Investment property is measured at acquisition cost less ble. If not, the change in useful life from indefinite to finite is any accumulated depreciation and any accumulated impai- accounted for as a change in accounting estimate. rment losses. Intangible assets are derecognized either at the time of their Investment property, excluding land, is depreciated on a disposal or when no future economic benefit is expected straight-line basis over the useful lives of the assets. from their use or disposal. Any gain or loss, recognized Impairment losses are determined on the basis of criteria through profit or loss, is calculated as the difference betwe- discussed below. en the net consideration received in the disposal, where The breakdown of the fair value of investment property is de- present, and the net book value of the derecognized assets. tailed in note 45 “Assets measured at fair value”. Investment The estimated useful life of the main intangible assets, di- property is derecognized either at the time of its disposal or stinguishing between internally generated and acquired as- when no future economic benefit is expected from its use or sets, is as follows: disposal. Any gain or loss, recognized through profit or loss, is calculated as the difference between the net considera- tion received in the disposal, where present, and the net book value of the derecognized assets. Intangible assets Intangible assets are identifiable assets without physical Development costs: - internally generated - acquired Industrial patents and intellectual property rights: - internally generated - acquired Concessions, licenses, trademarks and similar rights: substance controlled by the entity and capable of generating - internally generated future economic benefits. 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 - acquired Other: - internally generated - acquired the related cost can be reliably determined. The cost includes any directly attributable expenses neces- sary to make the assets ready for their intended use. Goodwill 3-5 years 3-5 years 5 years 3-25 years - 2-60 years 2-5 years - Internal development costs are recognized as an intangible Goodwill arises on the acquisition of subsidiaries and repre- asset when both the Group is reasonably assured of the sents the excess of the consideration transferred, as mea- technical feasibility of completing the intangible asset and sured at fair value at the acquisition date, and the value of that the asset will generate future economic benefits and any non-controlling interests over the net fair value of the it has intention and ability to complete the asset and use or acquiree’s identifiable assets and liabilities. After initial reco- sell it. gnition, goodwill is not amortized, but is tested for recovera- Research costs are recognized as expenses. bility at least annually using the criteria discussed in the sec- Intangible assets with a finite useful life are reported net of tion “Impairment of non-financial assets”. For the purpose accumulated amortization and any impairment losses. of impairment testing, goodwill is allocated, from the acqui- Amortization is calculated on a straight-line basis over the sition date, to each of the identified cash generating units. item’s estimated useful life, which is reassessed at least Goodwill relating to equity investments in associates and annually; any changes in amortization policies are reflected joint ventures is included in their carrying amount. on a prospective basis. Amortization commences when the asset is ready for use. Consequently, intangible assets not yet available for use are not amortized, but are tested for Impairment of non-financial assets impairment at least annually. At each reporting date, non-financial assets are reviewed to The Group’s intangible assets have a definite useful life, with determine whether there is evidence of impairment. If such the exception of a number of concessions and goodwill. evidence exists, the recoverable amount of any involved as- Intangible assets with indefinite useful lives are not amorti- set is estimated. The recoverable amount is the higher of an zed, but are tested for impairment annually. asset’s fair value less costs of disposal and its value in use. The assessment of indefinite life is reviewed annually to de- In order to determine the recoverable amount of property, termine whether the indefinite life continues to be supporta- plant and equipment, intangible assets and goodwill, the 176 Annual Report 2015Group generally adopts the value-in-use criterion. Inventories The value in use is represented by the present value of the estimated future cash flows generated by the asset in que- stion. Value in use is determined by discounting estimated future cash flows using a pre-tax discount rate that reflects the current market assessment of the time value of money and the specific risks of the asset. The future cash flows used to determine value in use are ba- sed on the most recent business plan, approved by the mana- gement, containing forecasts for volumes, revenue, operating costs and investments. These projections cover the next five years. Consequently, cash flows related to subsequent periods are determined on the basis of a long-term growth rate that does not exceed the average long-term growth rate for the particular sector and country. The recoverable amount of assets that do not generate inde- pendent cash flows is determined based on the cash genera- ting unit to which the asset belongs. If the carrying amount of an asset or of a cash generating unit to which it is allocated is higher than its recoverable amount, an impairment loss is recognized in profit or loss under “De- preciation, amortization and impairment losses”. Impairment losses of cash generating units are firstly char- ged against the carrying amount of any goodwill attributed to it and then against the other assets, in proportion to their carrying amount. If the reasons for a previously recognized impairment loss no longer obtain, the carrying amount of the asset is resto- red through profit or loss, under “Depreciation, amortization and impairment losses”, in an amount that shall not exceed the net carrying amount that the asset would have had if the Inventories are measured at the lower of cost and net reali- zable value except for inventories involved in trading activi- ties, which are measured at fair value with recognition throu- gh profit or loss. Cost is determined on the basis of average weighted cost, which includes related ancillary charges. Net estimated realizable value is the estimated normal selling price net of estimated costs to sell or, where applicable, re- placement cost. For the portion of inventories held to discharge sales that have already been made, the net realizable value is determi- ned on the basis of the amount established in the contract of sale. Inventories include environmental certificates (green cer- tificates, energy efficiency certificates and CO2 emissions allowances) that were not utilized for compliance in the re- porting period. As regards CO2 emissions allowances, inven- tories are allocated between the trading portfolio and the compliance portfolio, i.e. those used for compliance with greenhouse gas emissions requirements. Within the latter, CO2 emissions allowances are allocated to sub-portfolios on the basis of the compliance year to which they have been assigned. Inventories also include nuclear fuel stocks, use of which is determined on the basis of the electricity generated. Materials and other consumables (including energy commo- dities) held for use in production are not written down if it is expected that the final product in which they will be incorpo- rated will be sold at a price sufficient to enable recovery of the cost incurred. impairment loss had not been recognized and depreciation Construction contracts or amortization had been performed. The original value of go- odwill is not restored even if in subsequent years the reasons for the impairment no longer obtain. The recoverable amount of goodwill and intangible assets with an indefinite useful life and intangible assets not yet available for use is tested for recoverability annually or more frequently if there is evidence suggesting that the assets may be impaired. 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 generation of cash flows, they can be isolated from the rest of the assets of the cash generating unit, undergo separate analysis of their recoverability and are impaired where necessary. When the outcome of a construction contract can be estima- ted reliably and it is probable that the contract will be profi- table, contract revenue and contract costs are recognized by reference to the stage of completion of the contract activity at the end of the reporting period. Under this criteria, revenue, expenses and profit are attributed in proportion to the work completed. When it is probable that total contract costs will exceed total contract revenue, the expected loss on the construction con- tract is recognized as an expense immediately, regardless of the stage of completion of the contract. When the outcome of a construction contract cannot be esti- mated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recove- rable. 177 Consolidated financial statementsAnnual Report 2015The stage of completion of the contract in progress is deter- on an active market and not representing equity investments, mined, using the cost-to-cost method, as a ratio between for which the Group has the positive intention and ability to costs incurred for work performed to the reporting date and hold until maturity. They are initially recognized at fair value, the estimated total contract costs. In addition to initial amount including any transaction costs, and subsequently measured of revenue agreed in the contract, contract revenue includes at amortized cost using the effective interest method. any payments in respect of variations, claims and incentives, to the extent that it is probable that they will result in revenue and can be reliably measured. Loans and receivables This category mainly includes trade receivables and other fi- The amount due from customers for construction contract is nancial receivables. Loans and receivables are non-derivative presented as an asset; the amount due to customers for con- financial assets with fixed or determinable payments, that struction contract is presented as a liability. are not quoted on an active market, other than those the Financial instruments Group intends to sell immediately or in the short term (which are classified as held for trading) and those that the Group, on initial recognition, designates as either at fair value throu- Financial instruments are recognized and measured in accor- gh profit or loss or available for sale. Such assets are initially dance with IAS 32 and IAS 39. recognized at fair value, adjusted for any transaction costs, A financial asset or liability is recognized in the consolidated and are subsequently measured at amortized cost using the financial statements when, and only when, the Group be- effective interest method, without discounting unless ma- comes party to the contractual provisions of the instrument terial. (the trade date). Financial instruments are classified as follows under IAS 39: > financial assets and liabilities at fair value through profit Available-for-sale financial assets This category mainly includes listed debt securities not clas- or loss; sified as held to maturity and equity investments in other > held-to-maturity financial assets; entities (unless classified as “designated as at fair value > loans and receivables; through profit or loss”). Available-for-sale financial assets are > available-for-sale financial assets; non-derivative financial assets that are designated as avai- > financial liabilities at amortized cost. lable for sale or are not classified as loans and receivables, Financial assets and liabilities at fair value through profit or loss This category includes: securities, equity investments in en- held-to-maturity financial assets or financial assets at fair va- lue through profit or loss. These financial instruments are measured at fair value with changes in fair value recognized in other comprehensive in- tities other than subsidiaries, associates and joint ventures come. and investment funds held for trading or designated as at fair At the time of sale, or when a financial asset available for value through profit or loss at the time of initial recognition. sale becomes an investment in a subsidiary as a result of Financial instruments at fair value through profit or loss are successive purchases, the cumulative gains and losses pre- financial assets and liabilities: viously recognized in equity are reversed to the income sta- > classified as held for trading because acquired or incurred tement. principally for the purpose of selling or repurchasing at When the fair value cannot be determined reliably, these short term; assets are recognized at cost adjusted for any impairment > designated as such upon initial recognition, under the op- losses. tion allowed by IAS 39 (the fair value option). Such financial assets and liabilities are initially recognized at fair value with subsequent gains and losses from changes in Impairment of financial assets At each reporting date, all financial assets classified as loans their fair value recognized through profit or loss. and receivables (including trade receivables), held to matu- Held-to-maturity financial assets This category comprises non-derivative financial assets with rity or available for sale, are assessed in order to determine if there is objective evidence that an asset or a group of financial assets is impaired. fixed or determinable payments and fixed maturity, quoted An impairment loss is recognized if and only if such evidence 178 Annual Report 2015exists as a result of one or more events that occurred after is the cumulative fair value loss recognized in other com- initial recognition and that have an impact on the future cash prehensive income. Such impairment loss is reversed throu- flows of the asset and which can be estimated reliably. gh profit or loss if the fair value of the debt instrument objec- Objective evidence of an impairment loss includes observa- tively increases as a result of an event that occurred after the ble data about, for example: impairment loss was recognized. > significant financial difficulty of the issuer or obligor; > a breach of contract, such as a default or delinquency in interest or principal payments; Cash and cash equivalents This category includes deposits that are available on de- > evidence that the borrower will enter bankruptcy or other mand or at very short term, as well as highly liquid short- form of financial reorganization; term financial investments that are readily convertible into a > a measurable decrease in estimated future cash flows. known amount of cash and which are subject to insignificant Losses that are expected to arise as a result of future events risk of changes in value. are not recognized. In addition, for the purpose of the consolidated statement of For financial assets classified as loans and receivables or cash flows, cash and cash equivalents do not include bank held to maturity, once an impairment loss has been iden- overdrafts at period-end. tified, its amount is measured as the difference between the carrying amount of the asset and the present value of expected future cash flows, discounted at the original effec- Financial liabilities at amortized cost This category mainly includes borrowings, trade payables, tive interest rate. This amount is recognized in profit or loss. finance lease obligations and debt instruments. The carrying amount of trade receivable is reduced through Financial liabilities other than derivatives are recognized use of an allowance account. when the Group becomes a party to the contractual clauses If the amount of a past impairment loss decreases and the of the instrument and are initially measured at fair value adju- decrease can be related objectively to an event occurring sted for directly attributable transaction costs. Financial lia- after the impairment was recognized, the impairment is re- bilities are subsequently measured at amortized cost using versed through profit or loss. the effective interest rate method. Further factors are considered in case of impairment of avai- lable-for-sale equity investments, such as significant adverse changes in the technological, market, economic or legal en- Derivative financial instruments A derivative is a financial instrument or another contract: vironment. > whose value changes in response to the changes in an A significant or prolonged decline in fair value constitutes underlying variable such as an interest rate, commodity or objective evidence of impairment and, therefore, the fair va- security price, foreign exchange rate, a price or rate index, lue loss previously recognized in other comprehensive inco- a credit rating or other variable; me is reclassified from equity to income. > that requires no initial net investment, or an initial net in- The amount of the cumulative loss is the difference betwe- vestment that is smaller than would be required for a con- en the acquisition cost and the current fair value, less any tract with a similar response to changes in market factors; impairment loss previously recognized in profit or loss. An > that is settled at a future date. impairment loss on an available-for-sale equity investment Derivative instruments are classified as financial assets or cannot be reversed. liabilities depending on whether their fair value is positive or If there is objective evidence of impairment for unquoted negative and they are classified as “held for trading” and me- equity instruments measured at cost because fair value can- asured at fair value through profit or loss, except for those not be reliably measured, the amount of the impairment loss designated as effective hedging instruments. is measured as the difference between the carrying amount For more details about hedge accounting, please see note 44 and the present value of estimated future cash flows, di- “Derivatives and hedge accounting”. scounted at the current rate of interest for a similar financial All derivatives held for trading are classified as current assets asset. Reversal of impairment are not permitted in these ca- or liabilities. ses either. Derivatives not held for trading purposes but measured at fair The amount of the impairment loss on a debt instrument value through profit or loss since they do not qualify for hedge classified as available for sale, to be reclassified from equity, accounting and derivatives designated as effective hedging 179 Consolidated financial statementsAnnual Report 2015instruments are classified as current or non-current on the ba- A contract to buy or sell non-financial items is classified as sis of their maturity date and the Group’s intention to hold the a “normal purchase or sale” if it is entered into: financial instrument until maturity or not. > for the purpose of physical delivery; > in accordance with the Group’s expected purchase, sale Embedded derivatives An embedded derivative is a derivative included in a “com- or usage requirements. The Group analyses all contracts to buy or sell non-finan- bined” contract (the so-called “hybrid instrument”) that con- cial assets, with a specific focus on forward purchases and tains another non-derivative contract (the so-called “host sales of electricity and energy commodities, in order to contract“) and gives rise to some or all of the combined con- determine if they should be classified and treated in ac- tract’s cash flows. cordance with IAS 39 or if they have been entered into for The main Group contracts that may contain embedded derivati- “own use”. ves are contracts to buy or sell non-financial items with clauses or options that affect the contract price, volume or maturity. Such contracts, which do not represent financial instruments to be measured at fair value, are analyzed in order to identify Derecognition of financial assets and lia- bilities Financial assets are derecognized whenever one of the fol- any embedded derivatives, which are to be separated and lowing conditions is met: measured at fair value. This analysis is performed when the > the contractual right to receive the cash flows associated Group becomes party to the contract or when the contract with the asset expires; is renegotiated in a manner that significantly changes the > the Group has transferred substantially all the risks and original associated cash flows. Embedded derivatives are rewards associated with the asset, transferring its rights separated from the host contract and accounted for as de- to receive the cash flows of the asset or assuming a con- rivatives when: tractual obligation to pay such cash flows to one or more > host contract is not a financial instrument measured at fair beneficiaries under a contract that meets the require- value through profit or loss; ments established by IAS 39 (the “pass through test”); > the economic risks and characteristics of the embedded > the Group has not transferred or retained substantially all derivative are not closely related to those of the host con- the risks and rewards associated with the asset but has tract; transferred control over the asset. > a separate contract with the same terms as the embed- Financial liabilities are derecognized when they are extingui- ded derivative would meet the definition of a derivative. shed, i.e. when the contractual obligation has been dischar- Embedded derivatives that are separated from the host con- ged, cancelled or expired. tract are recognized in the consolidated financial statements at fair value with changes recognized through profit or loss (except when the embedded derivative is part of a designa- Offsetting financial assets and liabilities The Group offsets financial assets and liabilities when: ted hedging relationship). > there is a legally enforceable right to set off the recogni- Contracts to buy or sell non-financial items In general, contracts to buy or sell non-financial items that are entered into and continue to be held for receipt or de- livery, in accordance with the Group’s normal expected purchase, sale or usage requirements, do not fall within zed amounts; and > it has the intention of either settling on a net basis, or realizing the asset and settling the liability simultaneously. Employee benefits the scope of IAS 39 and are then recognized in accordan- Liabilities related to employee benefits paid upon or after ce- ce with the accounting treatment of such transactions (the asing employment in connection with defined benefit plans “own use exemption”). or other long-term benefits accrued during the employment Such contracts are recognized as derivatives and, as a con- period are determined separately for each plan, using actua- sequence, at fair value through profit or loss only if: rial assumptions to estimate the amount of the future bene- > they can be settled net in cash; and fits that employees have accrued at the balance sheet date > they are not entered into in accordance with the Group’s (the projected unit credit method). More specifically, the expected purchase, sale or usage requirements. present value of the defined benefit obligation is calculated 180 Annual Report 2015by using a discount rate determined on the basis of market the termination benefits due to employees are expected yields at the end of the reporting period on high-quality cor- to be settled wholly before 12 months after the end of the porate bonds. annual reporting period, the entity measures the liability in The liability is recognized on an accruals basis over the ve- accordance with the requirements for short-term employee sting period of the related rights. These appraisals are perfor- benefits; if they are not expected to be settled wholly before med by independent actuaries. 12 months after the end of the annual reporting period, the If the value of plan assets exceeds the present value of the entity measures the liability in accordance with the require- related defined benefit obligation, the surplus (up to the limit ments for other long-term employee benefits. of any cap) is recognized as an asset. As regards the liabilities/(assets) of defined benefit plans, the cumulative actuarial gains and losses from the actuarial Provisions for risks and charges measurement of the liabilities, the return on the plan assets Provisions are recognized where there is a legal or construc- (net of the associated interest income) and the effect of the tive obligation as a result of a past event at the end of the asset ceiling (net of the associated interest income) are re- reporting period, the settlement of which is expected to re- cognized in other comprehensive income when they occur. sult in an outflow of resources whose amount can be relia- For other long-term benefits, the related actuarial gains and bly estimated. Where the impact is not immaterial, the ac- losses are recognized through profit or loss. cruals are determined by discounting expected future cash In the event of a change being made to an existing defined flows using a pre-tax discount rate that reflects the current benefit plan or the introduction of a new plan, any past servi- market assessment of the time value of money and, if ap- ce cost is recognized immediately in profit or loss. plicable, the risks specific to the liability. If the provision is Employees are also enrolled in defined contribution plans discounted, the periodic adjustment of the present value for under which the Group pays fixed contributions to a separa- the time factor is recognized as a financial expense. te entity (a fund) and has no legal or constructive obligation When the Group expects some or all of the expenditure re- to pay further contributions if the fund does not hold suffi- quired to extinguish a liability will be reimbursed by a third cient assets to pay all employee benefits relating to emplo- party, the reimbursement is recognized as a separate asset yee service in the current and prior periods. Such plans are if such reimbursement is virtually certain. usually aimed to supplement pension benefits due to em- Where the liability relates to plant decommissioning and/ ployees post-employment. The related costs are recognized or site restoration, the initial recognition of the provision in income statement on the basis of the amount of contribu- is made against the related asset and the expense is then tions paid in the period. recognized in profit or loss through the depreciation of the Termination benefits asset involved. Where the liability regards the treatment and storage of nu- clear waste and other radioactive materials, the provision is Liabilities for benefits due to employees for the early termi- recognized against the related operating costs. nation of the employment relationship, both as a result of a In the case of contracts in which the unavoidable costs of decision by the Group or an employee’s decision to accept meeting the obligations under the contract exceed the eco- voluntary redundancy in exchange for these benefits, are re- nomic benefits expected to be received under it (onerous cognized at the earlier of the following dates: contracts), the Group recognizes a provision as the lower of > when the Group can no longer withdraw its offer of be- the costs of fulfilling the obligation that exceed the econo- nefits; and mic benefits expected to be received under the contract and > when the Group recognizes a cost for a restructuring that any compensation or penalty arising from failure to fulfil it. is within the scope of IAS 37 and involves the payment of Changes in estimates of accruals to the provision are reco- termination benefits. gnized in the income statement in the period in which the The liabilities are measured on the basis of the nature of changes occur, with the exception of those in respect of the the employee benefits. More specifically, when the bene- costs of decommissioning, dismantling and/or restoration re- fits represent an enhancement of other post-employment sulting from changes in the timetable and costs necessary to benefits, the associated liability is measured in accordance extinguish the obligation or from a change in the discount rate. with the rules governing that type of benefit. Otherwise, if These changes increase or decrease the value of the related 181 Consolidated financial statementsAnnual Report 2015assets and are taken to the income statement through depre- tes (so-called white certificates), as well as the European ciation. Where they increase the value of the assets, it is also “Emissions Trading System”. determined whether the new carrying amount of the assets Green certificates accrued in proportion to electricity ge- is fully recoverable. If this is not the case, a loss equal to the nerated by renewable energy plants and energy efficiency unrecoverable amount is recognized in the income statement. certificates accrued in proportion to energy savings achie- Decreases in estimates are recognized up to the carrying ved that have been certified by the competent authority are amount of the assets. Any excess is recognized immediately treated as non-monetary government operating grants and in the income statement. are recognized at fair value, under other revenue and inco- For more information on the estimation criteria adopted in me, with recognition of an asset under other non-financial determining liabilities for plant dismantling and site restora- assets, if the certificates are not yet credited to the owner- tion, especially those associated with nuclear power plants ship account, or under inventories, if the certificates have or the storage of waste fuel and other radioactive materials, already been credited to that account. At the time the cer- please see the section on the use of estimates. tificates are credited to the ownership account, they are re- Government grants classified from other assets to inventories. Revenue from the sale of such certificates are recognized under revenue from sales and services, with a correspon- Government grants, including non-monetary grants at fair ding decrease in inventories. value, are recognized where there is reasonable assuran- For the purposes of accounting for charges arising from re- ce that they will be received and that the Group will com- gulatory requirements concerning green certificates, energy ply with all conditions attaching to them as set by the go- vernment, government agencies and similar bodies whether efficiency certificates and CO2 emissions allowances, the Group uses the “net liability approach”. local, national or international. Under this accounting policy, environmental certificates re- When loans are provided by governments at a below-market ceived free of charge and those self-produced as a result of rate of interest, the benefit is regarded as a government Group’s operations that will be used for compliance purpo- grant. The loan is initially recognized and measured at fair ses are recognized at nominal value (nil). In addition, char- value and the government grant is measured as the diffe- ges incurred for obtaining (in the market or in some other rence between the initial carrying amount of the loan and transaction for consideration) any missing certificates to the funds received. The loan is subsequently measured in fulfil compliance requirements for the reporting period are accordance with the requirements for financial liabilities. recognized through profit or loss on an accruals basis un- Government grants are recognized in profit or loss on a syste- der other operating expenses, as they represent “system matic basis over the periods in which the Group recognizes as charges” consequent upon compliance with a regulatory expenses the costs that the grants are intended to compensate. requirement. Where the Group receives government grants in the form of a transfer of a non-monetary asset for the use of the Group, it accounts for both the grant and the asset at the fair value of the non-monetary asset received at the date of the transfer. Grants related to long-lived assets, including non-monetary Non-current assets (or disposal groups) classified as held for sale and discontinued operations grants at fair value, i.e. those received to purchase, build or Non-current assets (or disposal groups) are classified as otherwise acquire non-current assets (for example, an item held for sale if their carrying amount will be recovered prin- of property, plant and equipment or an intangible asset), are cipally through a sale transaction, rather than through con- recognized on a deferred basis under other liabilities and are tinuing use. credited to profit or loss on a straight-line basis over the use- This classification criteria is applicable only when non-cur- ful life of the asset. Environmental certificates rent assets (or disposal groups) are available in their present condition for immediate sale and the sale is highly probable. If the Group is committed to a sale plan involving loss of con- trol of a subsidiary and the requirements provided for under Some Group companies are affected by national regulations IFRS 5 are met, all the assets and liabilities of that subsidiary governing green certificates and energy efficiency certifica- are classified as held for sale when the classification criteria 182 Annual Report 2015are met, regardless of whether the Group will retain a non- > represents a separate major line of business or geographi- controlling interest in its former subsidiary after the sale. cal area of operations; The Group applies these classification criteria as envisaged > is part of a single coordinated plan to dispose of a sepa- in IFRS 5 to an investment, or a portion of an investment, in rate major line of business or geographical area of ope- an associate or a joint venture. Any retained portion of an in- rations; or vestment in an associate or a joint venture that has not been > is a subsidiary acquired exclusively with a view to resale. classified as held for sale is accounted for using the equity The Group presents, in a separate line item of the income method until disposal of the portion that is classified as held statement, a single amount comprising the total of: for sale takes place. > the post-tax profit or loss of discontinued operations; and Non-current assets (or disposal groups) and liabilities of di- > the post-tax gain or loss recognized on the measurement sposal groups classified as held for sale are presented sepa- to fair value less costs to sell or on the disposal of the rately from other assets and liabilities in the balance sheet. assets or disposal groups constituting the discontinued The amounts presented for non-current assets or for the operation. assets and liabilities of disposal groups classified as held The corresponding amount is re-presented in the income for sale are not reclassified or re-presented for prior periods statement for prior periods presented in the financial state- presented. ments, so that the disclosures relate to all operations that Immediately before the initial classification of non-current are discontinued by the end of the current reporting period. assets (or disposal groups) as held for sale, the carrying If the Group ceases to classify a component as held for amounts of such assets (or disposal groups) are measured sale, the results of the component previously presented in in accordance with the IFRS-EU applicable to the specific discontinued operations are reclassified and included in in- assets or liabilities. Non-current assets (or disposal groups) come from continuing operations for all periods presented. classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses for any initial or subsequent writedown of the assets Revenue (or disposal groups) to fair value less costs to sell and gains Revenue is recognized to the extent that it is probable that for their reversals are included in profit or loss from continu- the economic benefits will flow to the Group and the amount ing operations. can be reliably measured. Revenue includes only the gross Non-current assets are not depreciated (or amortized) while inflows of economic benefits received and receivable by they are classified as held for sale or while they are part of a the Group on its own account. Therefore, in an agency rela- disposal group classified as held for sale. tionship, the amount collected on behalf of the principal are If the classification criteria are no longer met, the Group cea- excluded from revenue. ses to classify non-current assets (or disposal group) as held Revenue is measured at the fair value of the consideration for sale. In that case they are measured at the lower of: received or receivable, taking into account the amount of any > the carrying amount before the asset (or disposal group) trade discounts and volume rebates allowed by the Group. was classified as held for sale, adjusted for any deprecia- When goods or services are exchanged or swapped for go- tion, amortization or revaluations that would have been ods or services which are of a similar nature and value, the recognized if the asset (or disposal group) had not been exchange is not regarded as a transaction which generates classified as held for sale; and revenue. > the recoverable amount, which is equal to the greater of In arrangements under which the Group will perform multi- its fair value net of costs of disposal and its value in use, ple revenue-generating activities (a multiple-element arran- as calculated at the date of the subsequent decision not gement), the recognition criteria are applied to the separa- to sell. tely identifiable components of the transaction in order to Any adjustment to the carrying amount of a non-current as- reflect the substance of the transaction or to two or more set that ceases to be classified as held for sale is included in transactions together when they are linked in such a way profit or loss from continuing operations. that the commercial effect cannot be understood without A discontinued operation is a component of the Group that reference to the series of transactions as a whole. either has been disposed of, or is classified as held for sale, More specifically, the following criteria are used depending and: on the type of transaction: 183 Consolidated financial statementsAnnual Report 2015 > revenue from the sale of goods is recognized when the zed only to the extent of the expenses recognized that significant risks and rewards of ownership of the goods are recoverable; are transferred to the buyer and their amount can be re- > revenue associated with construction contracts is recogni- liably determined; zed as specified in the section “Construction contracts”; > revenue from the sale of electricity and gas is recognized > revenue from monetary and in-kind fees for connection when these commodities are supplied to the customer to the electricity distribution network is recognized in and regard the quantities provided during the period, full upon completion of connection activities if the ser- even if these have not yet been invoiced. It is determi- vice supplied is identified. If more than one separately ned using estimates as well as periodic meter readings. identifiable service is identified, the fair value of the total Where applicable, this revenue is based on the rates and consideration received or receivable is allocated to each related restrictions established by law or the Authority for service and the revenue related to the service performed Electricity, Gas and the Water System (“the Authority“) in the period is recognized; in particular, if any ongoing and analogous foreign authorities during the applicable services (electricity distribution services) are identified, period; the related revenue is generally determined by the terms > revenue from the transport of electricity is recognized of the agreement with the customer or, when such an when the services are rendered to distribution customers agreement does not specify a period, over a period no even if they have not yet been invoiced. That revenue is longer than the useful life of the transferred asset; determined on the basis of the amounts that have actually > revenue from rentals and operating leases is recognized transited along the distribution network, net of estimated on an accruals basis in accordance with the substance of losses. Where provided for in the specific local regulations, the relevant agreement. such revenue is adjusted to take account of the restrictions and mandatory rates established by the Authority in Italy or the equivalent national organizations in other countries. In particular, in setting restrictions and mandatory rates, each Financial income and expense from derivatives authority covers the costs incurred for investments in the Financial income and expense from derivatives includes: network, the associated remuneration based on an appro- > income and expense from derivatives measured at fair priate rate of return on capital and the timing with which value through profit or loss on interest rate and exchange those amounts are incorporated in rates. risks; Where the inclusion of the investments in rates, which > income and expense from fair value hedge derivatives on gives rise to the operator’s right to receive the amount, in interest rate risk; the year in which they are carried out is already virtually > income and expense from cash flow hedge derivatives on certain, the revenue is recognized on an accrual basis, interest rate and exchange risks. regardless of the financial mechanism used to pay it. These arrangements reflect the provision of Authority Re- solution 654/2015 concerning the definition of the criteria Other financial income and expense for the new rate period for distribution and metering in For all financial assets and liabilities measured at amortized force for the regulatory cycle (2016-2023). For more de- cost and interest-bearing financial assets classified as availa- tails on the changes introduced with that resolution, plea- ble for sale, interest income and expense is recorded using se see the report on operations; the effective interest rate method. The effective interest rate > revenue from the rendering of services is recognized by is the rate that exactly discounts the estimated future cash reference to the stage of completion of services at the payments or receipts over the expected life of the financial end of the reporting periods in which the services are instrument or a shorter period, where appropriate, to the net rendered. The stage of completion of the transaction is carrying amount of the financial asset or liability. determined based on an assessment of the service ren- Interest income is recognized to the extent that it is proba- dered as a percentage of the total services to be rende- ble that the economic benefits will flow to the Group and the red or as costs incurred as a proportion of the estimated amount can be reliably measured. total costs of the transaction. When it is not possible to Other financial income and expense also includes changes in reliably determine the value of the revenue, it is recogni- the fair value of financial instruments other than derivatives. 184 Annual Report 2015Income taxes the same taxation authority that arise at the time of reversal if a legally enforceable right to set-off exists. Current income taxes Current income taxes for the period, which are recognized under “income tax payable” net of payments on account, Dividends or under “tax receivables” where there is a credit balance, Dividends are recognized when the right to receive payment are determined using an estimate of taxable income and in is established. conformity with the applicable regulations. Dividends and interim dividends payable to a company’s sha- In particular, such payables and receivables are determined reholders are recognized as changes in equity in the period using the tax rates and tax laws that are enacted or substan- in which they are approved by the shareholders’ meeting tively enacted as at the end of the reporting period. and the board of directors, respectively. Current income taxes are recognized in profit or loss with the exception of current income taxes related to items re- cognized outside profit or loss that are recognized in equity. Deferred tax items Deferred tax liabilities and assets are calculated on the tem- porary differences between the carrying amounts of assets and liabilities in the financial statements and their correspon- ding values recognized for tax purposes on the basis of tax rates in effect on the date the temporary difference will re- verse, which is determined on the basis of tax rates that are enacted or substantively enacted as at end of the reporting period. Deferred tax liabilities are recognized for all taxable tempo- rary differences, except when the deferred tax liability arises from the initial recognition of goodwill or in respect of taxa- ble temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the Group can control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible tempo- rary differences, the carry forward of unused tax credits and any unused tax losses, when recovery is probable, i.e. when an entity expects to have sufficient future taxable income to recover the asset. The recoverability of deferred tax assets is reviewed at each period-end. Unrecognized deferred tax assets are re-assessed at each reporting date and they are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred taxes are recognized in profit or loss, with the exception of those in respect of items recognized outside profit or loss that are recognized in equity. Deferred tax assets and deferred tax liabilities are offset against current tax liabilities relate to income taxes levied by 3 Recently issued accounting standards New accounting standards applied in 2015 The Group adopted the following interpretation and amendments to existing standards with effect as from Ja- nuary 1, 2015. > “IFRIC 21 - Levies”; the interpretation addresses the ac- counting treatment of a liability in respect of the obliga- tion to pay a levy that is not covered by another standard (for example, income taxes), other than fines or sanctions imposed for violations of the law, due to the government, whether local, national or international. More specifical- ly, the interpretation established that the liability shall be recognized when the obligating event giving rise to the liability to pay the levy, as set out in the applicable law, occurs. If the obligating event occurs over a specified pe- riod of time (for example, the generation of revenue over a specified period of time), the liability shall be recognized gradually over that period. If the obligation to pay the levy is triggered upon reaching a given threshold (for example, upon reaching a minimum amount of revenue generated), the corresponding liability is recognized at the time the threshold is reached. The application of IFRIC 21 did not give rise, on an annual basis, to any restatement of com- parative figures, although during the year it did give rise to a number of changes in the interim income statement. > “Annual improvements to IFRSs 2011-2013 cycle”; the do- cument contains formal modifications and clarifications 185 Consolidated financial statementsAnnual Report 2015of existing standards. More specifically, the following In order to determine how financial assets should be clas- standards were amended: sified and measured, consideration must be given to the - “IFRS 3 - Business combinations”; the amendment business model used to manage its financial assets and clarifies that IFRS 3 does not apply to the financial sta- the characteristics of the contractual cash flows. If the tements of a joint arrangement in accounting for the objective of the business model is to collect contractual formation of the joint arrangement itself; cash flows, financial assets are measured at amortized - “IFRS 13 - Fair value measurement”; the amendment costs. If however the objective is to collect contractual clarifies that the exception provided for in that standard cash flows and those from sales, they are measured at of measuring financial assets and liabilities on the ba- fair value through other comprehensive income (FVTOCI), sis of the net exposure of the portfolio (the “portfolio which enables the recognition of interest calculated using exception”) shall apply to all contracts within the scope the amortized cost method through profit or loss and the of IAS 39 or IFRS 9 even if they do not meet the defini- fair value of the financial asset through OCI. Financial as- tions in IAS 32 of financial assets or liabilities; sets at fair value through profit or loss (FVTPL) is now - “IAS 40 - Investment property”; the amendment clari- a residual category that comprises financial instruments fies that management judgment must be used to de- that are not held under one of the two business models termine whether the acquisition of an investment pro- indicated above. perty represents the acquisition of an asset or group As regards the classification and measurement of finan- of assets or is a business combination under the provi- cial liabilities, IFRS 9 maintains the accounting treatment sions of IFRS 3. That judgment must be consistent with envisaged in IAS 39, making limited amendments, for the guidance of IFRS 3. which most of such liabilities are measured at amortized “Annual improvements to IFRSs 2011-2013 cycle” amen- cost. The standard does introduce new provisions for fi- ded the Basis for Conclusions of “IFRS 1 - First-time nancial liabilities designated as fair value through profit adoption of International Financial Reporting Standards” or loss, under which in certain circumstances the portion to clarify that a first-time adopter may adopt a new IFRS of changes in fair value due to own credit risk shall be re- whose adoption is not yet mandatorily effective if the cognized through OCI rather than profit or loss. This part new IFRS permits early application. of the standard may be applied early, without having to Accounting standards taking effect at a future date apply the entire standard. Finally, the standard proposes a new model that gives users of financial statements more information on “ex- pected credit losses”, adopting a single approach for all The following new standards, amendments and interpreta- financial assets. It envisages: tions take effect after December 31, 2015: a) the recognition of expected credit losses on an ongoing > “IFRS 9 - Financial instruments”; the final version was is- basis and the updating of the amount of such losses sued on July 24, 2014, replacing the existing “IAS 39 - Fi- at the end of each reporting period, with a view to re- nancial instruments: recognition and measurement” and flecting changes in the credit risk of the financial instru- supersedes all previous versions of the new standard. ment; The standard will take effect as from January 1, 2018 and b) the measurement of expected losses on the basis of early application will permitted following endorsement. reasonable information, obtainable without undue cost, The final version of IFRS 9 incorporates the results of the about past events, current conditions and forecasts of three phases of the project to replace IAS 39 concerning future conditions; classification and measurement, impairment and hedge c) an improvement of disclosures on expected losses and accounting. credit risk. As regards the classification of financial instruments, IFRS 9 also introduces a new approach to hedge ac- IFRS 9 provides for a single approach for all types of fi- counting, enabling entities to reflect their risk manage- nancial asset, including those containing embedded deri- ment activities in the financial statements, extending the vatives, under which financial assets are classified in their criteria for eligibility as hedged items to the risk compo- entirety, without the application of complex subdivision nents of non-financial elements, to net positions, to layer methods. components and to aggregate exposures (e.g. a combi- 186 Annual Report 2015 nation of a non-derivative exposure and a derivative). The once the contract has been identified, it must identify most significant changes regarding hedging instruments the performance obligations in the contract, recognizing compared with the hedge accounting approach used in separable goods or services as separate obligations; the IAS 39 involve the possibility of deferring the time value entity must then determine the transaction price, which of an option, the forward element of forward contracts is represented by the consideration that it expects to and currency basis spreads (i.e. “hedging costs”) in OCI obtain; the entity must then allocate the transaction price up until the time in which the hedged element impacts to the individual obligations identified in the contract on profit or loss. IFRS 9 also eliminates the requirement for the basis of the individual price of each separable good or testing effectiveness under which the results of the retro- service; revenue is recognized when (or if) each individual spective test needed to fall with a range of 80%-125%, performance obligation is satisfied through the transfer of allowing entities to rebalance the hedging relationship if the good or service to the customer, i.e. when the custo- risk management objectives have not changed. mer obtains control of the good or service. The potential impact of the future application of IFRS 9 is IFRS 15 also requires complete disclosure concerning the still being assessed. The Group immediately established nature, amount, timing and degree of uncertainty of the specific working groups to conduct the assessment. revenue and cash flows associated with contracts with > “IFRS 14 - Regulatory deferral accounts”, issued in Ja- customers. nuary 2014. The standard allows first-time adopters to The standard shall take effect, subject to endorsement, continue to recognize rate-regulated amounts recognized for periods beginning on or after January 1, 2018. The under their previous GAAP at first-time adoption of the Group is assessing the potential impact of the future ap- International Financial Reporting Standards. The standard plication of the standard. The Group immediately establi- may not be adopted by entities that already prepare their shed specific working groups to conduct the assessment. financial statements in accordance with the IFRS/IAS. In > “IFRS 16 - Leases”, issued in January 2016, replaces the other words, an entity may not recognize rate-regulated previous standard governing leases, IAS 17, and the as- assets and liabilities under IFRS 14 if its current GAAP do sociated interpretations. It establishes the criteria for the not permit such recognition or if the entity has not adop- recognition, measurement and presentation of leases for ted such accounting treatment as permitted under its cur- both the lessor and the lessee and the associated disclo- rent GAAP. The standard shall take effect retrospectively, sures. Although IFRS 16 does not modify the definition subject to endorsement, for periods beginning on or after of a lease contract set out in IAS 17, the main change is January 1, 2016. The application of the standard will have represented by the introduction of the concept of control no impact on the Group. within that definition. More specifically, in order to de- > “IFRS 15 - Revenue from contracts with customers”, is- termine whether a contract represents a lease, IFRS 16 sued in May 2014, will replace “IAS 11 - Construction con- requires the lessee to determine whether it has the right tracts”, “IAS 18 - Revenue”, “IFRIC 13 - Customer loyalty to control the use of a given assets for a specified period programmes”, “IFRIC 15 - Agreements for the construc- of time. IFRS 16 eliminates the distinction between ope- tion of real estate”, “IFRIC 18 - Transfers of assets from rating and finance leases, as required under IAS 17, intro- customers” and “SIC 31 - Revenue - Barter transactions ducing a single method for recognizing all leases. Under involving advertising services” and will apply to all con- the new approach, the lessee must recognize: tracts with customers, with a number of exceptions (for a) in the balance sheet, the assets and liabilities in re- example, lease and insurance contracts, financial instru- spect of all leases with a term of more than 12 months, ments, etc.). The new standard establishes a general fra- unless the underlying asset is of low value; and mework for the recognition and measurement of revenue b) in the income statement, the depreciation of the assets based on the principle that revenue shall be recognized involved in the lease contract separately from the inte- in a manner that faithfully depicts the transfer of goods rest connected with the associated liabilities. and services to customers in an amount that reflects the For lessors, IFRS 16 essentially retains the recognition consideration to which the entity expects to be entitled in requirements provided for under IAS 17. Accordingly, the exchange for those goods or services. The fundamental lessor shall continue to classify and recognize leases principle will be applied on the basis of five key phases: as operating or finance leases. The standard will apply, the entity must identify the contract with the customer; subject to endorsement, for periods beginning on or after 187 Consolidated financial statementsAnnual Report 2015 January 1, 2019. The Group is assessing the potential im- 1, 2017. The Group does not expect the future application pact of the future application of the standard. of the amendments to have an impact. > “Amendments to IAS 1 - Disclosure initiative”, issued in > “Amendments to IAS 12 - Recognition of deferred tax December 2014. The amendments form part of a broader assets for unrealised losses”, issued in January 2016. initiative to improve presentation and disclosure require- The amendments clarify the recognition of deferred tax ments, including changes in the following areas: assets in respect of debt instruments measured at fair - materiality: the amendments clarify that the concept value. More specifically, the amendments clarify the re- of materiality applies to all parts of the financial state- quirements for recognizing deferred tax assets for unrea- ments and that the inclusion of immaterial information lized losses in order to eliminate differences in accounting could undermine the utility of financial disclosures; treatment. The amendments will take effect, subject to - disaggregation and subtotals: the amendments clarify endorsement, for periods beginning on or after January that the line items in the income statement, the state- 1, 2017. Early application is permitted. The Group is asses- ment of comprehensive income and the balance sheet sing the potential impact of the future application of the may be disaggregated. They also introduce new requi- amended standard. rements concerning the use of subtotals; > “Amendments to IAS 19 - Defined benefit plans: em- - the structure of the notes: the amendments clarify that ployees contributions”, issued in November 2013. The entities have a certain degree of flexibility in the order amendments are intended to clarify how to recognize in which the notes to the financial statements may be contributions from employees within a defined benefit presented. They also emphasize that in establishing plan. More specifically, contributions linked to service that order the entity must consider the requirements should be recognized as a reduction in service cost: of understandability and comparability of the financial - over the periods in which employees render their servi- statements; ces, if the amount of the contributions is dependent on - investments accounted for using the equity method: the number of years of service; or the entity’s share of OCI of investments in equity-ac- - in the period in which the service is rendered, if the counted associates and joint ventures must be split amount of the contributions is independent of the num- between the portion recyclable and that not recyclable ber of years of service. to profit and loss; such portion must be presented as The amendments will take effect for the Group as from separate line items in the statement of comprehensive January 1, 2016. The Group does not expect the future income depending whether they will subsequently be application of the amendments to have an impact. reclassified to profit or loss. > “Amendments to IAS 27 - Equity method in separate finan- The amendments will take effect for periods beginning on cial statements” issued in August 2014. The amendments or after January 1, 2016. The Group does not expect the permit the use of the equity method for investments in future application of the amendments to have an impact. subsidiaries, joint ventures and associates in an entity’s > “Amendments to IAS 7 - Disclosure initiative”, issued in separate financial statements. The amendments also cla- January 2016. The amendments apply to liabilities and rify a number of issues concerning investment entities. assets arising from financing activities, which are defi- Specifically, when an entity ceases to be an investment ned as liabilities and assets for which cash flows were, entity, it must recognize investments in subsidiaries or will be, classified in the statement of cash flows as in accordance with IAS 27. Conversely, when an entity “cash flows from financing activities”. The amendments becomes and investment entity, it must recognize in- require disclosure of changes in such liabilities/assets, di- vestments in subsidiaries at fair value through profit or stinguishing between cash flow changes and non-cash loss in accordance with IFRS 9. The amendments will variations (i.e. variations arising from obtaining or losing take effect for periods beginning on or after January 1, control of a subsidiary or other businesses, the effect of 2016. As the amendments regard the separate financial changes in foreign exchange rates and changes in fair va- statements only, they are not expected to have an impact lues). The IASB suggests providing such disclosure in a on the consolidated financial statements. reconciliation between the opening and closing balances > “Amendments to IFRS 11 - Accounting for acquisitions for the period for such liabilities/assets. The amendments of interests in joint operations”, issued in May 2014. The will take effect for periods beginning on or after January amendments clarify the accounting treatment of the ac- 188 Annual Report 2015quisition of an interests in a joint operation that is busi- The Group does not expect the future application of the ness, pursuant to IFRS 3, requiring the application of all amendments to have an impact. the accounting rules for business combinations under > “Amendments to IFRS 10 and IAS 28 - Sale or contribution IFRS 3 and other applicable IFRS with the exception of of assets between an investor and its associate or joint those standards that conflict with the guidance on IFRS venture”, issued in September 2014. The amendments 11. Under the amendments, a joint operator that acquires establish that in the case of the sale or contribution of as- such interests must measure the identifiable assets and sets to a joint venture or an associate, or the sale of an in- liabilities at fair value; expense acquisition-related costs terest that gives rise to a loss of control while maintaining (with the exception of debt or equity issuance costs); re- joint control or significant influence over the associate or cognize deferred taxes; recognize any goodwill or bargain joint venture, the amount of the gain or loss recognized purchase gain; perform impairment tests for the cash ge- shall depend on which of the assets or interest constitute nerating units to which goodwill has been allocated; and a business in accordance with “IFRS 3 - Business com- disclose information required for relevant business com- binations”. More specifically, if the assets/interest consti- binations. The amendments will take effect for periods tute a business, any gain/(loss) shall be recognized in full; beginning on or after January 1, 2016. if the assets/interest does not constitute a business, any > “Amendments to IAS 16 and IAS 38 - Clarification of gain/(loss) shall only be recognized to the extent of the acceptable methods of depreciation and amortization”, unrelated investors’ interests in the associate or joint ven- issued in May 2014. The amendments provide additio- ture, who represent the counterparties in the transaction. nal guidance on how the depreciation or amortization The EFRAG has recommended that the European Com- of property, plant and equipment and intangible assets mission postpone endorsement of the amendments until should be calculated. The provisions of IAS 16 have been the IASB completes its project on the elimination of gains amended to clarify that a revenue-based depreciation me- and losses on transactions between an entity and its as- thod asset is not appropriate. The provisions of IAS 38 sociates or joint ventures. have been amended to introduce a presumption that a > “Amendments to IFRS 10, IFRS 12 and IAS 28 - In- revenue-based amortization method is inappropriate. That vestment entities: applying the consolidation exception”, presumption can be overcome when: issued in December 2014. The amendments clarify that if - the intangible asset is expressed as a measure of re- a parent entity (or intermediate parent) prepares its finan- venue; cial statements in conformity with IFRS 10 (including the - it can be demonstrated that revenue and the con- case of an investment entity that does not consolidate sumption of the economic benefit generated by an in- its investments in subsidiaries but rather measures them tangible asset are highly correlated. at fair value), the exemption from preparing consolida- The amendments will take effect prospectively for pe- ted financial statements is available to the subsidiaries riods beginning on or after January 1, 2016. The Group of an investment entity that in turn qualify as investment is assessing the impact of the future application of the entities. In addition, the amendments also clarify that a amendments. parent entity that qualifies as an investment entity must > “Amendments to IAS 16 and IAS 41 - Bearer plants”, consolidate a subsidiary that provides services related to issued in June 2014. The amendments change the ac- the parent’s investment activities if the subsidiary is not counting treatment of biological assets that meet the itself an investment entity. The amendments also sim- definition of “bearer plants”, such as fruit trees, that cur- plify application of the equity method for an entity that rently fall within the scope of “IAS 16 - Property, plant is not an investment entity but holds an interest in an and equipment”. As a consequence, they will be subject associate or joint venture that is an investment entity. In to all of the provisions of that standard. Accordingly, particular, when applying the equity method, the entity for measurement subsequent to initial recognition, the may retain the fair value measurement applied by the entity may choose between the cost model and the re- associate or joint venture to its interests in subsidiaries. valuation model. The agricultural products produced by The amendments will take effect, subject to endorse- the bearer plants (e.g. fruit) will remain within the scope ment, for periods beginning on or after January 1, 2016. of “IAS 41 - Agriculture”. The amendments will take ef- The Group does not expect the future application of the fect for periods beginning on or after January 1, 2016. amendments to have an impact. 189 Consolidated financial statementsAnnual Report 2015 > “Annual improvements to IFRSs 2010-2012 cycle”, issued sclosures required under IAS 24 for related parties. The in December 2013; the document contains formal modifi- amendment also clarifies that if an entity obtains key cations and clarifications of existing standards applicable management personnel services from a management to the Group as from January 1, 2016 that are not ex- entity, the entity is not required to disclose the com- pected to have a significant impact on the Group. More pensation paid or payable by the management entity to specifically, the following standards were amended: those managers; - “IFRS 2 - Share-based payment”; the amendment se- - “IAS 38 - Intangible assets”; the amendment clarifies parates the definitions of “performance conditions” that when an intangible asset is revalued, its gross and “service conditions” from the definition of “ve- carrying amount shall be adjusted in a manner consi- sting conditions” in order to clarify the description of stent with the revaluation of the carrying amount. In each condition; addition, it also clarifies that the accumulated amortiza- - “IFRS 3 - Business combinations”; the amendment tion shall be calculated as the difference between the clarifies how to classify any contingent consideration gross carrying amount and the carrying amount of the agreed in a business combination. Specifically, the asset after taking account of accumulated impairment amendment establishes that if the contingent consi- losses. deration meets the definition of financial instrument, it “Annual improvements to IFRSs 2010-2012 cycle” amen- shall be classified as a financial liability or equity. In the ded the Basis for Conclusions of “IFRS 13 - Fair value former case, the liability shall be measured at fair value measurement” to clarify that short-term receivables and and changes in fair value shall be recognized in profit payables with no stated interest rate to apply to the invoi- or loss in accordance with IFRS 9. Contingent consi- ce amount can still be measured without discounting, if deration that does not meet the definition of financial the impact of discounting would not be material. instrument shall be measured at fair value and changes > “Annual improvements to IFRSs 2012-2014 cycle”, issued in fair value shall be recognized in profit or loss; in September 2014; the document contains formal modi- - “IFRS 8 - Operating segments”; the amendments in- fications and clarifications of existing standards that are troduce new disclosure requirements in order to ena- not expected to have a significant impact on the Group. ble the users of financial statements to understand More specifically, the following standards were amended: the judgments adopted by management in aggregating - “IFRS 5 - Non-current assets held for sale and disconti- operating segments and the reasons for such aggrega- nued operations”; the amendments clarify that the re- tion. The amendments also clarify that the reconciliation classification of an asset (or disposal group) from held of total segment assets and total assets of the entity is for sale to held for distribution should not be conside- required only if provided periodically by management; red as a new plan of sale but rather the continuation of - “IAS 16 - Property, plant and equipment”; the the original plan. Accordingly, the reclassification does amendment clarifies that, when an item of property, not give rise to any interruption in the application of the plant and equipment is revalued, the gross carrying provisions of IFRS 5 or any change in the date of clas- amount of that asset shall be adjusted in a manner con- sification. The amendments will take effect for periods sistent with the revaluation of the carrying amount. In beginning on or after January 1, 2016; addition, it also clarifies that the accumulated deprecia- - “IFRS 7 - Financial instruments: disclosures”; as re- tion shall be calculated as the difference between the gards disclosures to be provided on any continuing gross carrying amount and the carrying amount of the involvement in assets that have been transferred and asset after taking account of accumulated impairment derecognized in their entirety, the amendments clarify losses; that for disclosure purposes, a servicing contract that - “IAS 24 - Related party disclosures”; the amendment provides for the payment of a fee can represent a con- clarifies that a management entity, i.e. an entity provi- tinuing involvement in the transferred asset. The entity ding key management personnel services to an entity, must assess the nature of the fee and the servicing is a related party of that entity. Accordingly, in addition contract to determine when disclosure is required. The to fees for services paid or payable to the management amendments also clarify that disclosures concerning entity, the entity must report other transactions with the offsetting of financial assets and liabilities are not the management entity, such as loans, within the di- required in condensed interim financial statements. 190 Annual Report 2015The amendments will take effect for periods beginning on or after January 1, 2016; - “IAS 19 - Employee benefits”; IAS 19 requires that the discount rate used to discount post-employment bene- fit obligations shall be determined by making reference to market yields on high quality corporate bonds or go- 4 Restatement of comparative disclosures vernment bonds where there is not deep market in such Newly applied accounting standards or newly adopted ac- high quality corporate bonds. The amendment to IAS 19 counting policies did not give rise to the restatement of clarifies that the depth of the market in high quality cor- comparative disclosures at December 31, 2014. porate bonds must be assessed on the basis of the cur- More specifically, as a result of the application, starting from rency in which the bond is denominated and not the cur- January 1, 2015 with retrospective effect, of the new stan- rency of the country in which the bond is issued. If there dard “IFRIC 21 - Levies”, under which a tax liability is reco- is no deep market in high quality corporate bonds in that gnized when the obligating event giving rise to the liability currency, the corresponding market yield on government to pay the levy, as set out in the applicable law, occurs, a bonds shall be used. The amendments will take effect number of indirect taxes on real estate held in Spain were for periods beginning on or after January 1, 2016; recognized in the full amount at the start of the period and - “IAS 34 - Interim financial reporting”; the amendment no longer deferred over the course of the year. This approach establishes that the required disclosures for interim fi- simply involves the redistribution of the expenses among nancial reports shall be provided in the interim financial the various interim periods, but has no restatement impact statements or cross-referenced in the interim financial on figures for performance and financial position as they re- statements by way of a reference to another statement gard the entire year ending and as at December 31, 2014. (e.g. a management risk report) that is available on the same terms and at the same time to users of the in- In addition, as regards the structure of “cash flows from terim financial statements. The amendments will take operating activities” in the consolidated statement of cash effect for periods beginning on or after January 1, 2016. flows, whose overall value was unchanged, the items that compose cash flows from operating activities have been reported in greater detail, which led to the corresponding reclassification of certain items for 2014 in order to ensure the comparability of the figures. As from the 2015 financial year, the new organizational mo- del of the Enel Group can be considered fully operational. The future adoption of the model was first announced on July 31, 2014, at the time of the presentation of the new organizational structure. In 2015, the new organization, based on a matrix that com- prises Divisions (Global Generation, Global Infrastructure and Networks, Renewable Energy, Global Trading, Upstream Gas) and Regions/Countries (Italy, Iberian Peninsula, Latin America and Eastern Europe), represented the basis of plan- ning, reporting and assessing the financial performance of the Group, both internally by top management and in rela- tions with the financial community. In view of these developments, it has also become neces- sary to review disclosures under “IFRS 8 - Operating seg- ments”, as reported in note 5 below, which have also been supplemented with restated comparative figures to ensure full comparability. 191 Consolidated financial statementsAnnual Report 20155 Main changes in the scope of consolidation > disposal in December 2014 of 100% of Enel Green Power France, a renewables generator in France. In addition, following the internal reorganization of the Group designed to restructure the holdings of the Iberia and Latin America Division, there were a number of changes in non- In the two periods under review, the scope of consolidation controlling interests in a number of subsidiaries as a result changed as a result of a number of transactions. of the following transactions: 2014 > acquisition, through a tender offer in effect between Janua- ry 14, 2014 and May 16, 2014, of an additional 15.18% sta- > Loss of control, as from January 1, 2014, of SE Hydro- ke in Coelce, an electricity distribution company in Brazil, power, under agreements signed in 2010 upon the ac- already under the Group’s control prior to the tender offer; quisition of the company, providing for the change in > acquisition, on September 4, 2014, of the remaining 39% governance structure as from that date. This resulted in of Generandes Perú (previously controlled through a sta- the Enel Group no longer meeting the requirements for ke of 61%), a company that controls, with an interest of control of the company, which has instead become an 54.20%, Edegel, a company operating in the power gene- entity under joint control. With these new governance ar- ration sector in Peru; rangements, the investment was reclassified as a joint > disposal, on October 23, 2014, by Endesa (of which the operation under IFRS 11; Group holds 92.06%) to Enel Energy Europe, now Enel > acquisition, on April 22, 2014, of 50% of Inversiones Gas Iberoamérica (a wholly-owned subsidiary) of 100% of En- Atacama, a company operating in the natural gas tran- desa Latinoamérica (an investment holding company that sport and electricity generation sector in Chile in which owned 40.32% of Enersis) and 20.30% of Enersis, the the Group already held 50%; therefore, as from that date parent company for operations in Latin America. The ope- the company is consolidated on a line-by-line basis rather ration increased the Group’s stake in Enersis by 4.81%; than using equity method accounting; > disposal, on November 21, 2014, of 21.92% of Endesa in > acquisition, on May 12, 2014, of 26% of Buffalo Dunes a public offering. Wind Project, a company operating in the wind gene- ration sector in the United States in which the Group already held 49%; therefore, following the acquisition of 2015 control the company is now consolidated on a line-by-line > Acquisition, on March 6, 2015, of the share not previously basis rather than using equity method accounting; held by the Group, amounting to 66.7%, of 3Sun, a pho- > acquisition, on July 22, 2014, of the remaining 50% of tovoltaic firm. Through this acquisition, the Group obtai- Enel Green Power Solar Energy, an Italian company ned control of the company, which is now consolidated operating in the development, design, construction and on a line-by-line basis; operation of photovoltaic plants, in which the Group had > acquisition, on September 24, 2015, acting through the previously held 50%; therefore, the company is now con- subsidiary Enel Green Power, of a controlling interest of solidated on a line-by-line basis rather than using equity 68% in BLP Energy (“BLP”), a company operating in the method accounting; renewables sector in India; > acquisition, on September 17, 2014, of 100% of Osage > acquisition, in September 2015, of the remaining 60% of Wind LLC, a company that owns a 150 MW wind deve- the ENEOP Group, identified in a split agreement with lopment project in the United States. In October 2014, the other participants in the venture, with the acquisition a stake of 50% in the company was sold. Consequen- being settled with the concomitant transfer of the 40% tly, the company, held as a joint venture, began to be ac- that Enel Green Power held in the other two portfolios counted for using the equity method; transferred to the other partners in the consortium; > disposal in December 2014 of the entire stake (36.2%) > disposal, on November 26, 2015, of the ENEOP Group held in LaGeo, a geothermal generation company in El and other Portuguese companies in which Enel Green Salvador; Power held an interest; 192 Annual Report 2015 > full consolidation, following changes in shareholders’ sent transactions involving the acquisition or loss of control, agreements, in December 2015, of Osage Wind LLC, a gave rise to a change in the interest held by the Group in the company 50% held by Enel Green Power North America, investees: previously accounted for using the equity method; > disposal, on January 29, 2015, of SF Energy, a hydroelec- > acquisition of a controlling interest of 78.6% in Erdwärme tric generation company in Italy; Oberland GmbH (“EO”), a company specialized in the de- > disposal, on March 31, 2015, of 49% of EGPNA Renew- velopment of geothermal projects in Germany; able Energy Partners, an electricity generation company > contribution, on December 31, 2015, of the former whol- in the United States. Since the Group has maintained ly-owned subsidiaries Altomonte, Enel Green Power San control of the company, the transaction is one involving a Gillio and Enel Green Power Strambino Solar to an equal- non-controlling interest; ly held joint venture (Ultor) with the fund F2i accounted > disposal, on April 15, 2015, of SE Hydropower, a hydroe- for using the equity method. lectric generation company in Italy; In addition to the above changes in the scope of consolida- Energia Eolica, a wind generation company operating in tion, the following transactions, although they do not repre- Italy in which the Group already held an interest of 51%. > acquisition, on April 8, 2015, of the remaining 49% of Definitive allocation of the purchase price for the acquisition of 3Sun On March 6, 2015, Enel Green Power completed the acqui- sition of an additional 66.7% stake in 3Sun from STM and Sharp as provided for under the agreement signed between the parties in July 2014. Therefore, as a result of this acquisition, the Group has full ownership of 3Sun, and the company is now consolidated on a line-by-line basis rather than using the equity method. As provided for under IFRS 3 Revised, the transaction qua- lifies as a step acquisition and, therefore, the fair value adjustments of the part of the net assets already held were recognized through profit or loss for the period. Having completed the purchase price allocation process, the following table reports the definitive fair values of the assets acquired and liabilities and contingent liabilities assumed at the acquisition date. Millions of euro Property, plant and equipment Intangible assets Deferred tax assets Other current and non-current assets Total assets Shareholders’ equity attributable to the shareholders of the Parent Company Financial debt Trade payables Deferred tax liabilities and other liabilities Total liabilities and shareholders’ equity Definitive amounts recognized at the acquisition date 122 7 84 93 306 115 140 25 26 306 As shown in the following table, the transaction resulted in the recognition of negative goodwill of €76 million, but did not have an impact on cash flows. 193 Consolidated financial statementsAnnual Report 2015Effects of the transaction Millions of euro Transaction price Net assets of acquiree following definitive allocation Carrying amount of interest held previously Remeasurement at fair value of interest held previously Negative goodwill - 115 (1) 40 76 Definitive allocation of the purchase price for the acquisition of a number of companies in South Africa During 2015, the Group, acting through its subsidiary Enel Green Power, was awarded contracts for the start of new wind projects in South Africa for a total installed capacity of 705 MW in the fourth phase of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) tender. This led to the acquisition of a number of projects represen- ting businesses that were accounted for in accordance with the provisions of IFRS 3 Revised. The consideration for each of those transactions includes a fixed component and contingent consideration depending on winning the tender. Accordingly, in 2015 the definitive fair values of the assets acquired and the liabilities and contin- gent liabilities assumed were determined. The main adjustments essentially regard the adjustment of the value, net of tax effects, of a number of intangible assets. The allocation of the total cost of the transaction led to the recognition of negative goodwill of €12 million. Effects of the transaction Millions of euro Intangible assets Other assets Total assets Deferred tax liabilities Total liabilities Total net assets of the acquiree Millions of euro Transaction price Net assets of acquiree following definitive allocation Negative goodwill Cash and cash equivalents acquired Cash and cash equivalents paid Cash flow impact Carrying amount at the acquisition date Fair value adjustments Amounts recognized at the acquisition date - - - - - - 76 - 76 21 21 55 76 - 76 21 21 55 43 55 (12) - 6 (6) Disposal of interest in EGPNA Renewable Energy Partners which will be consolidated on a line-by-line basis, and will conti- nue to be responsible for administration, operation and mainte- On March 31, 2015, the Group, acting through its subsidiary Enel Green Power North America, entered into an agreement for the sale of a 49% stake in a newly created company, EGPNA Re- newable Energy Partners, whose portfolio contains a number of companies operating primarily in the wind and hydroelectric power sector. The Group continues to indirectly own 51% of the company, nance activities. The disposal involved a total price of €458 million (collected in full), which, excluding transaction costs of €8 million, gave rise to a transaction value of €450 million, taking into account the value assigned to certain projects subject to conditions that had not yet been entirely met as of the date of this report. The gain on the transaction, calculated as the difference betwe- en the net sale price and the percentage of shareholders’ equity 194 Annual Report 2015sold to non-controlling interests, is equal to €14 million and was interests, since the Group has maintained control over the com- allocated to an equity reserve for transactions in non-controlling pany. Effects of the transaction Millions of euro Value of the transaction (1) Net assets transferred Reserve for transactions in non-controlling interests - of which attributable to the shareholders of the Parent Company - of which attributable to non-controlling shareholders (1) Net of transaction costs. 450 436 14 10 4 Acquisition of 68% of BLP Energy The process of allocating the purchase price to the fair va- On September 24, 2015 the Group, acting through Enel Gre- lues of the assets acquired and the liabilities and contingent en Power, acquired a controlling stake of 68% in BLP Energy liabilities assumed is not yet definitive and will be completed (“BLP”), a company operating in the renewables industry in within 12 months of the acquisition date. India, which owns wind plants with a total installed capacity of The non-controlling interest in the company was determined 172 MW, generating a total of about 340 GWh per year. The tran- in proportion to the minority interest in the net identifiable saction qualifies as a business combination and was accounted assets of the acquiree. for in accordance with the provisions of IFRS 3 Revised. Effects of the transaction Millions of euro Property, plant and equipment Cash and cash equivalents Goodwill Other current and non-current assets Total assets Financial debt Deferred tax liabilities Other current and non-current liabilities Total liabilities Non-controlling interests Total net assets acquired Millions of euro Transaction price Net assets acquired following provisional allocation Goodwill Cash and cash equivalents acquired Cash and cash equivalents paid Cash flow impact Carrying amount at the acquisition date Fair value adjustments Amounts recognized at the acquisition date 76 15 3 4 98 62 - 3 65 10 23 16 - - - 16 - 5 2 7 3 6 92 15 3 4 114 62 5 5 72 13 29 29 29 - 15 29 (14) 195 Consolidated financial statementsAnnual Report 2015Reallocation of assets to shareholders of the ENEOP consortium held in each of the other parties’ portfolios in exchange for the residual interest held in the other portfolios by the com- pany. More specifically, the assets allocated to EGP have a In 2015, Enel Green Power (“EGP”), acting through its Spa- net installed capacity of about 445 MW. Enel Green Power nish and Portuguese subsidiaries, initiated an operation to España then acquired an additional stake of 60% (for a fair split the assets of the ENEOP consortium, in which it held value of €96 million) from the other shareholders for its port- a stake of 40%. In September 2015, EGP signed an agree- folio, with the consequent acquisition of control (step acqui- ment with the other consortium members with which each sition) against the transfer of 40% of the assets to the other acquired control of a specific portfolio of plants already iden- two consortium members (with a fair value totaling about tified in accordance with the terms of a split agreement si- €80 million) and payment of compensation to rebalance the gned previously, with the acquisition of the residual interest weights of the various portfolios. The following table reports the provisional fair values of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition of the portfolio. Effects of the transaction Millions of euro Property, plant and equipment Intangible assets Goodwill Cash and cash equivalents Other current and non-current assets Total assets Loans Other current and non-current liabilities Total liabilities Total net assets Total net assets acquired (60%) Carrying amounts at the acquisition date Fair value adjustments and compensation among portfolios (1) Amounts recognized at the acquisition date 442 18 25 128 34 647 518 52 570 77 47 - - 15 - 41 56 (28) - (28) 84 49 442 18 40 128 75 703 490 52 542 161 96 (1) Carried out to balance the exchange among the consortium participants. Net of transaction costs, the transaction had a total impact asurement at fair value (pursuant to IFRS 3 Revised) of the on profit or loss of about €29 million as a result of the reme- interest held previously. Millions of euro Transaction price (including cash compensation) Net assets of acquiree following provisional allocation Carrying amount of interest held previously Remeasurement at fair value of interest held previously Goodwill 96 161 36 29 - The completion of the split of ENEOP meets the condition pre- of all renewables assets held in Portugal, which occurred in cedent for the closing of the agreement signed in September November 2015, as described in the next section. 2015 with First State Wind Energy Investments for the sale Disposal of 100% of Finerge Gestão de Projectos Energéticos ting through its subsidiary Enel Green Power España, com- pleted the sale of all of the share capital of Finerge Gestão On November 26, 2015, the Enel Green Power Group, ac- de Projectos Energéticos to the Portuguese company First 196 Annual Report 2015State Wind Energy Investments for a total of about €900 effects of consolidating ENEOP net of transaction costs, million. The transaction closed following completion of the amounting to about €29 million. split of ENEOP and gave rise to a capital gain, including the Creation of an equally-held joint venture in the Italian photovoltaic industry with effect from December 31, 2015. The transaction, which involved the loss of control of those assets, had a fair value of €111 million (see note 22) and a During the 4th Quarter of 2015, the Enel Green Power Group total impact on profit or loss of €11 million, including the transferred part of its solar assets in Italy to a new equally remeasurement at fair value (in accordance with IFRS 10) of held joint venture with F2i Energie Rinnovabili Srl under the the interest previously held and transferred to the new joint provisions of the agreement signed on October 16, 2015, venture. 197 Consolidated financial statementsAnnual Report 20156 Segment information The representation of performance and financial position order to pursue and maintain technological leadership in the by business area presented here is based on the approach sectors in which the Group operates, ensuring operational used by management in monitoring Group performance for excellence, and to maximize the level of service offered to the two periods being compared. customers in local markets. On July 31, 2014, the Enel Group adopted a new organi- For more information on performance and financial deve- zational structure, based on a matrix of Divisions and geo- lopments during the year, please see the dedicated section graphical areas, focused on the industrial objectives of the in the report on operations. Group, with clear specification of roles and responsibilities in Segment information for 2015 and 2014 Results for 2015 (1) Millions of euro Italy Iberian Peninsula Latin America Eastern Europe Renewable Energy Other, eliminations and adjustments Total Revenue from third parties 38,155 19,644 10,599 4,488 2,747 25 75,658 Revenue from transactions with other segments Total revenue Total costs Net income/(expense) from commodity contracts measured at fair value Depreciation and amortization Impairment losses Reversals of impairment losses Operating income 1,489 39,644 33,747 461 20,105 17,002 201 8 1,479 583 31 4,005 1,526 409 (221) 1,397 985 28 10,627 7,456 (4) 876 69 (19) 2,241 1,819 343 4,831 3,506 (17) 283 1,539 (15) (499) 229 (3) 264 3,011 1,160 (25) 689 259 (1) 879 2,466 (2,585) (2,560) (2,342) 5 34 119 (28) (338) 52 - 75,658 60,529 168 4,887 2,978 (253) 7,685 7,113 Capital expenditure 1,562 (2) (1) Segment revenue includes both revenue 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”. (3) Does not include €648 million regarding units classified as “held for sale”. 198 Annual Report 2015Results for 2014 restated (1) (2) Millions of euro Italy Iberian Peninsula Latin America Eastern Europe Renewable Energy Other, eliminations and adjustments Total Revenue from third parties 37,679 20,766 9,645 4,928 2,662 111 75,791 Revenue from transactions with other segments Total revenue Total costs Net income/(expense) from commodity contracts measured at fair value Depreciation and amortization Impairment losses Reversals of impairment losses Operating income Capital expenditure 710 38,389 31,861 186 20,952 17,638 (185) (111) 1,678 2,748 (1) 1,918 1,460 1,632 556 (225) 1,240 993 3 9,648 6,553 (3) 885 658 - 1,549 1,609 371 5,299 4,088 (1) 383 3,540 (37) (2,676) 936 259 2,921 1,059 76 589 228 (3) 1,124 1,658 (1,529) (1,418) (1,390) (1) 37 3 (1) (68) 45 - 75,791 59,809 (225) 5,204 7,733 (267) 3,087 6,701 (1) Segment revenue includes both revenue 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 enable comparison with the results for 2015, which are presented on the basis of the new organization of the Enel Group, which as from this year represents the basis for the planning, reporting and assessment of the performance and financial position of the Group, both inter- nally by management and with respect to the financial community. 199 Consolidated financial statementsAnnual Report 2015Financial position by segment At December 31, 2015 Millions of euro Property, plant and equipment Intangible assets Trade receivables Other Italy Iberian Peninsula Latin America Eastern Europe Renewable Energy 22,441 1,075 8,655 3,513 23,294 14,844 2,228 1,445 11,589 10,197 1,777 465 5,767 904 366 567 Operating assets 35,684 41,811 24,028 7,604 (1) 13,894 1,994 451 476 16,815 1,270 282 437 783 2,130 1,312 4,225 (2) 1,989 Trade payables Sundry provisions Other Operating liabilities 6,928 3,445 6,852 17,225 2,060 3,804 2,824 8,688 1,817 817 1,174 3,808 (1) Of which €4,231 million regarding units classified as “held for sale”. (2) Of which €2,331 million regarding units classified as “held for sale”. At December 31, 2014 restated (1) Millions of euro Property, plant and equipment Intangible assets Trade receivables Other Italy Iberian Peninsula Latin America Eastern Europe Renewable Energy 22,518 1,237 7,832 3,963 23,865 14,817 2,185 1,488 11,950 11,572 1,656 798 6,702 912 409 501 11,765 2,248 440 599 Operating assets 35,550 (2) 42,355 (4) 25,976 (5) 8,524 (6) 15,052 Trade payables Sundry provisions Other 8,248 3,362 6,054 Operating liabilities 17,664 (3) 2,132 3,979 2,852 8,963 2,184 765 1,317 4,266 747 2,572 1,304 892 193 560 4,623 (7) 1,645 Other, eliminations and adjustments 66 52 (621) (389) (892) (805) 581 (718) (942) Other, eliminations and adjustments 171 76 (420) (350) (523) (493) 469 (576) (600) Total 77,051 29,066 12,856 6,077 125,050 12,053 11,059 11,881 34,993 Total 76,971 30,862 12,102 6,999 126,934 13,710 11,340 11,511 36,561 (1) The figures have been restated to enable comparison with the results for 2015, which are presented on the basis of the new organization of the Enel Group, which as from this year represents the basis for the planning, reporting and assessment of the performance and financial position of the Group, both inter- nally by management and with respect to the financial community. (2) Of which €347 million regarding units classified as “held for sale”. (3) Of which €22 million regarding units classified as “held for sale”. (4) Of which €4 million regarding units classified as “held for sale”. (5) Of which €10 million regarding units classified as “held for sale”. (6) Of which €4,255 million regarding units classified as “held for sale”. (7) Of which €2,790 million regarding units classified as “held for sale”. 200 Annual Report 2015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 Derivatives Cash and cash equivalents Deferred tax assets Income tax receivables Long-term tax receivables included in “Other current assets” Financial and tax assets of “Assets held for sale” Segment assets (1) Total liabilities Long-term borrowings Short-term borrowings Current portion of long-term borrowings Current financial liabilities Derivatives Deferred tax liabilities Income tax payable Other tax payables Financial and tax liabilities included in disposal groups classified as “held for sale” Segment liabilities (1) at Dec. 31, 2015 at Dec. 31, 2014 161,179 166,634 607 3,274 463 2,381 7,416 10,639 7,386 636 706 2,621 125,050 109,428 44,872 2,155 5,733 1,063 7,027 8,977 585 990 3,033 34,993 872 3,645 501 3,984 6,835 13,088 7,067 788 759 2,161 126,934 115,489 48,655 3,252 5,125 1,177 7,882 9,220 253 887 2,477 36,561 (1) The figures have been restated to enable comparison with the results for 2015, which are presented on the basis of the new organization of the Enel Group, which as from this year represents the basis for the planning, reporting and assessment of the performance and financial position of the Group, both inter- nally by management and with respect to the financial community. 201 Consolidated financial statementsAnnual Report 2015Revenue 7.a Revenue from sales and services - €73,076 million Millions of euro Revenue from the sale of electricity Revenue from the transport of electricity Fees from network operators Transfers from equalization funds, market operators and energy services operators Revenue from the sale of natural gas Revenue from the transport of natural gas Revenue from fuel sales Connection fees to electricity and gas networks Revenue from the sale of environmental certificates Revenue from other sales and services Total 2015 46,638 9,911 826 1,152 4,045 509 7,104 829 343 1,719 73,076 2014 48,062 9,142 783 1,857 3,628 459 5,659 843 1,238 1,657 73,328 Change (1,424) 769 43 (705) 417 50 1.445 (14) (895) 62 (252) -3.0% 8.4% 5.5% -38.0% 11.5% 10.9% 25.5% -1.7% -72.3% 3.7% -0.3% In 2015 “revenue from the sale of electricity” amounted to tary recognition of revenue for the entire previous regula- €46,638 million (€48,062 million in 2014) and included sa- tory period under the provisions of the temporary regime, les of electricity to end users amounting to €29,994 million amounted to €557 million, of which €100 million for 2015 (€29,933 million in 2014), sales of electricity to wholesale investments. For more details on the regulatory changes, buyers totaling €13,355 million (€14,428 million in 2014) please see the appropriate section in note 2 “Accounting po- and revenue from electricity trading activities amounting licies and measurement criteria”. to €3,289 million (€3,701 million in 2014). The decrease is mainly attributable to the decline in quantities sold on natio- In 2015, “transfers from equalization funds, market opera- nal electricity exchanges and to foreign wholesale buyers, as tors and energy services operators” amounted to €1,152 well as the effect of translating the ruble into euro following million, down €705 million compared with the previous year. the former’s significant depreciation. This mainly reflected a decline in transfers in the extra-pe- ninsular area of Spain, due to the increase in sales and the “Revenue from the transport of electricity” amounted to reduction in fuel prices. €9,911 million in 2015, an increase of €769 million, largely due to the increase in revenue from transportation to end “Revenue from the sale of natural gas” amounted to €4,045 users connected to the Enel network (€258 million) and in million in 2015 (€3,628 million in 2014), an increase of €417 revenue from other suppliers (€511 million). More specifical- million, mainly reflecting the increase in sales in the Iberian ly, the increase is essentially attributable to new regulation Peninsula and on the domestic market, due to a sharp incre- in Italy (Resolutions 654/2015 and 655/2014 of the Authority ase in volumes traded accompanied by falling average unit for Electricity, Gas and the Water System) which produced prices. an increase in electricity transport rates and resolved the regulatory lag issue. The latter development will enable the “Revenue from the transport of natural gas” amounted to recognition, as from the current year, of revenue in respect €509 million, up €50 million (+10.9%), which matched the of the remuneration and regulatory amortization of eligible increase in gas sales. investments in the grid made during the year. That revenue will be recognized in rates as from 2016 and 2017. The overall “Revenue from fuel sales” amounted to €7,104 million, and impact of the recognition, which also led to the supplemen- in 2015 included sales of natural gas of €7,053 million (€5,536 202 Annual Report 2015million in 2014) and sales of other fuels amounting to €51 “Revenue from the sale of environmental certificates” de- million (€123 million in 2014). The sharp rise with respect to creased by €895 million, largely due to a contraction in sales the previous year reflects the increase in volumes traded. of environmental certificates and CO2 emissions allowances. The table below gives a breakdown of revenues from sales and services by geographical area. Millions of euro Italy Europe Iberian Peninsula France Switzerland Germany Austria Slovenia Slovakia Romania Greece Bulgaria Belgium Czech Republic Hungary Russia Netherlands United Kingdom Other European countries Americas United States Canada Mexico Brazil Chile Peru Colombia Argentina Other South American countries Other Africa Asia Total 2015 28,705 19,175 1,439 362 2,556 20 26 1,240 1,031 64 9 365 679 356 1,022 3,414 1,214 67 463 11 166 2,864 3,377 1,226 2,114 588 172 3 348 2014 28,567 20,378 1,375 711 3,154 4 22 1,367 1,046 61 8 256 813 141 1,336 113 3,105 179 455 - 135 3,100 2,820 1,034 2,087 453 158 1 449 73,076 73,328 203 Consolidated financial statementsAnnual Report 20157.b Other revenue and income - €2,582 million Millions of euro Operating grants Grants for environmental certificates Capital grants (electricity and gas business) Sundry reimbursements Gains on disposal and negative goodwill on acquisitions of subsidiaries, associates, joint ventures, joint operations and non- current assets held for sale Gains on remeasurement at fair value after changes in control Gains on disposal of property, plant and equipment and intangible assets Service continuity bonuses Other revenue Total 2015 8 874 17 239 313 80 52 65 934 2,582 2014 13 923 12 184 292 82 32 76 849 2,463 Change (5) (49) 5 55 21 (2) 20 (11) 85 119 -38.5% -5.3% 41.7% 29.9% 7.2% -2.4% 62.5% -14.5% 10.0% 4.8% “Grants for environmental certificates” decreased by €49 “Gains on remeasurement at fair value after changes in con- million compared with the previous year. The item compri- trol” amounted to €80 million. They mainly include the reme- ses incentives granted to renewable generation plants or for asurement at fair value of the assets and liabilities pertaining energy efficiency initiatives. to the Group (€40 million and €29 million) which Enel fully owned prior to the acquisition of full control of 3Sun and “Sundry reimbursements” regard sundry reimbursements of the ENEOP consortium respectively. In 2014, this item from customers and suppliers totaling €110 million (€46 reported remeasurement at fair value of the assets and lia- million in 2014) and insurance indemnities in the amount bilities pertaining to the Group: (i) remaining after the loss of of €129 million (€86 million in 2014). The increase is due to control as from January 1, 2014, of SE Hydropower following more substantial insurance indemnities for damage to plants changes in governance arrangements (€50 million); and (ii) and to end-user reimbursements in Spain caused by fraudu- already held by Enel prior to the acquisition of full control of lent connections to the network. Inversiones Gas Atacama (€29 million) and Buffalo Dunes Wind Project (€3 million). Gains on disposal and negative goodwill amounted to €313 million in 2015, up €21 million on 2014, mainly due to the The increase in “Other revenue” mainly reflects revenue re- impact of the proceeds from the disposal of SE Hydropo- cognized in 2015 that was generated by the application of wer (€141 million) and SF Energy (€15 million) and negative regulatory amendments introduced in Argentina with Reso- goodwill amounting to €76 million, from the acquisition of lución 32/2015, which had a particular impact on Edesur with control of 3Sun. Gains in 2014 were mainly accounted for regard to the recognition of revenue and the Mecanismo de by the adjustment of the price for Artic Russia (€82 million), Monitoreo de Costos, with a total positive effect of €247 under the earn-out clause in the sale agreement with the million, only partly offset by a reduction in other income regi- buyer prior to the closing, and other gains in the renewables stered by Enel Green Power, Endesa and other smaller com- sector from the sale of LaGeo (€123 million) and Enel Green panies amounting to about €162 million. Power France (€31 million). 204 Annual Report 2015Costs 8.a Electricity, gas and fuel purchases - €37,644 million Millions of euro Electricity Gas Nuclear fuel Other fuels Total 2015 22,218 11,710 250 3,466 37,644 2014 23,317 8,388 206 5,017 36,928 Change (1,099) 3,322 44 (1,551) 716 -4.7% 39.6% 21.4% -30.9% 1.9% Purchases of “electricity” comprise those from the Acqui- Purchases of “gas” increased by €3,322 million, largely due rente Unico (Single Buyer) in the amount of €3,695 million to an increase in intermediation activities on the fuel market. (€4,395 million in 2014) and purchases from the Energy Mar- Purchases of “nuclear fuel” reflected the increase in price kets Operator (GME) in the amount of €1,553 million (€1,690 and greater quantities produced in Spain. million in 2014). The decrease in the aggregate mainly re- gards the reduction in costs for electricity purchases on elec- Purchases of “other fuels” diminished by €1,551 million, to tricity exchanges and on national and international markets, €3,466 million in 2015, mainly due to the reduction in con- essentially due to the decline in demand. sumption in a context of falling prices. 8.b Services and other materials - €16,457 million Millions of euro Transmission and transport Maintenance and repairs Telephone and postal costs Communication services IT services Leases and rentals Building services Insurance services Professional and technical services Fees and commissions Services and other expenditure connected with personnel Materials and services for service concession arrangements Other services Other materials Total 2015 9,118 1,213 209 104 364 577 137 229 190 302 204 318 2,414 1,078 16,457 2014 8,979 1,301 221 115 305 609 133 118 186 251 218 246 2,222 2,275 17,179 Change 139 (88) (12) (11) 59 (32) 4 111 4 51 (14) 72 192 (1,197) (722) 1.5% -6.8% -5.4% -9.6% 19.3% -5.3% 3.0% 94.1% 2.2% 20.3% -6.4% 29.3% 8.6% -52.6% -4.2% 205 Consolidated financial statementsAnnual Report 2015Costs for services and other materials amounted to €16,457 This decrease was only partly offset by an increase in costs million in 2015, a decrease on 2014 due largely to a contrac- for wheeling and transport associated with the increase in tion in costs for the purchase of environmental certificates electricity consumption in the main markets in which the and to a larger change in stocks of CO2 emissions allowan- ces, environmental certificates and other materials, as re- Group operates. flected in the decrease of €1,197 million in costs for other materials. 8.c Personnel - €5,313 million Millions of euro Wages and salaries Social security contributions Deferred compensation benefits Other post-employment and long-term benefits Early retirement incentives Other costs Total 2015 3,306 953 125 (831) 1,601 159 5,313 2014 3,329 931 111 70 313 110 4,864 Change (23) 22 14 (901) 1,288 49 449 -0.7% 2.4% 12.6% - - 44.5% 9.2% Personnel costs amounted to €5,313 million in 2015, an in- in 2015. The increase compared with 2014 is mainly attri- crease of €449 million. butable to new agreements for early retirement reached in The workforce contracted by 1,047, reflecting the balance Italy in December 2015, in accordance with Article 4 of Law between hirings and terminations (a decrease of 1,316), only 92/2012, and to the introduction of early retirement mechani- partially offset by the increase associated with the change in sms in Spain (“Acuerdo Voluntario de Salida”), which produ- the scope of consolidation (an increase of 269 employees). ced an increase of €90 million in costs compared with 2014. For more details, please see the section concerning the pro- The increase in “other post-employment and long-term be- vision for early retirement incentives in note 35 below. nefits” largely reflects the release (€902 million) of the provi- sion for the electricity discount granted to retired employees The table below shows the average number of employees in Italy, following the unilateral termination of that benefit in by category compared with the previous year, and the actual the 4th Quarter of 2015. number of employees at December 31, 2015. “Early retirement incentives” amounted to €1,601 million Senior managers Middle managers Office staff Blue collar Total Average number (1) Headcount (1) 2015 1,457 10,177 34,769 21,978 68,381 2014 1,552 14,263 38,224 16,709 70,748 Change at Dec. 31, 2015 (2) (95) (4,086) (3,455) 5,269 (2,367) 1,465 10,387 35,975 20,087 67,914 (1) For companies consolidated on a proportionate basis, the headcount corresponds to Enel percentage share of the total. (2) Of which 4,301 in units classified as “held for sale”. 206 Annual Report 20158.d Depreciation, amortization and impairment losses - €7,612 million Millions of euro Property, plant and equipment Investment property Intangible assets Impairment losses Reversal of impairment losses Total 2015 4,190 8 689 2,978 (253) 7,612 2014 4,425 8 771 7,733 (267) 12,670 Change -5.3% - -10.6% -61.5% 5.2% -39.9% (235) - (82) (4,755) 14 (5,058) Depreciation and amortization decreased by €317 million in reduction in assets subject to depreciation (also caused by 2015 (comprising property, plant and equipment and intan- impairment losses posted in late 2014, which are discussed gible assets), due to the variation in exchange rates and the below). Millions of euro Impairment losses: - property, plant and equipment - investment property - intangible assets - goodwill - trade receivables - assets classified as held for sale - other assets Total impairment losses Reversals of impairment losses: - property, plant and equipment - investment property - intangible assets - trade receivables - assets classified as held for sale - other assets Total reversals of impairment losses 2015 1,246 5 68 13 1,058 574 14 2,978 (21) - - (230) - (2) (253) 2014 Change 2,886 (1,640) 18 744 194 997 2,878 16 7,733 (3) - - (250) - (14) (267) (13) (676) (181) 61 (2,304) (2) (4,755) (18) - - 20 - 12 14 -56.8% -72.2% -90.9% -93.3% 6.1% -80.1% -12.5% -61.5% - - - 8.0% - 85.7% 5.2% “Impairment losses” decreased by €4,755 million on the > a number of mineral exploration assets in Algeria (attribu- previous year. table to the upstream gas area) totaling €132 million, due Impairment losses on property, plant and equipment in 2015 to the unfavorable fuel price situation. mainly regarded: In 2014 this item included (in addition to the factors noted > power plants in Russia in the amount of €899 million above for comparison purposes) impairment losses on ther- (€205 million in 2014), in view of market forecasts for that mal plants in Italy in the amount of €2,096 million (due to country. The parameters used in the impairment test of the continuing economic crisis in Italy and the consequent the Enel Russia CGU are discussed in note 20 below; negative impact on power generation from conventional re- > the property, plant and equipment of Enel Green Power sources), on leased assets in Slovakia – more specifically the Romania for €139 million and of 3Sun for €42 million. The Gabcˇíkovo hydroelectric plant – in the amount of €103 million parameters used in the impairment test of the associated (following the renegotiation which advanced the lease expiry CGUs are discussed in note 20 below; to 2015, instead of the original expiry of 2036), as well as 207 Consolidated financial statementsAnnual Report 2015on the property, plant and equipment of Enel Green Power amount of €35 million) and Spain (Distribuidora Eléctrica del Hellas in the amount of €91 million. Puerto de la Cruz in the amount of €31 million). Impairment losses on intangible assets in 2015 amounted to Impairment losses on goodwill were recognized following €68 million. They mainly regard: impairment testing. More details are provided in note 20. > concessions and similar rights of Enel Longanesi in the amount of €27 million to adjust the value of Upstream Finally, impairment losses on assets classified as held for Gas assets to their value in use; sale amounted to €574 million in 2015 and to €2,878 million > Enel Green Power North America in the amount of €26 in 2014. They regard the net assets of Slovenské elektrárne. million. The impairment loss was determined in both periods to align In 2014, this item included impairment losses on the water the carrying amount of the assets with their fair value less rights held by Endesa Chile to use the water of a number of costs to sell pending disposal, subsequently confirmed with rivers in the Aysén region of that country in the amount of the closing of an agreement with EPH in December 2015, €589 million, concessions and similar rights of Enel Green although the effects are suspending pending receipt of the Power Hellas in the amount of €55 million, as well as a num- necessary antitrust clearance. ber of smaller concessions in Portugal (Hidromondego in the 8.e Other operating expenses - €2,654 million Millions of euro System charges - emissions allowances System charges - energy efficiency certificates System charges - green certificates Losses on disposal of property, plant and equipment and intangible assets Taxes and duties Other Total 2015 340 315 181 49 1,272 497 2,654 2014 341 105 144 21 1,275 476 2,362 Change (1) 210 37 28 (3) 21 292 -0.3% - 25.7% - -0.2% 4.4% 12.4% Other operating expenses amounted to €2,654 million, an lations introduced in July 2015 by the Slovak government, increase of €292 million, mainly due to: who approved a new strategy for dealing with the “back > an increase of €210 million in charges for white certifi- end” of spent nuclear fuel; in 2014 another provision for cates, largely reflecting higher volumes of purchased the Slovakian plants had been released in the amount of certificates for compliance purposes and a change in €136 million; regulations with Resolution 13/2014 of the Authority for > the release of €63 million of provisions for risks and char- Electricity, Gas and the Water System, which introduced ges in 2014 following the settlement agreement between a new cost reimbursement mechanism; Enel Distribuzione, A2A and A2A Reti Elettriche; > an increase of €37 million in costs for the purchase of > an increase in provisions of €328 million to cover com- green certificates; pensation for the unilateral termination of the residential > the release of the nuclear fuel disposal provision in Slova- electricity discount for the Group’s retired employees in kia in the amount of €550 million, based on a study con- Italy as of December 31, 2015. ducted by independent experts, following the new regu- 208 Annual Report 20158.f Capitalized costs - €(1,539) million Millions of euro Personnel Materials Other Total 2015 (746) (433) (360) 2014 (719) (391) (414) (1,539) (1,524) Change (27) (42) 54 (15) -3.8% -10.7% 13.0% -1.0% Capitalized costs consist of €746 million in personnel costs and €433 million in materials costs (compared with €719 million and €391 million, respectively, in 2014). 9. Net income/(expense) from commodity contracts measured at fair value - €168 million Net income from commodity contracts measured at fair va- 2015 in the amount of €304 million (€268 million in 2014) lue amounted to €168 million, the result of net unrealized and net realized gains on positions closed during the year expense on open positions in derivatives at December 31, of €472 million (€43 million net in 2014). Millions of euro Income: - unrealized on positions open at the end of the period - realized on positions closed during the period Total income Expense: - unrealized on positions open at the end of the period - realized on positions closed during the period Total expense NET INCOME/(EXPENSE) FROM COMMODITY CONTRACTS MEASURED AT FAIR VALUE 2015 2014 Change 2,832 6,702 9,534 (3,136) (6,230) (9,366) 4,455 3,793 8,248 (4,723) (3,750) (8,473) (1,623) 2,909 1,286 1,587 (2,480) (893) -36.4% 76.7% 15.6% 33.6% -66.1% -10.5% 168 (225) 393 - 209 Consolidated financial statementsAnnual Report 201510. Net financial income/(expense) from derivatives - €950 million Millions of euro Income: - income from cash flow hedge derivatives - income from derivatives at fair value through profit or loss - income from fair value hedge derivatives Total income Expense: - expense on cash flow hedge derivatives - expense on derivatives at fair value through profit or loss - expense on fair value hedge derivatives Total expense TOTAL FINANCIAL INCOME/(EXPENSE) FROM DERIVATIVES 2015 2014 Change 1,507 907 41 2,455 (330) (1,145) (30) (1,505) 950 1,532 468 78 2,078 (434) (476) (6) (916) 1,162 (25) 439 (37) 377 104 (669) (24) (589) (212) -1.6% 93.8% -47.4% 18.1% 24.0% - - -64.3% -18.2% Net income from cash flow hedge derivatives amounted to For more details on derivatives, please see note 44 “Deriva- €1,177 million, while derivatives at fair value through profit tives and hedge accounting”. or loss posted net expense of €238 million. By contrast, the net performance of fair value hedge deriva- tives produced net income of €11 million. 11. Net other financial income/(expense) - €(3,406) million Other financial income Millions of euro Interest income from financial assets (current and non- current): - interest income at effective rate on non-current securities and receivables - interest income at effective rate on short-term financial investments Total interest income at the effective interest rate Financial income on non-current securities at fair value through profit or loss Exchange gains Income on equity investments Other income 2015 2014 Change 85 180 265 5 882 11 400 43 217 260 6 529 4 449 42 (37) 5 (1) 353 7 (49) 315 97.7% -17.1% 1.9% -16.7% 66.7% - -10.9% 25.2% TOTAL OTHER FINANCIAL INCOME 1,563 1,248 Other financial income amounted to €1,563 million, an in- reduction reflects: crease of €315 million compared with the previous year. The > an increase in “exchange gains”, reflecting the impact of 210 Annual Report 2015developments in exchange rates on net financial debt de- > a slight increase in “income on equity investments” nominated in currencies other than the euro, as well as and “interest income at the effective rate”, respectively the recognition, under the terms of the associated con- amounting to €11 million and €265 million in 2015; tract, by the Argentine authorities of the conversion of > a decrease in “other income”, mainly due to effect of the receivables for the construction of the Vuelta de Obligado increase in the same item in 2014 following the settle- plant into US dollars, given that it is essentially completed ment agreement on Costanera’s payables to Mitsubishi. (about €258 million); Other financial expense Millions of euro Interest expense on financial debt (current and non-current): - interest expense on bank borrowings - interest expense on bonds - interest expense on other borrowings Total interest expense Expense on securities at fair value through profit or loss Exchange losses Accretion of post-employment and other employee benefits Accretion of other provisions Charges on equity investments Other charges 2015 2014 Change 371 2,314 143 2,828 - 1,738 101 210 3 89 360 2,476 116 2,952 - 1,814 139 258 3 374 11 (162) 27 (124) - (76) (38) (48) - (285) (571) 3.1% -6.5% 23.3% -4.2% - -4.2% -27.3% -18.6% - -76.2% -10.3% TOTAL OTHER FINANCIAL EXPENSE 4,969 5,540 Other financial expense amounted to €4,969 million, a de- note 34 for details), including other charges from accre- crease of €571 million on 2014. The change reflects the fol- tion of other provisions in the amount of €48 million, lowing factors: mainly ascribable to the accretion of the provision for > a decrease in interest expense, largely owing to an avera- early retirement incentives; ge decrease in gross financial debt compared with 2014; > a decrease of €285 million in “other charges” (€89 million > a decrease of €76 million in “exchange losses”, attributa- in 2015 and €374 million in 2014), essentially reflecting the ble to the fluctuation of the euro against the other curren- effect of the downward adjustment in 2014 of financial as- cies in which bonds are issued. This factor was essentially sets (€92 million) associated with service concession ar- offset by an increase in income on cash flow hedge deri- rangements in Brazil and the impairment loss recognized vatives on exchange rates; in 2014 on the financial receivables from Elcogas, as well > a decrease of €38 million in charges from “accretion of as an increase of about €63 million in capitalized interest, post-employment and other employee benefits” (see partly due to the rise in investment. 211 Consolidated financial statementsAnnual Report 201512. Share of income/(losses) of equity investments accounted for using the equity method - €52 million Millions of euro Share of income of associates Share of losses of associates Impairment losses Total 2015 152 (100) - 52 2014 229 (87) (177) (35) Change (77) (13) 177 87 -33.6% -14.9% - - The share of income and losses of equity investments ac- Chile) and on Enel Green Power Hellas CGU with regard counted for using the equity method increased by €87 mil- to the “Elica 2” equity-accounted investments as a result lion compared with the previous year. The rise is attributable of the persistent adverse economic climate. These factors to impairment losses posted in 2014 in the amount of €177 were only partly offset by a decline in income from associa- million on the joint venture in Centrales Hidroeléctricas de tes posted in 2015 (€77 million), which was mostly due to Aysén (as a result of uncertainty about permitting for the the effect of changes in the scope of consolidation during development of the project to build a hydroelectric plant in the periods under consideration. 13. Income taxes - €1,909 million Millions of euro Current taxes Adjustments for income taxes related to prior years Total current taxes Deferred tax liabilities Deferred tax assets TOTAL 2015 2,061 (19) 2,042 (125) (8) 1,909 2014 1,968 (119) 1,849 (961) (1,738) (850) Change 93 100 193 836 1,730 2,759 4.7% 84.0% 10.4% 87.0% - - Income taxes for 2015 amounted to €1,909 million, compa- > a reduction in taxes in the period on non-recurring tran- red with a credit position of €850 million in 2014. sactions subject to non-standard tax rates, in particular Income taxes therefore increased by €2,759 million compa- the effect of remeasurements at fair value and the nega- red with the previous year, as a result of the sharp increase tive goodwill on 3Sun and the gains from the sale of SE in income before taxes and of the following non-recurring Hydropower; factors: > a reduction of €50 million in IRAP due to changes in the > adjustment of net deferred tax assets in Italy totaling deductibility of personnel costs for IRAP purposes; €197 million, as a result of the Stability Act passed in De- > the effect of the change in tax rates on deferred taxation, cember 2015, reducing the IRES rate from 27.5% to 24% mainly in Chile, Colombia, Peru and Spain, recognized in as from January 1, 2017; 2014, which had produced a net benefit of €146 million: > the recognition of deferred tax assets in 2014 in the in 2015, the changes in tax rates in the above countries amount of €1,392 million in respect of Enel Iberoamérica began to impact current income taxes. (formerly Enel Energy Europe) following the distribution of dividends associated with a number of non-recurring Note that in 2014 an increase of €366 million in taxes was corporate transactions; recognized as a result of an adjustment of deferred taxation 212 Annual Report 2015in Italy following a court ruling that the IRES surtax (the so- the effective tax rate. Please note that the estimated taxes called Robin Hood Tax) was unconstitutional after a lengthy of Group companies outside of Italy in 2015 – including the administrative proceeding. effect of deferred taxation – were a negative €751 million The following table reconciles the theoretical tax rate with (compared with €1,885 million in 2014). Millions of euro Income before taxes Theoretical taxes Change in tax effect on impairment losses, capital gains and negative goodwill Tax credit from distribution of Endesa dividends Impact on deferred taxation of changes in tax rates IRES surtax (Decree Law 112/2008) IRAP Other differences, effect of different foreign tax rates, and minor items Total 27.5% 27.5% 2015 5,281 1,452 (51) - 197 - 250 61 1,909 2014 (78) (21) 245 (1,392) (146) 188 320 (44) (850) 14. 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 (none in both periods). Net income from continuing operations attributable to shareholders of the Parent Company (millions of euro) Net income from discontinued operations attributable to shareholders of the Parent Company (millions of euro) Net income attributable 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) 2015 2,196 - 2,196 2014 517 - 517 9,403,357,795 9,403,357,795 - 0.23 0.23 - - 0.05 0.05 - Change 1,679 - 1,679 - - 0.18 0.18 - - - - - - - - - 213 Consolidated financial statementsAnnual Report 201515. Property, plant and equipment - €73,307 million The breakdown of and changes in property, plant and equipment for 2015 are shown below. Buildings Plant and machinery Industrial and commercial equipment Other assets Leased assets Leasehold improvements Assets under construction and advances 8,711 4,902 3,809 59 377 6 56 (16) (135) (303) 1 (25) 20 8,788 4,959 3,829 144,890 83,970 60,920 1,014 4,463 (723) (171) (87) (3,789) (712) 20 169 184 147,014 85,910 61,104 386 312 74 21 5 - 8 (1) (18) (8) - (4) 3 400 323 77 1,332 1,042 290 46 37 (13) - (1) (76) (2) - (27) (36) 1,289 1,035 254 1,091 226 865 11 (4) (15) (48) - - - - (37) (93) 1,030 258 772 332 201 131 10 29 - (5) (1) (26) - - 2 9 364 224 140 6,442 6,442 5,125 (4,955) - - - - (391) 249 (6) (221) 225 26 6,468 6,468 Total 163,742 90,653 73,089 6,353 - (1,145) 124 (113) (4,092) (1,246) 21 316 218 166,016 92,709 73,307 Millions of euro Cost Accumulated depreciation Balance at Dec. 31, 2014 Capital expenditure Assets entering service Exchange rate differences Change in scope of consolidation Disposals Depreciation Impairment losses Reversal of impairment losses Other changes Total changes Cost Accumulated depreciation Balance at Dec. 31, 2015 Land 558 - 558 67 44 (20) 2 (1) - - - 13 105 663 - 663 214 Annual Report 201515. Property, plant and equipment - €73,307 million The breakdown of and changes in property, plant and equipment for 2015 are shown below. Millions of euro Cost Accumulated depreciation Balance at Dec. 31, 2014 Capital expenditure Assets entering service Exchange rate differences Change in scope of consolidation Disposals Depreciation Impairment losses Other changes Total changes Cost Reversal of impairment losses Accumulated depreciation Balance at Dec. 31, 2015 Land 558 - 558 67 44 (20) 2 (1) - - - - 13 105 663 663 8,711 4,902 3,809 59 377 6 56 (16) (135) (303) 1 (25) 20 8,788 4,959 3,829 144,890 83,970 60,920 1,014 4,463 (723) (171) (87) (3,789) (712) 20 169 184 147,014 85,910 61,104 386 312 74 21 5 - 8 (1) (18) (8) - (4) 3 400 323 77 Buildings Plant and machinery equipment Other assets Leased assets Leasehold improvements Industrial and commercial Assets under construction and advances 1,332 1,042 290 46 37 (13) - (1) (76) (2) - (27) (36) 1,289 1,035 254 1,091 226 865 11 - (4) (15) - (48) - - (37) (93) 1,030 258 772 332 201 131 10 29 - (5) (1) (26) - - 2 9 364 224 140 6,442 - 6,442 5,125 (4,955) (391) 249 (6) - (221) - 225 26 6,468 - 6,468 Total 163,742 90,653 73,089 6,353 - (1,145) 124 (113) (4,092) (1,246) 21 316 218 166,016 92,709 73,307 215 Consolidated financial statementsAnnual Report 2015“Plant and machinery” includes assets to be relinquished free For more information on “leased assets”, please see note 17 of charge with a net carrying amount of €8,516 million (€8,269 below. million at December 31, 2014), largely regarding power plants in the Iberian Peninsula and Latin America amounting to The table below summarizes capital expenditure in 2015 by €5,155 million (€4,820 million at December 31, 2014) and category. These expenditures, totaling € 6,353 million, increa- the electricity distribution network in Latin America totaling sed by €334 million on 2014. €2,998 million (€3,027 million at December 31, 2014). Millions of euro Power plants: - thermal - hydroelectric - geothermal - nuclear - alternative energy resources Total power plants Electricity distribution networks Land, buildings and other assets and equipment TOTAL 2015 757 807 197 128 1,900 3,789 2,466 98 6,353 2014 884 656 169 787 1,256 3,752 2,115 152 6,019 Capital expenditure on power plants amounted to €3,789 At December 31, 2015, testing was conducted of the reco- million, an increase of €37 million on the previous year, es- verability of the value of the assets of a number of CGUs sentially reflecting increased investment in renewable ge- (Enel Russia, Enel Green Power Hellas and Enel Produzio- neration plants (mainly wind plants totaling €1,233 million ne) that showed evidence of impairment, following which and photovoltaic plants amounting to €628 million) and in it was determined that the values were essentially reco- hydroelectric facilities by the Renewable Energy Division. verable. Capital expenditure for the electricity distribution network In order to verify the robustness of the value in use identi- amounted to €2,446 million, up €351 million compared fied for those CGUs, sensitivity analyses were conducted with the previous year. The increase is essentially attribu- for the main value drivers, and in particular WACC, the long- table to greater investment in the medium and low-voltage term growth rate and EBITDA, assuming individual changes grids in Italy and Latin America. in each assumption of up to 5% of the value used in the tests. The “change in scope of consolidation” for the period For the Enel Produzione CGU, the analysis found that in the mainly concerned the acquisitions of control of 3Sun, in the case of changes in EBITDA or WACC within the range no- 1st Quarter of 2015, the acquisition of 68% of BLP Energy, ted above and holding the other assumptions unchanged, an Indian company operating in the renewables generation the value in use would not exceed the carrying amount. sector, and the full consolidation of Osage Wind, which had Accordingly, in view of this evidence and confirming the previously been accounted for using the equity method. impairment indicators already identified last year, no write- These effects were partly offset by the disposal of the Por- back of its value was performed. tuguese companies and the deconsolidation of the Italian solar assets of the Renewable Energy Division. “Impairment losses” on property, plant and equipment amounted to €1,246 million. For a more detailed analysis, please see note 8.d. 216 Annual Report 2015“Other changes” include, among other items, the effect expenditure in the amount of €208 million (€196 million in of the capitalization of interest on specific loans for capital 2014), as detailed in the following table. Millions of euro Renewable Energy Latin America Eastern Europe (1) Iberian Peninsula Italy Total 2015 80 104 - 7 17 208 % rate 5.2% 23.7% - 2.7% 4.2% 2014 59 75 41 6 15 196 % rate 4.8% 14.8% 2.6% 3.0% 5.0% Change 21 29 (41) 1 2 12 35.6% 38.7% - 16.7% 13.3% 6.1% (1) The figure does not include €51 million regarding units classified as “held for sale”. At December 31, 2015, contractual commitments to purchase property, plant and equipment amounted to €424 million. 16. Infrastructure within the scope of “IFRIC 12 - Service concession arrangements” Service concession arrangements, which are recognized in The following table summarizes the salient details of those accordance with IFRIC 12, regard certain infrastructure ser- concessions. ving concessions for electricity distribution in Brazil. Millions of euro Grantor Activity Country Concession period Concession period remaining Renewal option Amount recognized among financial assets at Dec. 31, 2015 Amount recognized among intangible assets at Dec. 31, 2015 Ampla Energia e Serviços Brazilian government Companhia Energética do Ceará Brazilian government Electricity distribution Electricity distribution Brazil 1997-2026 11 years Brazil 1998-2028 12 years Total Yes Yes 425 206 631 810 692 1,502 The value of the assets at the end of the concessions clas- lue. For more details, please see note 45 “Assets measu- sified under financial assets has been measured at fair va- red at fair value”. 217 Consolidated financial statementsAnnual Report 201517. Leases The Group, in the role of lessee, has entered into finance lea- and a discount rate of between 4.95% and 5.5%. se agreements. They include certain assets which the Group In Latin America, the assets relate to leased power transmis- is using in Spain, France, Greece, Italy and Latin America. sion lines and plant (Ralco-Charrúa), with a residual term of More specifically, in Spain the assets relate to a 25-year “tol- eight years on the lease at a 6.5% rate, a lease of a combined- ling” contract for which an analysis pursuant to IFRIC 4 iden- cycle plant (Talara) with a term of nine years at a fixed rate of tified an embedded finance lease, under which Endesa has 5.8%, as well as a number of combined-cycle plants in Peru access to the generation capacity of a combined cycle plant (residual lease term of one year bearing a floating rate). for which the toller, Elecgas, has undertaken to transform gas into electricity in exchange for a toll at a rate of 9.62%. The The carrying amount of assets held under finance leases is other lease agreements regard wind plants that the Group reported in the following table. uses in Italy (with a term of 18 years expiring in 2030-2031) Millions of euro Property, plant and equipment Intangible assets Total 2015 772 - 772 2014 865 - 865 Change (93) - (93) -10.8% - -10.8% The following table reconciles total future minimum lease payments and the present value, broken down by maturity. Millions of euro Periods: - 2016 - 2017-2020 - Beyond 2020 Total Finance charges Present value of minimum lease payments Future minimum payments Present value of future minimum payments Future minimum payments Present value of future minimum payments at Dec. 31, 2015 at Dec. 31, 2014 97 322 696 1,115 (360) 755 58 199 498 755 102 398 750 1,250 (412) 838 62 250 526 838 The Group, in the role of lessee, has entered also into ope- Costs for operating leases are broken down in the following rating lease agreements regarding the use of certain assets table into minimum payments, contingent rents and suble- for industrial purposes. The associated lease payments are ase payments. expensed under “Services and other materials”. Millions of euro Minimum lease payments Contingent rents Sublease payments Total 218 2015 2,002 - 3 2,005 Annual Report 2015The future minimum lease payments due by the Group under such leases break down by maturity as follows. Millions of euro Periods: - within 1 year - beyond 1 year and within 5 years - beyond 5 years Total 18. Investment property - €144 million Investment property at December 31, 2015 amounted to €144 million, essentially unchanged on the previous year. Millions of euro Cost Accumulated depreciation and impairment Balance at Dec. 31, 2014 Entry into service Depreciation Impairment losses Other changes Total change Cost Accumulated depreciation and impairment Balance at Dec. 31, 2015 2015 216 841 945 2,002 2015 173 30 143 - (8) (5) 14 1 187 43 144 The Group’s investment property consists of properties in investment property or for repairs, maintenance or enhan- Italy, Spain and Chile, which are free of restrictions on the cements. realizability of the investment property or the remittance of For more details on the valuation of investment property, income and proceeds of disposal. In addition, the Group has please see notes 45 “Assets measured at fair value” and no contractual obligations to purchase, construct or develop 45.1 “Fair value of other assets”. 219 Consolidated financial statementsAnnual Report 201519. Intangible assets - €15,235 million A breakdown of and changes in intangible assets for 2015 are shown below. Millions of euro Cost Accumulated amortization and impairment Balance at Dec. 31, 2014 Capital expenditure Assets entering service Exchange rate differences Change in scope of consolidation Disposals Amortization Impairment losses Other changes Total changes Cost Accumulated amortization and impairment Balance at Dec. 31, 2015 Development costs Industrial patents and intellectual property rights Concessions, licenses, trademarks and similar rights Service concession arrangements 26 17 9 8 1 (2) - (1) (2) - (3) 1 28 18 10 2,735 14,515 3,774 2,231 504 118 239 (5) - - (275) (1) 1 77 2,999 2,418 581 1,392 13,123 7 3 (820) (14) - (162) (20) 25 (981) 13,394 1,252 12,142 1,836 1,938 318 - (500) - (9) (158) - (87) (436) 2,972 1,470 1,502 Assets under development and advances Total 622 23,328 - 6,716 622 291 (265) 16,612 760 - 4 (1,309) 17 (17) 114 (27) - (692) (39) (39) (68) (155) (48) (1,377) 574 21,609 - 6,374 574 15,235 Other 1,656 1,240 416 18 22 14 111 - (95) (8) (52) 10 1,642 1,216 426 “Industrial patents and intellectual property rights” relate clude costs incurred by the gas companies and the foreign mainly to costs incurred in purchasing software and open- electricity distribution companies to acquire customers. ended software licenses. The most important applications Amortization is calculated on a straight-line basis over the relate to invoicing and customer management, the deve- average duration of the relationships with the customers ac- lopment of Internet portals and the management of com- quired or the concessions. pany systems. Amortization is calculated on a straight-line basis over the asset’s residual useful life (on average betwe- The following table reports service concession arrange- en three and five years). ments that do not fall within the scope of IFRIC 12. “Concessions, licenses, trademarks and similar rights” in- Millions of euro Grantor Activity Country Concession period Period remaining Renewal option at Dec. 31, 2015 Initial fair value Endesa Distribución Eléctrica Electricity distribution - Codensa Republic of Colombia Electricity distribution Chilectra Republic of Chile Empresa de Distribución Eléctrica de Lima Norte Enel Distributie Muntenia Republic of Peru Romanian Ministry for the Economy Electricity distribution Electricity distribution Electricity distribution Spain Indefinite Indefinite 5,679 5,673 Colombia Indefinite Indefinite 1,568 1,839 Chile Indefinite Indefinite 1,566 1,667 Peru Indefinite Indefinite 641 548 Romania 2005-2054 38 years Yes 155 191 220 Annual Report 2015The item includes assets with an indefinite useful life in the The “change in scope of consolidation” for the period mainly amount of €9,454 million (€9,848 million at December 31, regards acquisitions and disposals of the Renewable Energy 2014), essentially accounted for by concessions for distribu- Division, as well as the acquisition of residential customers tion activities in Spain (€5,679 million), Colombia (€1,568 mil- connected with the supply of gas in Spain. lion), Chile (€1,566 million) and Peru (€641 million), for which there is no statutory or currently predictable expiration date. “Impairment losses” amounted to €68 million in 2015; for On the basis of the forecasts developed, cash flows for each more details, please see note 8.d. CGU, with which the various concessions are associated, are sufficient to recover the carrying amount. The change du- At December 31, 2015, contractual commitments for the ac- ring the year is essentially attributable to changes in exchan- quisition of intangible assets amounted to €16 million. ge rates. For more information on “Service concession ar- rangements”, please see note 24. 221 Consolidated financial statementsAnnual Report 201520. Goodwill - €13,824 million “Goodwill” amounted to €13,824 million, a decrease of €203 million for the year. Millions of euro at Dec. 31, 2014 Change in the scope of consolidation Exchange differences Impairment losses at Dec. 31, 2015 Cost Accumulated impairment Net carrying amount Cost Accumulated impairment Net carrying amount Endesa Latin America Enel Green Power Group (1) Enel Energia Enel Distributie Muntenia Enel Energie Muntenia Nuove Energie Total 10,999 3,285 990 579 546 113 26 (2,392) - (119) - - - - 8,607 3,285 871 579 546 113 26 - - (241) - - - - 16,538 (2,511) 14,027 (241) (13) 16,348 (2,524) 13,824 49 - - - - - 2 51 (13) - - - - - - 10,999 3,285 798 579 548 113 26 (2,392) (132) - - - - - 8,607 3,285 666 579 548 113 26 (1) Enel Green Power España, Enel Green Power Latin America, Enel Green Power North America, Enel Green Power Hellas, Enel Green Power Romania, Enel Green Power Bulgaria and Enel Green Power Italia. The “change in scope of consolidation” mainly regards the Cash flows were determined on the basis of the best in- disposal of the Portuguese companies of the Renewable formation available at the time of the estimate and drawn: Energy Division, only partly offset by a number of minor > for the explicit period, from the 5-year business plan ap- acquisitions the Division made in Mexico. proved by the Board of Directors of the Parent Company containing forecasts for volumes, revenues, operating The criteria used to identify the cash generating units costs, capital expenditure, industrial and commercial or- (CGUs) were essentially based (in line with management’s ganization and developments in the main macroeconomic strategic and operational vision) on the specific characteri- variables (inflation, nominal interest rates and exchange stics of their business, on the operational rules and regu- rates) and commodity prices. The explicit period of cash lations of the markets in which Enel operates and on the flows considered in impairment testing differs in accor- corporate organization, as well as on the level of reporting dance with the specific features and business cycles of monitored by management. the various CGUs being tested. These differences are ge- The recoverable value of the goodwill recognized was esti- nerally associated with the different average times nee- mated by calculating the value in use of the CGUs using ded to build and bring into service the plant and other discounted cash flow models, which involve estimating works that characterize the investments of the specific expected future cash flows and applying an appropriate di- businesses that make up the CGU (conventional thermal scount rate, selected on the basis of market inputs such as generation, nuclear power, renewables, distribution, etc.); risk-free rates, betas and market risk premiums. > for subsequent years, from assumptions concerning long- 222 Annual Report 201520. Goodwill - €13,824 million “Goodwill” amounted to €13,824 million, a decrease of €203 million for the year. Endesa Latin America Enel Green Power Group (1) Enel Energia Enel Distributie Muntenia Enel Energie Muntenia Nuove Energie Total 10,999 3,285 990 579 546 113 26 (2,392) (119) - - - - - (1) Enel Green Power España, Enel Green Power Latin America, Enel Green Power North America, Enel Green Power Hellas, Enel Green Power Romania, Enel Green Power Bulgaria and Enel Green Power Italia. 16,538 (2,511) 14,027 (241) Change in the scope of consolidation 8,607 3,285 871 579 546 113 26 (241) - - - - - - Millions of euro at Dec. 31, 2014 Exchange differences Impairment losses at Dec. 31, 2015 Cost Accumulated impairment Net carrying amount Cost Accumulated impairment Net carrying amount - - 49 - 2 - - 51 - - (13) - - - - 10,999 3,285 798 579 548 113 26 (2,392) - (132) - - - - 8,607 3,285 666 579 548 113 26 (13) 16,348 (2,524) 13,824 term developments in the main variables that determine scribed above was found to be greater than the amount cash flows, the average residual useful life of assets or recognized on the balance sheet, with the exceptions di- the duration of the concessions. scussed below. More specifically, the terminal value was calculated as a In order to verify the robustness of the value in use of the perpetuity or annuity with a nominal growth rate equal to CGUs, sensitivity analyses were conducted for the main dri- the long-term rate of growth in electricity and/or inflation vers of the values, in particular WACC, the long-term growth (depending on the country and business involved) and in rate and margins, the outcomes of which fully supported any case no higher than the average long-term growth rate that value. of the reference market. The value in use calculated as de- 223 Consolidated financial statementsAnnual Report 2015The table below reports the composition of the main go- horizon over which the expected cash flows have been di- odwill values according to the company to which the CGU scounted. belongs, along with the discount rates applied and the time Millions of euro Amount Growth rate (1) Discount rate pre-tax WACC (2) Explicit period of cash flows Terminal value (3) Amount Growth rate (1) Discount rate pre-tax WACC (2) flows Terminal value (3) Explicit period of cash at Dec. 31, 2015 at Dec. 31, 2014 8,607 3,285 - 659 579 404 308 117 - 26 24 13 5 1.92% 2.67% 0.97% 2.07% 0.13% 2.00% 3.45% 2.17% - 0.29% 2.00% 2.07% 2.50% 7.92% 8.48% 14.99% 7.90% 11.98% 7.90% 8.53% 7.46% 18.69% 8.98% 8.15% 8.26% 8.27% 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 10 years 5 years 5 years 5 years Perpetuity Perpetuity Perpetuity Perpetuity 15 years 13 years 22 years 20 years 21 years 16 years 17 years 15 years Perpetuity/14 years Endesa - Iberian Peninsula (4) Endesa - Latin America Enel Russia Enel Romania (5) Enel Energia Enel Green Power España Enel Green Power Latin America Enel Green Power North America Enel Green Power Hellas Nuove Energie Enel Green Power Italia Enel Green Power Romania Enel Green Power Bulgaria 8,607 3,285 - 660 579 157 350 131 - 26 23 - 5 1.77% 3.12% 4.00% 2.30% 0.16% 2.00% 3.34% 2.20% - 0.20% 2.00% 2.30% 2.20% 7.90% 8.42% 15.31% 7.65% 11.92% 7.63% 8.16% 9.27% - 9.94% 8.50% 8.08% 8.09% 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years - Perpetuity Perpetuity Perpetuity Perpetuity 15 years 12 years 21 years 19 years - 9 years 16 years 5 years Perpetuity/17 years (6) 5 years 5 years 16 years 14 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 of goodwill in respect of Enel Green Power España pertaining to it. (5) Includes all companies operating in Romania. (6) The terminal value for Enel Green Power Italia was estimated on the basis of a perpetuity for the hydroelectric and geothermal plants and an expected annuity with a rising yield for a period of 17 years for other renewables technologies (wind, solar, biomass). At December 31, 2015, impairment testing of the CGUs to At December 31, 2014 an impairment loss of €365 million which goodwill had been allocated found an impairment loss had been recognized on the Enel Russia CGU (formerly Enel of €155 million on the Enel Green Power Romania CGU, of OGK-5) and €269 million on the Enel Green Power Hellas which €13 million attributed to goodwill, while the remain- CGU. der was allocated among the generation assets. The loss is attributable to market forecasts and the regulatory situation in the country. 224 Annual Report 2015Millions of euro Amount Growth rate (1) WACC (2) cash flows Terminal value (3) Amount Growth rate (1) Discount rate pre-tax WACC (2) Discount rate pre-tax Explicit period of Explicit period of cash flows Terminal value (3) at Dec. 31, 2015 at Dec. 31, 2014 Endesa - Iberian Peninsula (4) Endesa - Latin America Enel Russia Enel Romania (5) Enel Energia Enel Green Power España Enel Green Power Latin America Enel Green Power North America Enel Green Power Hellas Nuove Energie Enel Green Power Italia Enel Green Power Romania Enel Green Power Bulgaria 8,607 3,285 - 660 579 157 350 131 - 26 23 - 5 1.77% 3.12% 4.00% 2.30% 0.16% 2.00% 3.34% 2.20% - 0.20% 2.00% 2.30% 2.20% 7.90% 8.42% 15.31% 7.65% 11.92% 7.63% 8.16% 9.27% - 9.94% 8.50% 8.08% 8.09% 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years - 5 years 5 years Perpetuity Perpetuity Perpetuity Perpetuity 15 years 12 years 21 years 19 years - 16 years 14 years 9 years 16 years 5 years Perpetuity/17 years (6) (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 of goodwill in respect of Enel Green Power España pertaining to it. (5) Includes all companies operating in Romania. (6) The terminal value for Enel Green Power Italia was estimated on the basis of a perpetuity for the hydroelectric and geothermal plants and an expected annuity with a rising yield for a period of 17 years for other renewables technologies (wind, solar, biomass). 8,607 3,285 - 659 579 404 308 117 - 26 24 13 5 1.92% 2.67% 0.97% 2.07% 0.13% 2.00% 3.45% 2.17% - 0.29% 2.00% 2.07% 2.50% 7.92% 8.48% 14.99% 7.90% 11.98% 7.90% 8.53% 7.46% 18.69% 8.98% 8.15% 8.26% 8.27% 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 5 years 10 years 5 years 5 years 5 years Perpetuity Perpetuity Perpetuity Perpetuity 15 years 13 years 22 years 20 years 21 years 16 years Perpetuity/14 years 17 years 15 years 225 Consolidated financial statementsAnnual Report 201521. Deferred tax assets and liabilities - €7,386 million and €8,977 million The following table details changes in deferred tax assets and also reports the amount of deferred tax assets that, where liabilities by type of timing difference and calculated based on allowed, can be offset against deferred tax liabilities. the tax rates established by applicable regulations. The table Millions of euro 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 - employee benefits - 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 Excess net deferred tax liabilities after any offsetting Increase/(Decrease) taken to income statement Increase/(Decrease) taken to equity Change in scope of consolidation Other changes Exchange rate differences “Assets held for sale” Reclassification from/to at Dec. 31, 2014 at Dec. 31, 2015 2,239 1,166 105 659 995 1,903 7,067 6,765 453 2,002 9,220 (357) 341 (36) 5 (210) 253 (4) (208) (26) 88 (146) 2 - - 195 (166) 7 38 8 16 (1) 23 - - - 1 - - - (1) (28) 11 (17) 140 (11) 71 (35) 17 187 369 408 (8) (102) 298 (26) (40) 5 (1) (16) (6) (84) (339) (2) (31) (372) - - - - - - - - - (29) (29) 1,998 1,456 145 824 620 2,343 7,386 6,606 433 1,938 8,977 2,149 3,310 430 At December 31, 2015, “deferred tax assets” totaled €7,386 “Deferred tax liabilities” amounted to €8,977 million at De- million (€7,067 million at December 31, 2014). cember 31, 2015 (€9,220 million at December 31, 2014). The increase during the year amounted to €319 million, They essentially include the determination of the tax effects mainly reflecting the tax effect of income components not of the value adjustments to assets acquired as part of the recognized for tax purposes, only partly offset by the reduc- final allocation of the cost of acquisitions made in the various tion associated with the expected decrease in the IRES rate years and the deferred taxation in respect of the differences in Italy from 27.5% to 24% as from 2017. between depreciation charged for tax purposes, including It should also be noted that no deferred tax assets were re- accelerated depreciation, and depreciation based on the corded in relation to prior tax losses in the amount of €1,051 estimated useful lives of assets. million because, on the basis of current estimates of future taxable income, it is not certain that such assets will be re- covered. 226 Annual Report 2015Millions of euro 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 - employee benefits - 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 Excess net deferred tax liabilities after any offsetting Increase/(Decrease) taken to Increase/(Decrease) taken income statement to equity Change in scope of consolidation Other changes Exchange rate differences Reclassification from/to “Assets held for sale” at Dec. 31, 2014 at Dec. 31, 2015 2,239 1,166 105 659 995 1,903 7,067 6,765 453 2,002 9,220 (357) 341 (36) 5 (210) 253 (4) (208) (26) 88 (146) 195 (166) 2 - - 7 38 8 16 (1) 23 - - - 1 - (1) - (28) - 11 (17) 140 (11) 71 (35) 17 187 369 408 (8) (102) 298 (26) (40) 5 (1) (16) (6) (84) (339) (2) (31) (372) - - - - - - - - - (29) (29) 1,998 1,456 145 824 620 2,343 7,386 6,606 433 1,938 8,977 2,149 3,310 430 227 Consolidated financial statementsAnnual Report 201522. Equity investments accounted for using the equity method - €607 million Investments in joint arrangements and associated companies accounted for using the equity method are as follows. Millions of euro Joint arrangements Hydro Dolomiti Enel Tejo Energia Produção e Distribuição de Energia Eléctrica Empresa de Energía Cundinamarca RusEnergoSbyt Energie Electrique de Tahaddart Electrogas Transmisora Eléctrica de Quillota Centrales Hidroeléctricas de Aysén PowerCrop Nuclenor Associates Ultor Elica 2 CESI Altomonte FV Tecnatom GNL Quinteros Suministradora Eléctrica de Cádiz Terrae Compañía Eólica Tierras Altas ENEOP - Eólicas de Portugal Eevm - Empreendimentos Eólicos do Vale do Minho Other Total % holding Income effect Change in scope of consolidation Reclassification from/to Dividends “Assets held for sale” Other changes % holding at Dec. 31, 2014 at Dec. 31, 2015 49.0% 38.9% 40.4% 49.5% 42.5% 50.0% 50.0% 51.0% 50.0% 50.0% - 30.0% 42.7% - 45.0% 20.0% 33.5% 20.0% 35.6% 36.0% 50.0% 218 61 34 29 29 15 9 8 5 - - 50 39 - 30 21 17 15 13 60 18 201 872 20 8 2 37 6 7 2 (3) (1) (58) - - - - 2 6 3 (3) 1 8 11 4 52 - - - - - - - - - - 72 - - 39 - - - - - (68) (23) (108) (88) (49) (6) - (49) (5) (6) - - - - - - - - - - - - (6) (3) (6) 6 (124) (189) - - - - - - - - - - - - - - - - - - - - - (189) (7) 15 (1) 3 - 58 (1) 1 1 - - - - - - - - - - - - 15 84 49.0% 38.9% 40.4% 49.5% 42.5% 50.0% 50.0% 51.0% 50.0% 50.0% 50.0% 30.0% 42.7% 50.0% 45.0% 20.0% 33.5% 20.0% 35.6% - 63 29 32 30 16 10 8 4 - 71 50 39 39 33 22 17 12 14 - - 118 607 The “change in scope of consolidation” item includes the The application of the equity method to the investments impact of the deconsolidation of solar assets in Italy fol- in RusEnergoSbyt and PowerCrop incorporates implicit go- lowing the agreement of October 16, 2015 concerning the odwill of €28 million and €9 million, respectively. companies Ultor and Altomonte, as well as the effects of the full consolidation of Osage and the disposal of a num- “Reclassification from/to ‘Assets held for sale’” regard the ber of Portuguese companies of the Renewable Energy investment held in Hydro Dolomiti Enel, which in view of Division. the decisions taken by management meets the require- 228 Annual Report 2015- €607 million Millions of euro Joint arrangements Hydro Dolomiti Enel Tejo Energia Produção e Distribuição de Energia Eléctrica Empresa de Energía Cundinamarca RusEnergoSbyt Energie Electrique de Tahaddart Electrogas Transmisora Eléctrica de Quillota Centrales Hidroeléctricas de Aysén PowerCrop Nuclenor Associates Ultor Elica 2 CESI Altomonte FV Tecnatom GNL Quinteros Suministradora Eléctrica de Cádiz Terrae Compañía Eólica Tierras Altas ENEOP - Eólicas de Portugal Eevm - Empreendimentos Eólicos do Vale do Minho Other Total 49.0% 38.9% 40.4% 49.5% 42.5% 50.0% 50.0% 51.0% 50.0% 50.0% - - 30.0% 42.7% 45.0% 20.0% 33.5% 20.0% 35.6% 36.0% 50.0% 218 61 34 29 29 15 9 8 5 - - - 50 39 30 21 17 15 13 60 18 201 872 (3) (1) (58) 20 37 8 2 6 7 2 - - - - 2 6 3 1 8 (3) 11 4 52 - - - - - - - - - - - - - - - - - 72 39 (68) (23) (108) (88) 22. Equity investments accounted for using the equity method Investments in joint arrangements and associated companies accounted for using the equity method are as follows. % holding Income effect consolidation Change in scope of Dividends Reclassification from/to “Assets held for sale” Other changes % holding at Dec. 31, 2014 at Dec. 31, 2015 - - (7) 15 - - (1) 3 - 58 (1) - - - 1 1 - - - - - 15 84 - 63 29 32 30 16 10 8 4 - 71 50 39 39 33 22 17 12 14 - - 118 607 (49) (6) - (49) (5) (6) - - - - - - - - - (6) (3) - - - (6) 6 (189) - - - - - - - - - - - - - - - - - - - - - (124) (189) ments of IFRS 5 for classification as assets held for sale at December 31, 2015. The following table provides a summary of financial infor- mation for each joint arrangement and associate of the Group not classified as held for sale in accordance with IFRS 5. 49.0% 38.9% 40.4% 49.5% 42.5% 50.0% 50.0% 51.0% 50.0% 50.0% 50.0% 30.0% 42.7% 50.0% 45.0% 20.0% 33.5% 20.0% 35.6% 229 Consolidated financial statementsAnnual Report 2015Millions of euro Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Equity at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Joint arrangements Centrales Hidroeléctricas de Aysén RusEnergoSbyt Tejo Energia Produção e Distribuição de Energia Eléctrica Empresa de Energía Cundinamarca Energie Electrique de Tahaddart PowerCrop Nuclenor Associates Ultor Elica 2 Altomonte FV Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 20 4 326 147 120 41 69 77 5 212 77 76 40 9 2 378 169 132 41 74 - 6 - 72 77 44 1 108 140 19 32 16 79 20 2 19 69 16 4 12 105 139 18 34 12 99 - 3 - 63 19 7 21 112 466 166 152 57 148 97 7 231 146 92 44 21 107 517 187 166 53 173 - 9 - 135 96 51 214 261 - - - - 72 26 1 98 147 28 24 2 - - - - - - 81 43 108 26 26 12 4 104 90 21 33 33 69 - - 6 46 17 4 5 98 101 22 32 27 86 - - - 42 19 3 5 104 304 93 59 34 167 - - 153 74 41 6 5 98 362 103 75 27 194 - - - 68 45 15 16 8 162 73 93 23 (19) 97 7 78 72 51 38 16 9 155 84 91 26 (21) - 9 - 67 51 36 230 Annual Report 2015Millions of euro Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Equity at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Joint arrangements Centrales Hidroeléctricas de Aysén RusEnergoSbyt Tejo Energia Produção e Distribuição de Energia Eléctrica Empresa de Energía Cundinamarca Energie Electrique de Tahaddart PowerCrop Nuclenor Associates Ultor Elica 2 Altomonte FV Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 20 4 326 147 120 41 69 77 5 212 77 76 40 9 2 378 169 132 41 74 - 6 - 72 77 44 1 108 140 19 32 16 79 20 2 19 69 16 4 12 105 139 18 34 12 99 - 3 - 63 19 7 21 112 466 166 152 57 148 97 7 231 146 92 44 21 107 517 187 166 53 173 - 9 - 135 96 51 - - 214 72 26 1 98 - - 147 28 24 2 - - 261 81 43 - 108 - - - 26 26 12 4 104 90 21 33 33 69 - - 6 46 17 4 5 98 101 22 32 27 86 - - - 42 19 3 5 104 304 93 59 34 167 - - 153 74 41 6 5 98 362 103 75 27 194 - - - 68 45 15 16 8 162 73 93 23 (19) 97 7 78 72 51 38 16 9 155 84 91 26 (21) - 9 - 67 51 36 231 Consolidated financial statementsAnnual Report 2015Millions of euro Total revenue Income before tax Net income from continuing operations at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Joint arrangements Centrales Hidroeléctricas de Aysén RusEnergoSbyt Tejo Energia Produção e Distribuição de Energia Eléctrica Empresa de Energía Cundinamarca Energie Electrique de Tahaddart PowerCrop Nuclenor Associates Ultor Elica 2 Altomonte FV Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 23. Derivatives - 2,019 221 119 55 2 8 - - 10 5 15 11 - 1,834 195 108 52 3 25 - - - 97 16 10 (7) 94 29 10 26 (2) (14) 87 22 13 23 (3) (7) 76 21 4 18 (2) (2) 68 16 8 16 (2) (42) (113) (46) (112) - - 2 5 8 3 - - - 3 8 - - - 2 5 8 3 - - - 3 8 - Millions of euro Non-current Current Derivative financial assets Derivative financial liabilities 2,343 1,518 1,335 2,441 5,073 5,509 5,500 5,441 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 For more information on derivatives classified as non-current financial assets, please see note 44 for hedging derivatives and trading derivatives. 232 Annual Report 201524. Other non-current financial assets - €3,274 million Millions of euro Equity investments in other companies measured at fair value Equity investments in other companies Receivables and securities included in net financial debt (see note 24.1) Service concession arrangements Non-current prepaid financial expense Total at Dec. 31, 2015 at Dec. 31, 2014 Change 181 56 2,335 631 71 3,274 157 56 2,701 669 62 3,645 24 - (366) (38) 9 (371) 15.3% - -13.6% -5.7% 14.5% -10.2% “Other non-current financial assets” decreased by €371 mil- so, in the absence of plans to sell them, are carried at cost lion on 2014. In particular, the decline reflected a reduction adjusted for any impairment losses. of receivables included in net financial debt, as discussed in note 24.1. Equity investments in other companies measured at fair va- “Equity investments in other companies” includes compa- lue and at cost break down as follows. nies whose market value cannot be readily determined and Millions of euro % holding % holding Bayan Resources Echelon Galsi Other Total at Dec. 31, 2015 at Dec. 31, 2014 Change 10.0% 7.1% 17.6% 175 2 17 43 237 10.0% 7.1% 15.6% 147 4 15 47 213 28 (2) 2 (4) 24 The change on the previous year essentially reflects the in- “Service concession arrangements” regard amounts due crease in the fair value of Bayan Resources, an Indonesian from the grantor for the construction and/or improvement company that operates in the coal extraction industry, as of infrastructure used to provide public services on a con- based on market prices for its stock. cession basis and recognized in application of IFRIC 12. 233 Consolidated financial statementsAnnual Report 201524.1 Other non-current financial assets included in net financial debt - €2,335 million Millions of euro Securities held to maturity Financial investments in funds or portfolio management products at fair value through profit or loss Financial receivables in respect of Spanish electrical system deficit Other financial receivables Total at Dec. 31, 2015 at Dec. 31, 2014 Change 117 45 2 2,171 2,335 139 40 - 2,522 2,701 (22) -15.8% 5 2 (351) (366) 12.5% - -13.9% -13.6% “Other financial receivables” decreased by €351 million in > a decrease of €259 million as a result of the collection of 2015 compared with the previous year. The change mainly the financial receivable in respect of ENEOP (accounted reflects the following factors: for using the equity method in 2014) following its disposal > the reclassification to short term of €48 million of recei- in 2015; vables in respect of the Electricity Equalization Fund, to- > a decrease of €126 million in the receivable of the Argen- taling €386 million at December 31, 2015 (€434 million tine generation companies in respect of the wholesale at December 31, 2014), regarding the reimbursement of electricity market deposited with the FONINVEMEM non-recurring charges connected with the early replace- (Fondo Nacional de Inversión Mercado Eléctrico Mayo- ment of electromechanical meters; rista); > the reclassification to short term of €57 million of the re- ceivable in respect of the reimbursement, provided for by > a decrease of €96 million in the receivable for CO2 emis- sions allowances connected with “new entrant” plants; the Authority for Electricity, Gas and the Water System in > an increase of €308 million following recognition by the Italy with Resolution 157/2012, of costs incurred with the Argentine authority of the transformation into US dollars termination of the Electrical Worker Pension Fund in the of the receivable for the construction of the Vuelta de total amount of €336 million at December 31, 2015 (€393 Obligado plant after essentially being completed. million at December 31, 2014); 25. Other non-current assets - €877 million Millions of euro at Dec. 31, 2015 at Dec. 31, 2014 Change Receivables due from equalization funds, market operators and energy services operators Other receivables Total 67 810 877 59 826 885 8 (16) (8) 13.6% -1.9% -0.9% At December 31, 2015, “other receivables” mainly regard of €141 million (€141 million at December 31, 2014) and non- tax receivables in the amount of €463 million (€501 million monetary grants to be received in respect of green certifica- at December 31, 2014), advances to suppliers in the amount tes totaling €78 million (€46 million at December 31, 2014). 234 Annual Report 201526. Inventories - €2,904 million Millions of euro Raw materials, consumables and supplies: - fuel - materials, equipment and other inventories Total Environmental certificates: - CO2 emissions allowances - green certificates - white certificates Total Buildings available for sale Payments on account TOTAL at Dec. 31, 2015 at Dec. 31, 2014 Change 1,212 819 2,031 680 78 1 759 68 46 1,533 759 2,292 623 294 3 920 76 46 2,904 3,334 (321) 60 (261) 57 (216) (2) (161) (8) - (430) -20.9% 7.9% -11.4% 9.1% -73.5% -66.7% -17.5% -10.5% - -12.9% Raw materials, consumables and supplies consist of fuel other fuels, primarily reflecting a decline in average prices, inventories to cover the requirements of the generation and in stocks of white certificates. The contraction was only companies and trading activities, as well as materials and partly offset by an increase in inventories of green certifica- equipment for the operation, maintenance and construction tes and other materials and equipment. The buildings availa- of plants and distribution networks. The decrease for the ble for sale are related to remaining units from the Group’s year is mainly attributable to the decline in stocks of gas and real estate portfolio and are primarily civil buildings. 27. Trade receivables - €12,797 million Millions of euro Customers: - sale and transport of electricity - distribution and sale of natural gas - other activities Total customer receivables Trade receivables due from associates and joint arrangements TOTAL at Dec. 31, 2015 at Dec. 31, 2014 Change 9,603 1,755 1,396 12,754 43 12,797 8,361 1,679 1,920 11,960 62 12,022 1,242 76 (524) 794 (19) 775 14.9% 4.5% -27.3% 6.6% -30.6% 6.4% Trade receivables from customers are recognized net of allo- Authority for Electricity, Gas and the Water System, as di- wances for doubtful accounts, which totaled €2,085 million scussed in greater detail in note 7.a above. at the end of the year, compared with an opening balance of The decrease in other activities reflects an increase in collec- €1,662 million. More specifically, the increase for the period tions in 2015 in respect of fuel sales. mainly reflects an increase in revenue from the transport For more details on trade receivables, please see note 41 of qualifying electricity following Resolution 654/2015 of the “Financial instruments”. 235 Consolidated financial statementsAnnual Report 201528. Other current financial assets - €2,381 million Millions of euro Current financial assets included in net financial position Other Total at Dec. 31, 2015 at Dec. 31, 2014 Change 2,241 140 2,381 3,860 124 3,984 (1,619) 16 (1,603) -41.9% 12.9% -40.2% 28.1 Other current financial assets included in net financial debt - €2,241 million Millions of euro Short-term portion of long-term financial receivables Receivables for factoring Securities held to maturity Financial receivables and cash collateral Other Total at Dec. 31, 2015 at Dec. 31, 2014 Change 769 147 1 1,020 304 2,241 1,566 177 - 1,654 463 3,860 (797) (30) 1 (634) (159) (1,619) -50.9% -16.9% - -38.3% -34.3% -41.9% The change in “short-term portion of long-term financial re- totaling €1,263 million (also including new receivables for ceivables” is mainly accounted for by a decrease in financial extra-peninsular generation). The decrease was only partly receivables in respect of the deficit of the Spanish electrical offset by the reclassification of the short-term portion of the system following the collections received (€2,145 million receivable from the Electricity Equalization Fund in respect including the effect of reimbursements for extra-peninsular of the reimbursement of non-recurring charges, which were generation) and net of new receivables accrued in 2015 mentioned in note 24.1. 29. Other current assets - €2,898 million Millions of euro Receivables due from equalization funds, market operators and energy services operators Advances to suppliers Receivables due from employees Receivables due from others Sundry tax receivables Accrued operating income and prepaid expenses Receivables for construction contracts at Dec. 31, 2015 at Dec. 31, 2014 Change 765 219 26 960 706 174 48 1,010 166 33 1,272 759 184 41 (245) 53 (7) (312) (53) (10) 7 (567) -24.3% 31.9% -21.2% -24.5% -7.0% -5.4% 17.1% -16.4% Total 2,898 3,465 “Receivables due from equalization funds, market opera- (€896 million at December 31, 2014) and the Spanish sy- tors and energy services operators“ include receivables in stem in the amount of €101 million (€114 million at Decem- respect of the Italian system in the amount of €664 million ber 31, 2014). Including the portion of receivables classified 236 Annual Report 2015as long-term in the amount of €67 million (€59 million in totaled €832 million (€1,069 million at December 31, 2014), 2014), receivables due from equalization funds, market ope- with payables of €5,122 million (€4,005 million at December rators and energy services operators at December 31, 2015 31, 2014). 30. Assets classified as held for sale - €6,854 million Changes in assets held for sale during the year are reported in the following table. Millions of euro Reclassification from/to current and non-current assets Disposals and change in scope of consolidation at Dec. 31, 2014 Impairment losses Other changes at Dec. 31, 2015 Property, plant and equipment Intangible assets Deferred tax assets Equity investments accounted for using the equity method Non-current financial assets Other non-current assets Cash and cash equivalents Current financial assets Inventories, trade receivables and other current assets Total 3,882 224 1,066 18 976 18 27 42 525 6,778 - - - 189 5 - 111 - - 305 (94) (212) (8) - - - (12) - (43) (369) (574) - - - - - - - - (574) 530 (5) 8 2 85 - 24 69 1 714 3,744 7 1,066 209 1,066 18 150 111 483 6,854 Assets held for sale amounted to €6,854 million at Decem- “Disposals and change in scope of consolidation” mainly in- ber 31, 2015. They largely include the assets of Slovenské clude the disposals of SF Energy and SE Hydropower in the elektrárne (€6,549 million), Hydro Dolomiti Enel (€189 mil- 1st half of 2015. lion), Compostilla RE (€111 million) and other smaller compa- nies, which in view of the decisions taken by management “Impairment losses” at December 31, 2015 amounted to meet the requirements of IFRS 5 for classification as assets €574 million and regarded Slovenské elektrárne; for more held for sale. details, please see note 8.d. 237 Consolidated financial statementsAnnual Report 201531. Liabilities included in disposal groups classified as held for sale - €5,364 million Liabilities held for sale at December 31, 2015 amounted to Changes in liabilities held for sale during the year are as fol- €5,364 million. They largely included the liabilities of Slo- lows. venské elektrárne (€5,335 million), Compostilla RE (€29 mil- lion) and other smaller companies. Millions of euro Reclassification from/to current and non-current liabilities Disposals and change in scope of consolidation at Dec. 31, 2014 Other changes at Dec. 31, 2015 Long-term borrowings Employee benefits Non-current portion of provisions for risks and charges Deferred tax liabilities Non-current financial liabilities Other non-current liabilities Short-term borrowings Other current financial liabilities Current portion of provisions for risks and charges Trade payables and other current liabilities 1,422 67 2,305 669 148 1 191 47 43 397 - - - 29 - - - - - - Total 5,290 29 (15) (1) (4) (82) - - (8) - - (22) (132) 294 2 (434) 23 83 1 156 64 (24) 12 177 1,701 68 1,867 639 231 2 339 111 19 387 5,364 The change in liabilities held for sale compared with Decem- For a summary of the fair value balances, broken down by ber 31, 2014 largely reflects the classifications and disposals measurement criteria, please see notes 45 and 46 on IFRS made under this item during 2015. 13 disclosures. 238 Annual Report 201532. Shareholders’ equity - €51,751 million 32.1 Equity attributable to the shareholders of the Parent Company - €32,376 million Share capital - €9,403 million At December 31, 2015 (as at December 31, 2014), the sha- re capital of Enel SpA – considering that there were no ap- Reserve from translation of financial state- ments in currencies other than euro - €(1,956) million The decrease for the year, equal to €635 million, is due to proved stock option plans (and thus no options exercised) the net appreciation of the functional currency against the – amounted to €9,403,357,795 fully subscribed and paid up, foreign currencies used by subsidiaries. represented by 9,403,357,795 ordinary shares with a par va- lue of €1.00 each. At the same date, based on the shareholders register and the notices submitted to CONSOB and received by the Company Reserve from measurement of cash flow hed- ge financial instruments - €(1,341) million This includes the net charges recognized in equity from the pursuant to Article 120 of Legislative Decree 58 of Februa- measurement of cash flow hedge derivatives. The cumulati- ry 24, 1998, as well as other available information, no sha- ve tax effect is equal to €405 million. reholders held more than 2% of the total share capital, apart from the Ministry for the Economy and Finance, which holds 25.50%, Norges Bank (with 2.018% of share capital, a stake that fell below 2% on January 8, 2016) and CNP Assurances Reserve from measurement of financial in- struments available for sale - €130 million This includes net unrealized income from the measurement (which held 2.87% as at June 23, 2015 for asset management at fair value of financial assets. purposes). There is no cumulative tax effects associated with the re- serve, taking account of the tax systems of the countries in Other reserves - €3,352 million which those financial instruments are held. Share premium reserve - €5,292 million Pursuant to Article 2431 of the Italian Civil Code, the share pre- mium reserve contains, in the case of the issue of shares at Reserve from equity investments accounted for using the equity method - €(54) million The reserve reports the share of comprehensive income to a price above par, the difference between the issue price of be recognized directly in equity of companies accounted for the shares and their par value, including those resulting from using the equity method. The cumulative tax effect is equal conversion from bonds. The reserve, which is a capital reser- to €13 million. ve, may not be distributed until the legal reserve has reached the threshold established under Article 2430 of the Italian Civil Code. Reserve from remeasurement of net defined benefit plan liabilities/(assets) - €(551) million The reserve includes all actuarial gains and losses, net of tax Legal reserve - €1,881 million The legal reserve is formed of the part of net income that, effects. The change is attributable to the increase in net ac- tuarial losses recognized during the period. The cumulative pursuant to Article 2430 of the Italian Civil Code, cannot be tax effect is equal to €83 million. distributed as dividends. Other reserves - €2,262 million These include €2,215 million related to the remaining portion Reserve from disposal of equity interests wi- thout loss of control - €(2,115) million This item reports: of the value adjustments carried out when Enel was tran- > the gain posted on the public offering of Enel Green Po- sformed from a public entity to a joint-stock company. wer shares, net of expenses associated with the dispo- Pursuant to Article 47 of the Uniform Income Tax Code (Te- sal and the related taxation; sto Unico Imposte sul Reddito), this amount does not con- > the sale of minority interests recognized as a result of stitute taxable income when distributed. the Enersis capital increase; 239 Consolidated financial statementsAnnual Report 2015 > the capital loss, net of expenses associated with the di- lowing the exercise of the bonus share option by the minori- sposal and the related taxation, from the public offering ty shareholders of Endesa, which resulted in the disposal of of 21.92% of Endesa. 0.04% of that company, and the income from the disposal The change for the period, a negative €2 million, represents of minority interests in Enel Green Power North America Re- the net balance between the capital loss recognized fol- newable Energy Partners. Reserve from transactions in non-controlling interests - €(196) million The reserve reports the amount by which the purchase pri- Eléctrica Cabo Blanco, Coelce, Generandes Perú, Enersis and Endesa Latinoamérica) exceeds the value of the equity acquired. The change for the period, a negative €3 million, ce in purchases from third parties of additional stakes in regards the difference between the purchase price and the companies already controlled in Latin America (generated in associated share of equity acquired from non-controlling previous years by the purchase of additional stakes in Am- shareholders of Energia Eolica. pla Energia e Serviços, Ampla Investimentos e Serviços, Retained earnings and loss carried forward - €19,621 million The reserve reports earnings from previous years that have The table below shows the changes in gains and losses re- cognized directly in other comprehensive income, including non-controlling interests, with specific reporting of the rela- not been distributed or allocated to other reserves. ted tax effects. at Dec. 31, 2014 Changes at Dec. 31, 2015 Of which shareholders of the Parent Company Of which non- controlling interests Total Gains/ (Losses) recognized in equity for the year Released to income statement Taxes Total Of which shareholders of the Parent Company Of which non- controlling interests Of which shareholders of the Parent Company Of which non- controlling interests Total (3,112) (1,321) (1,791) (1,743) - - (1,743) (635) (1,108) (4,855) (1,956) (2,899) (2,056) (1,806) (250) 29 101 229 359 465 (106) (1,697) (1,341) (356) 104 105 (1) 25 - - 25 25 - 129 130 (1) (73) (74) 1 23 8 (2) 29 20 9 (44) (54) 10 (872) (671) (201) 344 - (160) 184 120 64 (688) (551) (137) (6,009) (3,767) (2,242) (1,322) 109 67 (1,146) (5) (1,141) (7,156) (3,772) (3,383) Millions of euro Reserve from translation of financial statements in currencies other than euro Reserve from measurement of cash flow hedge financial instruments Reserve from measurement of financial instruments available for sale Share of OCI of equity investments accounted for using the equity method Remeasurements of net employee benefit liabilities/ (assets) Total gains/ (losses) recognized in equity 240 Annual Report 201532.2 Dividends Net dividends paid in 2014 Dividends for 2013 Interim dividends for 2014 Extraordinary dividends Total dividends paid in 2014 Net dividends paid in 2015 Dividends for 2014 Interim dividends for 2015 Extraordinary dividends Total dividends paid in 2015 Amount distributed (millions of euro) Net dividend per share (euro) 1,222 - - 1,222 1,316 - - 1,316 0.13 - - 0.13 0.14 - - 0.14 The dividend for 2015, equal to €0.16 per share, for a total of reflect the impact of the distribution of the dividend for 2015 €1,627 million, was proposed to the Shareholders’ Meeting to shareholders. called for May 26, 2016. These financial statements do not Capital management The Group’s objectives for managing capital comprise safe- In this context, the Group manages its capital structure and adjusts that structure when changes in economic conditions guarding the business as a going concern, creating value for so require. There were no substantive changes in objectives, stakeholders and supporting the development of the Group. policies or processes in 2015. In particular, the Group seeks to maintain an adequate capi- To this end, the Group constantly monitors developments talization that enables it to achieve a satisfactory return for in the level of its debt in relation to equity. The situation at shareholders and ensure access to external sources of fi- December 31, 2015 and 2014 is summarized in the following nancing, in part by maintaining an adequate rating. table. Millions of euro Non-current financial position Net current financial position Non-current financial receivables and long-term securities Net financial debt Equity attributable to the shareholders of the Parent Company Non-controlling interests Shareholders’ equity Debt/equity ratio at Dec. 31, 2015 at Dec. 31, 2014 44,872 (4,992) (2,335) 37,545 32,376 19,375 51,751 0.73 48,655 (8,571) (2,701) 37,383 31,506 19,639 51,145 0.73 Change (3,783) 3,579 366 162 870 (264) 606 - 241 Consolidated financial statementsAnnual Report 201532.3 Non-controlling interests - €19,375 million The following table reports the composition of non-controlling interests by Division. Non-controlling interests Net income attributable to non-controlling interests at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 6,742 8,052 803 386 3,392 19,375 6,648 8,690 1,134 385 2,782 19,639 280 1,032 (275) (3) 142 1,176 116 464 31 (523) 167 255 Millions of euro Endesa Group Enel Latinoamérica Group EIH Group Slovenské Group Enel Green Power Group Total 33. Borrowings Millions of euro Non-current Current Long-term borrowings Short-term borrowings Total at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 44,872 - 44,872 48,655 - 48,655 5.733 2.155 7,888 5,125 3,252 8,377 For more details on the nature of borrowings, please see note 41 “Financial instruments”. 242 Annual Report 201534. Employee benefits - €2,284 million The Group provides its employees with a variety of bene- tricity workers national collective bargaining agreement fits, including deferred compensation benefits, additional to a bonus for achievement of seniority milestones (25th months’ pay for having reached age limits or eligibility for and 35th year of service). It also includes other incentive old-age pension, loyalty bonuses for achievement of senio- plans, which provide for the award to certain Company rity milestones, supplemental retirement and healthcare managers of a monetary bonus subject to specified con- plans, residential electricity discounts (which for companies ditions. in Italy only regarded certain retired employees) and similar benefits. More specifically: Outside of Italy, major pension plans include those of Ende- sa, in Spain, which break down into three types that differ > for Italy, the item “pension benefits” regards estimated on the basis of employee seniority and company. In gene- accruals made to cover benefits due under the supple- ral, under the framework agreement of October 25, 2000, mental retirement schemes of retired executives and the employees participate in a specific defined-contribution benefits due to personnel under law or contract at the pension plan and, in cases of disability or death of emplo- time the employment relationship is terminated. For the yees in service, a defined benefit plan which is covered by foreign companies, the item reports post-employment appropriate insurance policies. In addition, the group has benefits; two other limited-enrollment plans: (i) for current and retired > the item “electricity discount” comprises benefits regar- Endesa employees covered by the electricity industry col- ding electricity supply associated with foreign compa- lective bargaining agreement prior to the changes introdu- nies. For Italy, that benefit, which was granted until the ced with the framework agreement noted earlier; and (ii) for end of 2015 to retired employees only, was unilaterally employees of the former Catalan companies (Fecsa/Enher/ cancelled; HidroEmpordà). Both are defined benefit plans and benefits > the item “health insurance” reports benefits for current or are fully ensured, with the exception of the former plan for retired employees covering medical expenses; benefits in the event of the death of a retired employee. > the item “other benefits” mainly regard the loyalty bonus, Finally, the Brazilian companies have also established defi- which for Italy is represented by the estimated liability ned benefit plans. for the benefit entitling employees covered by the elec- 243 Consolidated financial statementsAnnual Report 2015The following table reports changes in the defined benefit 2014, respectively, as well as a reconciliation of that obliga- obligation for post-employment and other long-term em- tion with the actuarial liability. ployee benefits at December 31, 2015 and December 31, Millions of euro 2015 2014 Pension benefits Electricity discount Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits CHANGES IN ACTUARIAL OBLIGATION Actuarial obligation at the start of the year 2,458 1,927 223 Current service cost Interest expense Actuarial (gains)/losses arising from changes in demographic assumptions Actuarial (gains)/losses arising from changes in financial assumptions Experience adjustments Past service cost (Gains)/Losses arising from settlements Exchange differences Employer contributions Employee contributions Benefits paid Other changes Liabilities classified as held for sale Actuarial obligation at year-end (A) CHANGES IN PLAN ASSETS Fair value of plan assets at the start of the year Interest income Expected return on plan assets excluding amounts included in interest income Exchange differences Employer contributions Employee contributions Benefits paid Other payments Change in scope of consolidation Fair value of plan assets at year-end (B) EFFECT OF ASSET CEILING Asset ceiling at the start of the year Interest income Changes in asset ceiling Exchange differences Change in scope of consolidation Asset ceiling at year-end (C) 24 106 1 (124) 10 (43) 1 (157) - 1 (154) 4 (1) 2,126 1,252 68 (30) (125) 98 1 (154) - - 1,110 68 5 2 (18) - 57 6 41 - (66) (196) - (902) (1) - - (88) 3 - 724 - - - - 88 - (88) - - - - - - - - - 5 10 - (8) 2 - - (17) - - 263 54 8 - 4 4 (5) - (6) - - 4,871 89 165 1 (194) (180) (48) (901) (181) - 1 (13) (39) (294) - - 2 - 9 (1) 202 285 3,337 - - - - 13 - (13) - - - - - - - - - - - - - 24 - (24) - - - - - - - - - 1,252 68 (30) (125) 223 1 (279) - - 1,110 68 5 2 (18) - 57 Net liability in balance sheet (A-B+C) 1,073 724 202 285 2,284 1,927 223 263 244 2,366 1,848 17 125 1 270 (24) (4) 8 (4) - 1 5 (237) (66) 2,458 1,187 82 28 4 186 (237) 1,251 58 1 - - 7 2 - - 67 1,274 6 60 1 173 (39) (36) (88) 1,927 88 (88) - - - - 2 - - - - - - - - - - - - - - - 209 4 11 - 9 5 (2) (1) - - - 1 - (13) 223 13 (13) - - - - - - - - - - - - - - 362 48 10 1 (7) (17) (24) (18) (89) (2) (1) 263 22 (22) - - - - - - - - - - - - - - - - - Total 4,785 75 206 445 (75) (66) (23) (427) (67) 4,871 1,187 82 28 309 (360) 1,251 58 3 8 - 1 6 4 1 - - 7 2 - - 67 3,687 Annual Report 2015  Millions of euro 2015 2014 benefits Electricity discount Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits 2,366 1,848 17 125 1 270 (24) (4) 8 (4) - 1 (237) 5 (66) 2,458 1,187 82 28 4 186 1 (237) - - 1,251 58 7 2 - - 67 1,274 6 60 1 173 (39) (36) - - - - (88) 2 - 1,927 - - - - 88 - (88) - - - - - - - - - 209 4 11 - 9 5 (2) - (1) - - (13) 1 - 223 - - - - 13 - (13) - - - - - - - - - 362 48 10 1 (7) (17) (24) - (18) - - (89) (2) (1) 263 - - - - 22 - (22) - - - - - - - - - 1,927 223 263 CHANGES IN ACTUARIAL OBLIGATION Actuarial obligation at the start of the year Current service cost Interest expense Actuarial (gains)/losses arising from changes in demographic assumptions Actuarial (gains)/losses arising from changes in financial (Gains)/Losses arising from settlements assumptions Experience adjustments Past service cost Exchange differences Employer contributions Employee contributions Benefits paid Other changes Liabilities classified as held for sale Actuarial obligation at year-end (A) CHANGES IN PLAN ASSETS Fair value of plan assets at the start of the year Interest income Expected return on plan assets excluding amounts included in interest income Exchange differences Employer contributions Employee contributions Benefits paid Other payments EFFECT OF ASSET CEILING Asset ceiling at the start of the year Interest income Changes in asset ceiling Exchange differences Change in scope of consolidation Asset ceiling at year-end (C) Pension 2,458 24 106 (124) 10 (43) (157) 1 1 - 1 4 (154) (1) 2,126 1,252 68 (30) (125) 98 1 (154) 68 - - 5 2 - (18) 57 1,073 Change in scope of consolidation Fair value of plan assets at year-end (B) 1,110 1,927 6 41 (66) (196) (902) (1) (88) 3 - 724 88 (88) - - - - - - - - - - - - - - - - - - 263 54 8 - 4 4 (5) (6) - - - 2 - - - - - - - - - - - - - - - 4,871 89 165 1 (194) (180) (48) (901) (181) - 1 9 (1) 1,252 68 (30) (125) 223 1 - - 1,110 68 5 2 - 57 (18) (13) (39) (294) 202 285 3,337 13 24 (13) (24) (279) 223 5 10 (8) 2 (17) - - - - - - - - - - - - - - - - - - - - - Net liability in balance sheet (A-B+C) 724 202 285 2,284 Total 4,785 75 206 3 445 (75) (66) 8 (23) - 1 (427) 6 (67) 4,871 1,187 82 28 4 309 1 (360) - - 1,251 58 7 2 - - 67 3,687 245 Consolidated financial statementsAnnual Report 2015  Millions of euro (Gains)/Losses charged to profit or loss Service cost and past service cost Net interest expense (Gains)/Losses arising from settlements Actuarial (gains)/losses on other long-term benefits Other changes Total Millions of euro Change in (gains)/losses in OCI Return on plan assets excluding amounts included in interest income Actuarial (gains)/losses on defined benefit plans Changes in asset ceiling excluding amounts included in interest income Other changes Total 2015 (5) 102 (901) 46 1 (757) 2015 30 (374) 2 (2) (344) 2014 (26) 131 8 34 7 154 2014 (28) 366 2 - 340 The change in cost recognized through profit or loss is mainly adjustment of the liability in respect of other employee bene- attributable to the cancellation (with effect from the end of fit plans, with a positive impact in respect of past service cost December 2015), for the Italian companies only, of the elec- of €48 million. tricity discount benefit, which involved the reversal of the as- The liability recognized in the balance sheet at the end of the sociated liability. year is reported net of the fair value of plan assets, entirely In addition, the supplemental provisions of the union agre- accounted for by the Enersis Group and the Endesa Group, ements implementing the new plan under Article 4 of the amounting to €1,110 million at December 31, 2015. Fornero Act established in December 2015 prompted an The plan assets break down as follows: 2015 4% 25% 4% 1% - 67% 100% 2014 5% 29% 5% - - 61% 100% Investment quoted in active markets Equity instruments Fixed-income securities Investment property Other Unquoted investments Assets held by insurance undertakings Other Total 246 Annual Report 2015The main actuarial assumptions used to calculate the liabi- which are consistent with those used the previous year, are lities in respect of employee benefits and the plan assets, set out in the following table. Italy Iberian Peninsula Latin America Other Italy Peninsula Latin America Other Iberian 2015 2014 0.5%-2.15% 1.17%-2.56% 4.95%-14.21% 2.03%-9.72% 0.50%-2.15% 0.87%-2.11% 4.60%-12.52% 1.60%-13.89% 1.60% 2.00% 3.00%-6.50% 1.50%-5.50% 1.60% 2.30% 3.00%-6.00% 1.75%-5.00% 1.60%-3.60% 2.00% 3.00%-9.69% 2.00%-5.50% 1.60%-3.60% 2.30% 3.00%-9.18% 1.75%-5.00% 2.60% 3.20% 4.20%-9.69% - 2.54% 4.18%-14.21% - - 2.60% 3.50% 3.50%-8.66% - 2.06% 12.52% - - Discount rate Inflation rate Rate of wage increases Rate of increase in healthcare costs Expected rate of return on plan assets The following table reports the outcome of a sensitivity of the year in the actuarial assumptions used in estimating analysis that demonstrates the effects on the defined be- the obligation. nefit obligation of changes reasonably possible at the end Millions of euro Decrease of 0.5% in discount rate Increase of 0.5% in discount rate Increase of 0.5% in inflation rate Decrease of 0.5% in inflation rate Increase of 0.5% in remuneration Increase of 0.5% in pensions currently being paid Increase of 1% in healthcare costs Increase of 1 year in life expectancy of active and retired employees Pension benefits Electricity discount Health insurance Other benefits Pension benefits Electricity discount Health insurance Other benefits at Dec. 31, 2015 at Dec. 31, 2014 131 (116) 33 (26) 8 11 - 47 60 (54) 59 (38) - - - 24 12 (12) 8 (9) - - 20 3 4 156 58 (10) (134) (120) 4 (7) 2 (3) - (2) 31 - 27 52 - 17 137 - - - - 81 11 (13) 8 - - - 24 11 5 (6) 5 - 7 - - 1 The sensitivity analysis used an approach that extrapolates The contributions expected to be paid into defined benefit the effect on the defined benefit obligation of reasonable plans in the subsequent year amount to €16 million. changes in an individual actuarial assumption, leaving the other assumptions unchanged. The following table reports expected benefit payments in the coming years for defined benefit plans. Millions of euro Within 1 year In 1-2 years In 2-5 years More than 5 years at Dec. 31, 2015 at Dec. 31, 2014 201 211 601 944 265 257 801 1,406 247 Consolidated financial statementsAnnual Report 201535. Provisions for risks and charges - €6,822 million Millions of euro Accrual Reversal Utilization Unwinding of interest Change in scope of consolidation Translation adjustment Other Millions of euro Provision for litigation, risks and other charges: - nuclear decommissioning - retirement, removal and site restoration - litigation - environmental certificates - taxes and duties - other Total Provision for early retirement incentives TOTAL at Dec. 31, 2014 567 599 850 43 316 1,274 3,649 1,589 5,238 Provision for litigation, risks and other charges: - nuclear decommissioning - retirement, removal and site restoration - litigation - environmental certificates - taxes and duties - other Total Provision for early retirement incentives TOTAL at Dec. 31, 2015 at Dec. 31, 2014 Non-current Current Non-current Current 528 611 762 - 290 819 3,010 2,182 5,192 - 11 47 19 20 1,062 1,159 471 1,630 566 594 810 - 309 693 2,972 1,079 4,051 1 5 40 43 7 581 677 510 1,187 at Dec. 31, 2015 - - - 14 231 18 43 683 989 (28) (140) (38) (11) 4 (213) (26) (101) (4) (34) (209) (374) 1,630 (52) 2,619 (265) (526) (900) 8 9 41 - 6 33 97 15 112 - (4) - - (1) 1 (4) - (4) - (47) 528 (3) (51) - (5) (47) (106) - (106) 61 (21) - (4) 142 131 (3) 128 622 809 19 310 1,881 4,169 2,653 6,822 Nuclear decommissioning provision power plants. The time horizon envisaged, three years, corre- At December 31, 2015, the provision reflected solely the costs that will be incurred at the time of decommissioning of nucle- ar plants by Enresa, a Spanish public enterprise responsible for such activities in accordance with Royal Decree 1349/2003 and Law 24/2005. Quantification of the costs is based on the standard contract between Enresa and the electricity compa- nies approved by the Ministry for the Economy in September 2001, which regulates the retirement and closing of nuclear sponds to the period from the termination of power genera- tion to the transfer of plant management to Enresa (so-called post-operational costs) and takes account, among the various assumptions used to estimate the amount, of the quantity of unused nuclear fuel expected at the date of closure of each of the Spanish nuclear plants on the basis of the provisions of the concession agreement. 248 Annual Report 2015Non-nuclear plant retirement and site restoration provision The provision for “non-nuclear plant retirement and site re- storation” represents the present value of the estimated cost for the retirement and removal of non-nuclear plants where there is a legal or constructive obligation to do so. Litigation provision The “litigation” provision covers contingent liabilities in re- spect of pending litigation and other disputes. It includes an estimate of the potential liability relating to disputes that arose during the period, as well as revised estimates of the potential costs associated with disputes initiated in prior pe- riods. The estimates are based on the opinions of internal and external legal counsel. The balance for litigation mainly re- gards distribution companies in Brazil (€135 million) and Spain (€154 million). It primarily regards disputes concerning service quality and disputes with employees or end users. The change for the year essentially reflects developments in a number of disputes, especially in Spain, that arose following disciplinary proceedings in the distribution area and disputes with suppliers (€110 million). These were accompanied by an increase in provisions for litigation in Brazil (€41 million). The balance of the provision decreased despite accruals for the period, mainly due to reversals to profit or loss and uses, espe- cially by Endesa Distribución and the Brazilian companies. Provision for environmental certificates The provision for “environmental certificates” covers costs in respect of shortfalls in the environmental certificates need for compliance with national or supranational environmental protection requirements. Other provisions “Other” provisions cover various risks and charges, mainly in connection with regulatory disputes and disputes with local authorities regarding various duties and fees or other charges. In particular in 2015 the item increased significantly as a result of the provision recognized by the Italian companies for the lump-sum charge for one-off payments to retired employees, totaling an estimated €328 million, following the Group’s uni- lateral decision to cancel the electricity discount benefit, as well as the provision of €92 million recognized by Enel Re in respect of potential charges for insurance settlements and the provision for the abandonment of the Girabolhos project by Hidromondego of €46 million. “Other” changes include €142 million for environmental costs to be incurred in the construction of the El Quimbo plant in Co- lombia, recognized as a direct increase in the value of the asset. In addition, the balance for other provisions for risks and char- ges also includes the provision for current and potential dispu- tes concerning local property tax (whether the Imposta Comu- nale sugli Immobili (“ICI”) or the new Imposta Municipale Unica (“IMU”)) in Italy, the Group has taken due account of the crite- ria introduced with circular 6/2012 of the Public Land Agency (which resolved interpretive issues concerning the valuation methods for movable assets considered relevant for property registry purposes, including certain assets typical to genera- tion plants, such as turbines) in estimating the liability for such taxes, both for the purposes of quantifying the probable risk associated with pending litigation and generating a reasonable valuation of probable future charges on positions that have not yet been assessed by Land Agency offices and municipalities. Provision for early retirement incentives The “provision for early retirement incentives” includes the esti- mated charges related to binding agreements for the voluntary termination of employment contracts in response to organizatio- nal needs. The change for the year reflects, among other factors, uses for incentive provisions established in Spain and Italy in pre- vious years, the latter largely associated with the union-company agreements signed on September 6, 2013, implementing, for a number of companies in Italy, the mechanism provided for under Article 4, paragraphs 1-7 ter, of Law 92/2012 (the Fornero Act). In December 2015, a new agreement was signed in Italy under the provisions of Article 4 of the Fornero Act. It envisages the vo- luntary termination of about 6,100 employees in 2016-2020 and prompted an additional accrual to the provision of about €1,196 million. In addition, during 2015 the Acuerdo de Salida Voluntaria (ASV) introduced in Spain in 2014 was expanded, with an addi- tional provision of about €390 million (for about 612 employees). The ASV mechanism was agreed in Spain in connection with Endesa’s restructuring and reorganization plan, which provides for the suspension of the employment contract with tacit annual renewal. With regard to that plan, on December 30, 2014, the company had signed an agreement with union representatives in which it undertook to not exercise the option to request a return to work at subsequent annual renewal dates for the em- ployees participating in the mechanism. The provision last year amounted to €349 million for 473 employees. 249 Consolidated financial statementsAnnual Report 201536. Other non-current liabilities - €1,549 million Millions of euro Accrued operating expenses and deferred income Other items Total at Dec. 31, 2015 at Dec. 31, 2014 Change 966 583 1,549 952 512 1,464 14 71 85 1.5% 13.9% 5.8% At December 31, 2015, this item essentially consisted of revenue for electricity and gas connections and grants received for specific assets. 37. Trade payables - €11,775 million The item amounted to €11,775 million (€13,419 million in More specifically, trade payables falling due in less than 12 2014) and includes payables in respect of electricity sup- months amounted to €11,261 million (€12,923 million in 2014), plies, fuel, materials, equipment associated with tenders while those falling due in more than 12 months amounted to and other services. €514 million (€496 million in 2014). 38. Other current financial liabilities - €1,063 million Millions of euro Deferred financial liabilities Other items Total at Dec. 31, 2015 at Dec. 31, 2014 Change 957 106 1,063 1,063 114 1,177 (106) (8) (114) -10.0% -7.0% -9.7% “Deferred financial liabilities” regard accrued expense on bonds. It is broadly unchanged on the previous year. 39. Net financial position and long-term financial receivables and securities - €37,545 million The following table shows the net financial position and long-term financial receivables and securities on the basis of the items on the consolidated balance sheet. Millions of euro Long-term borrowings Short-term borrowings Current portion of long-term borrowings Non-current financial assets included in debt Current financial assets included in debt Cash and cash equivalents Total 250 Notes at Dec. 31, 2015 at Dec. 31, 2014 Change 41 41 41 24 28 44,872 2,155 5,733 (2,335) (2,241) (10,639) 37,545 48,655 3,252 5,125 (2,701) (3,860) (13,088) 37,383 (3,783) (1,097) 608 366 1,619 2,449 162 -7.8% -33.7% 11.9% -13.6% -41.9% -18.7% 0.4% Annual Report 2015Pursuant to the CONSOB instructions of July 28, 2006, the financial debt as provided for in the presentation methods of following table reports the net financial position at Decem- the Enel Group. ber 31, 2015, and December 31, 2014, reconciled with net at Dec. 31, 2015 at Dec. 31, 2014 Change Millions 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 issued (short-term portion) Other borrowings (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 Other borrowings 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. 582 10,057 1 10,640 1,324 147 769 2,240 (180) (213) (844) (4,570) (319) (1,762) (7,888) 4,992 (6,863) (35,987) (2,022) (44,872) (39,880) 2,335 (37,545) 758 (176) -23.2% 12,330 (2,273) -18.4% 140 (139) - 13,228 (2,588) -19.6% 1,977 177 1,566 3,720 (30) (2,599) (824) (4,056) (245) (623) (8,377) 8,571 (7,022) (39,749) (1,884) (48,655) (40,084) 2,701 (37,383) (653) (30) (797) -33.0% -16.9% -50.9% (1,480) -39.8% (150) 2,386 (20) (514) (74) - 91.8% -2.4% -12.7% -30.2% (1,139) - 489 5.8% (3,579) -41.8% 159 3,762 (138) 3,783 204 (366) (162) 2.3% 9.5% -7.3% 7.8% 0.5% -13.6% -0.4% 251 Consolidated financial statementsAnnual Report 201540. Other current liabilities - €11,222 million Millions of euro at Dec. 31, 2015 at Dec. 31, 2014 Change Payables due to customers 1,567 1,599 Payables due to equalization funds, market operators and energy services operators 4,879 4,005 Payables due to employees Other tax payables Payables due to social security institutions Contingent consideration Payables for put options granted to minority shareholders Current accrued expenses and deferred income Payables for acquisition of equity investments Liabilities for construction contracts 459 990 216 36 793 294 - 347 496 887 216 46 789 285 33 317 Other Total 1,641 11,222 2,154 10,827 (32) 874 (37) 103 - (10) 4 9 (33) 30 (513) 395 -2.0% 21.8% -7.5% 11.6% - -21.7% 0.5% 3.2% - 9.5% -23.8% 3.6% “Payables due to customers” include €1,066 million (€1,096 rica. The increase in the item is mainly attributable to the million at December 31, 2014) in security deposits related to change in the methods for determining certain rate compo- amounts received from customers in Italy as part of electri- nents (A and UC) to be paid by Enel Distribuzione. city and gas supply contracts. Following the finalization of “Contingent consideration” regards a number of investees the contract, deposits for electricity sales, the use of which held by the Group in North America whose fair value was is not restricted in any way, are classified as current liabilities determined on the basis of the terms and conditions of the given that the Company does not have an unconditional right contractual agreements between the parties. to defer repayment beyond 12 months. The item “Payables for put options granted to minority sha- “Payables due to equalization funds, market operators and reholders” at December 31, 2015 includes the liability in energy services operators“ include payables arising from respect of Enel Distributie Muntenia and Enel Energie Mun- the application of equalization mechanisms to electricity tenia in the total amount of €778 million (unchanged on De- purchases on the Italian market amounting to €3,439 million cember 31, 2014). (€2,449 million at December 31, 2014) and on the Spanish In 2014, “payables for acquisition of equity investments” re- market amounting to €1,392 million (€1,556 million at De- garded the residual amounts to pay for the acquisition of a cember 31, 2014) while the remainder regards Latin Ame- number of companies in North America. 41. Financial instruments This note provides disclosures necessary for users to assess the significance of financial instruments for the Company’s financial position and performance. 252 Annual Report 201541.1 Financial assets by category The following table reports the carrying amount for each ca- hedging derivatives and derivatives measured at fair value tegory of financial asset provided for under IAS 39, broken through profit or loss separately. down into current and non-current financial assets, showing Millions of euro Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Loans and receivables Available-for-sale financial assets Financial assets held to maturity Financial assets at fair value through profit or loss Financial assets designated upon initial recognition (fair value option) Derivative financial assets at FVTPL Total financial assets at fair value through profit or loss Derivative financial assets designated as hedging instruments Fair value hedge derivatives Cash flow hedge derivatives Total derivative financial assets designated as hedging instruments TOTAL 41.1.1 41.1.2 41.1.3 41.1.4 41.1.5 41.1.5 41.1.5 2,173 868 117 45 13 58 46 2,284 2,330 5,546 2,522 25,676 28,830 882 139 40 5 45 55 1,275 1,330 4,918 - 1 - 140 - - 4,466 4,930 4,466 4,930 - 607 607 - 570 570 30,750 34,470 For more information on fair value measurement, please see note 45 “Assets measured at fair value”. 41.1.1 Loans and receivables The following table shows loans and receivables by nature, broken down into current and non-current financial assets. Millions of euro Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 Notes at Dec. 31, 2015 at Dec. 31, 2014 Cash and cash equivalents Trade receivables Short-term portion of long-term financial receivables Receivables for factoring Cash collateral Other financial receivables Total 30 27 28 28 28 24 - - - - - - - - - - 2,173 2,173 2,522 2,522 30 27 28 28 28 28 10,639 12,797 769 147 1,020 304 25,676 13,088 12,022 1,566 177 1,654 323 28,830 Trade receivables from customers at December 31, 2015 rment losses, which amounted to €2,085 million at the end amounted to €12,797 million (€12,022 million at December of the year, up from the opening balance of €1,662 million. 31, 2014) and are recognized net of allowances for impai- 253 Consolidated financial statementsAnnual Report 2015The table below shows impairment losses on trade receivables: Millions of euro Trade receivables Gross value Allowances for impairment Net value The table below shows changes in these allowances during the year. Millions of euro Opening balance at Jan. 1, 2014 Charge for the year Utilized Unused amounts reversed Other changes Closing balance at Dec. 31, 2014 Opening balance at Jan. 1, 2015 Charge for the year Utilized Unused amounts reversed Other changes Closing balance at Dec. 31, 2015 at Dec. 31, 2015 at Dec. 31, 2014 14,882 (2,085) 12,797 13,684 (1,662) 12,022 1,472 864 (529) (120) (25) 1,662 1,662 992 (546) (178) 155 2,085 Note 42 “Risk management” provides additional information on the ageing of receivables past due but not impaired. 41.1.2 Available-for-sale financial assets The following table shows available-for-sale financial assets by nature, broken down into current and non-current financial assets. Millions of euro Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 Notes at Dec. 31, 2015 at Dec. 31, 2014 Equity investments in other companies Available-for-sale securities Service concession arrangements Total 24 28.1 24 237 - 631 868 213 24 - 28.1 669 882 - - - - Changes in financial assets available for sale Millions of euro Opening balance at Jan. 1, 2015 Increases Decreases Changes in fair value through OCI Reclassifications Other changes Closing balance at Dec. 31, 2015 254 Non-current 882 129 (51) 16 85 (193) 868 - 140 - 140 Current 140 - (140) - - - - Annual Report 201541.1.3 Financial assets held to maturity At December 31, 2015 financial assets held to maturity the previous year. The item reports non-current securities amounted to €117 million, down €22 million compared with held by Enel Insurance. 41.1.4 Financial assets at fair value through profit or loss The following table shows financial assets at fair value through profit or loss by nature, broken down into current and non- current financial assets. Millions of euro Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 Notes at Dec. 31, 2015 at Dec. 31, 2014 Derivatives at FVTPL 41.4 Financial investments in funds Total financial assets designated upon initial recognition (fair value option) TOTAL 13 45 45 58 5 40 40 45 41.4 4,466 4,930 - - - - 4,466 4,930 41.1.5 Derivative financial assets For more information on derivative financial assets, please see note 44 “Derivatives and hedge accounting”. 255 Consolidated financial statementsAnnual Report 201541.2 Financial liabilities by category The following table shows the carrying amount for each ca- ing hedging derivatives and derivatives measured at fair va- tegory of financial liability provided for under IAS 39, broken lue through profit or loss separately. down into current and non-current financial liabilities, show- Millions of euro Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Financial liabilities measured at amortized cost 41.2.1 44,872 48,655 19,663 21,796 Financial liabilities at fair value through profit or loss Derivative financial liabilities at FVTPL 41.4 Total financial liabilities at fair value through profit or loss Derivative financial liabilities designated as hedging instruments Fair value hedge derivatives Cash flow hedge derivatives 41.4 41.4 Total derivative financial liabilities designated as hedging instruments TOTAL 41 41 - 1,477 1,477 46,390 35 35 - 2,406 2,406 51,096 4,734 4,971 4,734 4,971 - 775 775 - 470 470 25,172 27,237 For more information on fair value measurement, please see note 46 “Liabilities measured at fair value”. 41.2.1 Financial liabilities measured at amortized cost The following table shows financial liabilities at amortized cost by nature, broken down into current and non-current financial Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 Notes at Dec. 31, 2015 at Dec. 31, 2014 41 41 37 44,872 48,655 - - - - 44,872 48,655 41 41 37 5,733 2,155 11,775 19,663 5,125 3,252 13,419 21,796 liabilities. Millions of euro Long-term borrowings Short-term borrowings Trade payables Total 256 Annual Report 201541.3 Borrowings 41.3.1 Long-term borrowings (including the current portion due within 12 months) - €50,605 million The following table reports the carrying amount and fair va- associated market data at the reporting date, including the lue for each category of debt, including the portion falling credit spreads of Enel SpA. due within 12 months. For listed debt instruments, the fair value is given by official prices, while for unlisted debt instru- The table reports the situation of long-term borrowings and ments fair value is determined using valuation techniques repayment schedules at December 31, 2015, broken down appropriate for each category of financial instrument and the by type of borrowing and interest rate. Millions of euro Nominal value Carrying amount Current portion Portion due in more than 12 months Fair value Nominal value Carrying amount Current portion Portion due in more than 12 months Changes in carrying amount Fair value at Dec. 31, 2015 at Dec. 31, 2014 Bonds: - listed, fixed rate 30,250 29,809 3,351 26,458 34,897 32,155 31,897 2,561 29,336 37,847 (2,088) - listed, floating rate - unlisted, fixed rate 4,098 5,479 4,076 5,436 1,155 2,921 4,190 5,722 5,692 1,432 4,260 5,982 (1,616) - 5,436 6,186 4,926 4,885 - 4,885 5,808 551 - unlisted, floating rate 1,236 1,236 64 1,172 1,193 1,331 1,331 63 1,268 1,263 (95) Total bonds 41,063 40,557 4,570 35,987 46,466 44,134 43,805 4,056 39,749 50,900 (3,248) 1,169 6,555 1,147 6,529 137 707 1,010 1,256 945 926 47 879 5,822 6,812 6,861 6,839 708 6,131 1,170 7,026 221 (310) 31 31 - 31 31 81 81 69 12 70 (50) 7,755 7,707 844 6,863 8,099 7,887 7,846 824 7,022 8,266 (139) Bank borrowings: - fixed rate - floating rate - use of revolving credit lines Total bank borrowings Non-bank borrowings: - fixed rate - floating rate 329 329 2,012 2,012 250 69 1,762 2,012 1,723 1,723 186 1,537 1,824 260 341 406 406 59 347 420 289 (77) Total non-bank borrowings Total fixed-rate borrowings Total floating-rate borrowings 2,341 2,341 319 2,022 2,353 2,129 2,129 245 1,884 2,244 212 38,910 38,404 3,738 34,666 44,351 39,749 39,431 2,794 36,637 46,649 (1,027) 12,249 12,201 1,995 10,206 12,567 14,401 14,349 2,331 12,018 14,761 (2,148) TOTAL 51,159 50,605 5,733 44,872 56,918 54,150 53,780 5,125 48,655 61,410 (3,175) The balance for bonds regards, net of €808 million, the The table below reports long-term financial debt by currency unlisted floating-rate “Special series of bonds reserved for and interest rate. employees 1994-2019”, which the Parent Company holds in portfolio, while Enel Insurance holds bonds issued by Enel SpA totaling €15 million. 257 Consolidated financial statementsAnnual Report 2015Long-term financial debt by currency and interest rate Millions of euro Carrying amount Nominal value Carrying amount Nominal value Current average nominal interest rate Current effective interest rate at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 Euro US dollar Pound sterling Colombian peso Brazilian real Swiss franc Chilean peso/UF Peruvian sol Russian ruble Japanese yen Other currencies Total non-euro currencies TOTAL 31,059 31,433 35,221 35,424 9,552 5,775 1,358 875 534 445 410 124 240 233 19,546 50,605 9,636 5,845 1,358 880 535 456 410 124 240 242 19,726 51,159 8,485 5,437 1,663 1,149 606 458 363 69 237 92 18,559 53,780 8,559 5,508 1,663 1,157 607 470 363 69 238 92 18,726 54,150 3.8% 6.3% 6.1% 9.5% 14.8% 3.1% 10.4% 6.3% 12.1% 2.4% 4.1% 6.6% 6.2% 9.5% 15.1% 3.1% 12.6% 6.3% 12.1% 2.5% Long-term financial debt denominated in currencies other panies operating in the renewable energy sector in the Uni- than the euro increased by €987 million. The change is lar- ted States and Latin America, as well as adverse exchange gely attributable to new borrowing in US dollars by the com- differences registered during the year. Change in the nominal value of long-term debt Millions of euro value Repayments Nominal Change in own bonds Change in scope of consolidation Exchange offer New financing Exchange differences at Dec. 31, 2014 Reclassification from/to assets/ (liabilities) held for sale Nominal value at Dec. 31, 2015 Bonds 44,134 (4,065) (31) Bank borrowings Other borrowings 7,887 2,129 (1,035) (372) - - Total financial debt 54,150 (5,472) (31) - 55 160 215 33 - - 172 901 401 33 1,474 820 (53) 23 790 - - - - 41,063 7,755 2,341 51,159 Compared with December 31, 2014, the nominal value of million and other borrowings for €372 million. long-term debt at December 31, 2015 decreased by €2,991 million, the net effect of €5,472 million in repayments, More specifically, the main bonds maturing in 2015 included: €1,474 million in new borrowings, €790 million in exchan- > €1,000 million in respect of a fixed-rate bond issued by ge losses and €215 million due to the change in scope of Enel SpA, maturing in January 2015; consolidation. The latter development essentially regarded > €1,300 million in respect of a floating-rate bond issued by the acquisition of a number of companies in the renewable Enel SpA, maturing in January 2015; generation sector in the United States that had previously > €1,195 million in respect of a fixed-rate bond issued by entered into tax partnership agreements. Enel Finance International, maturing in June 2015; > the equivalent of €333 million in respect of bonds issued The main repayments in 2015 concerned bonds in the by a number of Latin American companies, maturing du- amount of €4,065 million, bank borrowings totaling €1,035 ring the course of 2015. 258 Annual Report 2015The main repayments of bank borrowings in the year inclu- In January 2015, following a non-binding exchange offer, the ded the following: subsidiary Enel Finance International carried out the repur- > €147 million in respect of floating-rate bank loans of Ende- chase and concomitant issue of a senior fixed-rate bond ma- sa, of which €66 million in subsidized loans; turing in January 2025 (the “exchange offer”). The amount > €338 million in respect of repayments of subsidized loans repurchased (€1,429 million) and that issued (€1,462 million) by Enel Produzione and Enel Distribuzione; generated a net cash inflow of €33 million. From an ac- > the equivalent of €170 million in respect of repayments of counting standpoint, taking account of the characteristics of bank loans by companies in Latin America; the instruments exchanged and the quantitative limits set by > the equivalent of €267 million in respect of repayments of the applicable accounting standard, the exchange offer did loans by companies belonging to the Enel Green Power not give rise to the extinguishment of the pre-existing finan- Group; cial liability. As the non-binding exchange offer was subscri- > the equivalent of €104 million in respect of loans of Enel bed by only part of the original bondholders, the previous is- Russia. sue remains in circulation on the market in the total notional amount of €4,114 million, maturing between 2016 and 2021. The main repayments of non-bank borrowings in the year The main new borrowing carried out in 2015 involved bonds included the following: in the amount of €172 million, bank borrowings of €901 mil- > the equivalent of €166 million in respect of loans in Latin lion and other borrowings totaling €401 million. America; The table below shows the main characteristics of financial > the equivalent of €124 million in respect of loans of Enel transactions carried out in 2015. Green Power North America. 259 Consolidated financial statementsAnnual Report 2015Bonds: Local bond Local bond Local bond Total bonds Bank borrowings: Total bank borrowings Non-bank borrowings: Total non-bank borrowings Issuer/grantor Issue/grant date Amount in millions of euro Currency Interest rate Interest rate type Maturity Edelnor 07/16/2015 Enel Russia 06/04/2015 Enel Russia 10/02/2015 Enel Green Power Chile Enel Green Power RSA Enel Green Power RSA Enel Green Power RSA 01/29/2015 04/01/2015 04/01/2015 08/27/2015 Endesa 09/25/2015 Enel Green Power North America Enel Green Power North America 12/23/2015 12/18/2015 19 62 62 143 69 11 35 30 300 445 80 190 270 PEN RUR RUR 6.12% Fixed rate 07/16/2019 12.10% Fixed rate 05/31/2018 12.10% Fixed rate 09/29/2018 USD LIBOR 6M + 265 bp USD JIBAR 6M + 125 bp JIBAR 6M + 270 bp ZAR ZAR EURIBOR 6M + 115 bp EUR EURIBOR 3M + 46.4 bp EUR Floating rate 12/03/2021 Floating rate 06/30/2032 Floating rate 06/30/2022 Floating rate 06/30/2029 Floating rate 09/25/2027 USD 7.50% Fixed rate 12/23/2025 USD 7.57% Fixed rate 12/18/2025 The main financing contracts finalized in 2015 include: sa Capital SA and International Endesa BV can be summari- > on February 11, Enel SpA renegotiated the forward star- zed as follows: ting revolving credit facility of about €9.4 billion obtained > negative pledge clauses under which the issuer and the on February 11, 2013, reducing its cost and extending its guarantor may not establish or maintain mortgages, liens term until 2020 from its original maturity of April 2018. or other encumbrances on all or part of its assets or reve- The facility was undrawn at December 31, 2015; nue to secure certain financial liabilities, unless the same > on July 16, 2015, a €450 million credit facility was agreed encumbrances are extended equally or pro rata to the between Enel SpA and UniCredit SpA with a term of 60 bonds in question; months, replacing the €400 million facility terminating > pari passu clauses, under which the bonds and the asso- in July 2016. The facility was undrawn at December 31, ciated security constitute a direct, unconditional and un- 2015; secured obligation of the issuer and the guarantor and are > during the year, Endesa renegotiated part of its credit li- issued without preferential rights among them and have nes for a total of €300 million. at least the same seniority as other present and future unsubordinated and unsecured bonds of the issuer and The Group’s main long-term financial liabilities are governed the guarantor; by covenants that are commonly adopted in international > cross-default clauses, under which the occurrence of a business practice. These liabilities primarily regard the bond default event in respect of a specified financial liability issues carried out within the framework of the Global Me- (above a threshold level) of the issuer, the guarantor or, dium-Term Notes Program, issues of subordinated uncon- in some cases, “significant” subsidiaries constitutes a vertible hybrid bonds and loans granted by banks and other default in respect of the liabilities in question, which be- financial institutions (including the European Investment come immediately repayable. Bank and Cassa Depositi e Prestiti SpA). The main covenants covering Enel’s hybrid bonds can be The main covenants regarding bond issues carried out within summarized as follows: the framework of the Global Medium-Term Notes Program > subordination clauses, under which each hybrid bond is su- of (i) Enel and Enel Finance International NV and of (ii) Ende- bordinate to all other bonds issued by the company and 260 Annual Report 2015has the same seniority with all other hybrid financial in- > cross-default clauses, under which the occurrence of a struments issued, being senior only to equity instruments; default event in respect of a specified financial liability > prohibition on mergers with other companies, the sale or (above a threshold level) of the issuer or, in some cases, leasing of all or a substantial part of the company’s assets the guarantor constitutes a default in respect of the liabi- to another company, unless the latter succeeds in all obli- lities in question, which become immediately repayable. gations of the issuer. The main covenants envisaged in the loan contracts of Enel All the financial borrowings considered specify “events of and Enel Finance International NV and the other Group com- default” typical of international business practice, such as, panies can be summarized as follows: for example, insolvency, bankruptcy proceedings or the en- > negative pledge clauses, under which the borrower and, tity ceases trading. in some cases, the guarantor are subject to limitations on In some cases the covenants are also binding for the signi- the establishment of mortgages, liens or other encum- ficant subsidiaries of the obligated parties or for their subsi- brances on all or part of their respective assets, with the diaries. exception of expressly permitted encumbrances; In addition, the guarantees issued by Enel in the interest > disposals clauses, under which the borrower and, in some of Enel Distribuzione for certain loans to Enel Distribuzione cases, the guarantor may not dispose of their assets or ope- from Cassa Depositi e Prestiti require that at the end of each rations, with the exception of expressly permitted disposals; six-month measurement period Enel’s net consolidated fi- > pari passu clauses, under which the payment underta- nancial debt shall not exceed 4.5 times annual consolidated kings of the borrower have the same seniority as its other EBITDA. unsecured and unsubordinated payment obligations; Furthermore, many of these agreements also contain > change of control clauses, under which the borrower and, cross-acceleration clauses that are triggered by specific cir- in some cases, the guarantor could be required to rene- cumstances, certain government actions, insolvency or judi- gotiate the terms and conditions of the financing or make cial expropriation of assets. compulsory early repayment of the loans granted; In addition to the foregoing, a number of loans provide for > rating clauses, which provide for the borrower or the gua- early repayment in the case of a change of control over En- rantor to maintain their rating above a certain specified desa or the subsidiaries. level; 261 Consolidated financial statementsAnnual Report 2015The following table reports the impact on gross long-term debt of hedges established to mitigate exchange risk. Long-term financial debt by hedged currency Millions of euro at Dec. 31, 2015 at Dec. 31, 2014 Initial debt structure Impact of hedge Debt structure after hedging Initial debt structure Impact of hedge Debt structure after hedging Carrying amount Nominal amount 35,221 35,424 3,1% 8,485 5,437 1,663 1,149 606 458 363 69 237 92 18,559 53,780 8,559 5,508 1,663 1,157 607 470 363 69 238 92 18,726 54,150 % 65.4% 15.8% 10.2% 3.1% 2.1% 1.1% 0.9% 0.7% 0.1% 0.4% 0.2% 34.6% 100.0% 11,787 (5,972) (5,508) (607) 206 332 (238) - - - - - (11,787) 47,211 2,587 1,663 1,157 - - - 676 363 401 92 6,939 54,150 87.2% 4.8% - - - 3.1% 2.1% 1.2% 0.7% 0.7% 0.2% 12.8% 100.0% Euro US dollar Pound sterling Colombian peso Brazilian real Swiss franc Chilean peso/UF Peruvian sol Russian ruble Japanese yen Other currencies Total non-euro currencies TOTAL Carrying amount Nominal amount 31,059 31,433 9,552 5,775 1,358 875 534 445 410 124 240 233 9,636 5,845 1,358 880 535 456 410 124 240 242 % 61.4% 18.8% 11.4% 2.7% 1.7% 1.0% 0.9% 0.8% 0.2% 0.5% 0.5% 12,770 (6,660) (5,845) 57 28 (535) 230 (58) 235 (240) 18 44,203 2,976 - 1,415 908 - 686 352 359 - 260 86.4% 5.8% - 2.8% 1.8% - 1.3% 0.7% 0.7% - 0.5% 19,546 50,605 19,726 51,159 38.6% 100.0% (12,770) - 6,956 51,159 13.6% 100.0% The amount of floating-rate debt that is not hedged against income statement (raising borrowing costs) in the event of interest rate risk is the main risk factor that could impact the an increase in market interest rates. Millions of euro 2015 2014 Floating rate Fixed rate Total Pre-hedge % Post-hedge % Pre-hedge % Post-hedge % 14,405 38,910 53,315 27.0% 11,055 20.7% 17,656 30.8% 13,396 23.3% 73.0% 42,260 79.3% 39,749 69.2% 44,009 76.7% 53,315 57,405 57,405 At December 31, 2015, 27% of financial debt was floating ineligible for hedge accounting, 79% of net financial debt rate (31% at December 31, 2014). Taking account of hedges was hedged (77% hedged at December 31, 2014). of interest rates considered effective pursuant to the IFRS– EU, 21% of net financial debt (23% at December 31, 2014) These results are in line with the limits established in the was exposed to interest rate risk. Including interest rate de- risk management policy. rivatives treated as hedges for management purposes but 262 Annual Report 2015The following table reports the impact on gross long-term debt of hedges established to mitigate exchange risk. Long-term financial debt by hedged currency Euro US dollar Pound sterling Colombian peso Brazilian real Swiss franc Chilean peso/UF Peruvian sol Russian ruble Japanese yen Other currencies Total non-euro currencies TOTAL Carrying amount Nominal amount 31,059 31,433 9,552 5,775 1,358 875 534 445 410 124 240 233 9,636 5,845 1,358 880 535 456 410 124 240 242 % 61.4% 18.8% 11.4% 2.7% 1.7% 1.0% 0.9% 0.8% 0.2% 0.5% 0.5% 12,770 (6,660) (5,845) 57 28 (535) 230 (58) 235 (240) 18 19,546 50,605 19,726 51,159 38.6% 100.0% (12,770) - 44,203 2,976 1,415 908 - - - 686 352 359 260 6,956 51,159 86.4% 5.8% - - - 2.8% 1.8% 1.3% 0.7% 0.7% 0.5% 13.6% 100.0% Millions of euro at Dec. 31, 2015 at Dec. 31, 2014 Initial debt structure Impact of hedge Debt structure after hedging Initial debt structure Impact of hedge Debt structure after hedging 3,1% Carrying amount Nominal amount 35,221 35,424 8,485 5,437 1,663 1,149 606 458 363 69 237 92 18,559 53,780 8,559 5,508 1,663 1,157 607 470 363 69 238 92 18,726 54,150 % 65.4% 15.8% 10.2% 3.1% 2.1% 1.1% 0.9% 0.7% 0.1% 0.4% 0.2% 34.6% 100.0% 11,787 (5,972) (5,508) - - (607) 206 - 332 (238) - (11,787) - 47,211 2,587 - 1,663 1,157 - 676 363 401 - 92 87.2% 4.8% - 3.1% 2.1% - 1.2% 0.7% 0.7% - 0.2% 6,939 54,150 12.8% 100.0% 263 Consolidated financial statementsAnnual Report 201541.3.2 Short-term borrowings - €2,155 million At December 31, 2015 short-term borrowings amounted to €2,155 million, a decrease of €1,097 million on December 31, 2014. They break down as follows. Millions of euro Short-term bank borrowings Commercial paper Cash collateral and other financing on derivatives Other short-term borrowings Short-term borrowings at Dec. 31, 2015 at Dec. 31, 2014 180 213 1,698 64 2,155 30 2,599 457 166 3,252 Change 150 (2,386) 1,241 (102) (1,097) Short-term bank borrowings amounted to €180 million. The gram of International Endesa BV and the $400 million (equal payables represented by commercial paper relate to issues to €367 million) program of Enersis. outstanding at the end of December 2015 in the context of At December 31, 2015 issues under these programs totaled the €6,000 million program launched in November 2005 by €213 million, of which €96 million pertaining to Enel Finance Enel Finance International and guaranteed by Enel SpA, which International and €117 million to International Endesa BV. was renewed in April 2010, as well as the €3,000 million pro- 41.4 Derivative financial liabilities For more information on derivative financial liabilities, please see note 44 “Derivatives and hedge accounting”. 41.5 Net gains and losses The following table shows net gains and losses by category of financial instruments, excluding derivatives. Millions of euro Available-for-sale financial assets measured at fair value Available-for-sale financial assets measured at amortized cost Financial assets held to maturity Loans and receivables Financial assets at FVTPL Financial assets held for trading Financial assets designated upon initial recognition (fair value option) Total financial assets at FVTPL Financial liabilities measured at amortized cost Financial liabilities at FVTPL Financial liabilities held for trading Financial liabilities designated upon initial recognition (fair value option) Total financial liabilities at FVTPL 2015 Net gains/(losses) Of which impairment/ reversal of impairment - 8 7 149 - 5 5 (3,900) - - - - - - - - - - - - - - For more details on net gains and losses on derivatives, please see note 10 “Net financial income/(expense) from derivatives”. 264 Annual Report 201542. Risk management Financial risk management objectives and policies As part of its operations, the Enel Group is exposed to a Group level and at the level of individual Regions/Countri- variety of financial risks, notably market risks (including inte- es/global business lines, which define the roles and re- rest rate risk, exchange risk and commodity risk), credit risk sponsibilities for those involved in managing, monitoring and liquidity risk. and controlling risks, ensuring the organizational separa- tion of units involved in managing the Group’s business The Group’s governance arrangements for financial risk en- and those responsible for managing risk; visage: > the specification of operational limits at both the Group le- > specific internal committees, formed of members of the vel and at the level of individual Regions/Countries/global Group’s top management and chaired by the CEO, which business lines for the various types of risk. These limits are responsible for strategic policy-making and oversight are monitored periodically by the risk management units. of risk management; > the establishment of specific policies set at both the Market risks Market risk is the risk that the expected cash flows or the euro of performance and financial aggregates denominated fair value of financial and non-financial assets and liabilities in foreign currencies, such as costs, revenue, assets and could change owing to changes in market prices. liabilities, as well as the consolidation values of equity in- Market risks are essentially composed of interest rate risk, vestments denominated in currencies other than the euro exchange risk and commodity price risk. (translation risk). As with interest rates, changes in exchange rates can cause variations in the value of financial assets and Interest rate risk and exchange risk are primarily generated liabilities measured at fair value. by the presence of financial instruments. The main financial liabilities held by the Company include The Group’s policies for managing market risks provide for bonds, bank borrowings, other borrowings, commercial pa- the mitigation of the effects on performance of changes in per, derivatives, cash collateral for derivatives transactions, interest rates and exchange rates with the exclusion of tran- liabilities for construction contracts and trade payables. slation risk. This objective is achieved both at the source of The main purpose of those financial instruments is to finan- the risk, through the strategic diversification of the nature ce the operations of the Group. of financial assets and liabilities, and by modifying the risk The main financial assets held by the Group include financial profile of specific exposures with derivatives entered into on receivables, factoring receivables, derivatives, cash collate- over-the-counter (OTC) markets. ral for derivatives transactions, cash and cash equivalents, receivables for construction contracts and trade receivables. The risk of fluctuations in commodity prices is generated For more details, please see note 41 “Financial instruments”. by the volatility of those prices and existing structural cor- The sources of exposure to interest rate risk and exchange relations between them, which creates uncertainty about risk did not change with respect to the previous year. the margin on transactions in fuels and energy. Price deve- lopments are observed and analyzed in order to develop the The nature of the financial risks to which the Group is ex- Group’s industrial, financial and commercial strategies and posed is such that changes in interest rates can cause an policies. increase in net financial expense or adverse changes in the In order to contain the effects of such fluctuations and stabi- value of assets/liabilities measured at fair value. lize margins, Enel develops, in accordance with the Group’s The Group is also exposed to the risk that changes in the policies and risk governance limits, strategies that impact the exchange rates between the euro and the main foreign various stages of the industrial process associated with the currencies could have an adverse impact on the value in production and sale of electricity and gas, such as advance 265 Consolidated financial statementsAnnual Report 2015sourcing and hedging, and plans and techniques for hedging company designated to steer, monitor and integrate global financial risks with derivatives. The Group companies deve- performance. In order to manage and control market risks lop strategies for hedging the price risk arising from trading associated with energy commodities, strengthening an in- in commodities and, using financial instruments, reduce or tegrated vision of our business and a geographical aware- eliminate market risk, sterilizing the variable components of ness of sales and trading operations is consistent with the price. If authorized, they can also engage in proprietary tra- global environment in which the Group operates, creating ding in the energy commodities used by the Group in order opportunities for improvement in both maximizing margins to monitor and enhance their understanding of the most re- and governing risks. levant markets. As part of its governance of market risks, the Company re- The organizational structure provides for a single entity to gularly monitors the size of the OTC derivatives portfolio operate on behalf of the entire Group in sourcing fuels and in relation to the threshold values set by regulators for the selling electricity and gas on wholesale markets, as well as activation of clearing obligations (EMIR - European Market centralizing trading with the direct control of the units invol- Infrastructure Regulation 648/2012 of the European Parlia- ved in that business, which as they also operate at the local ment). During 2015, no overshoot of those threshold values level can maintain effective relationships with the markets. was detected. The global business line cooperates with units of the holding Interest rate risk Interest rate risk is the risk that the fair value or expected sufficiently liquid. For the purpose of EMIR compliance, in cash flows of a financial instrument will fluctuate because order to test the actual effectiveness of the hedging tech- of changes in market interest rates. niques adopted, the Group subjects its hedge portfolios to The main source of interest rate risk for the Enel Group is periodic statistical assessment. the presence of financial instruments. It manifests itself primarily as a change in the flows associated with interest Using interest rate swaps, the Enel Group agrees with the payments on floating-rate financial liabilities, a change in counterparty to periodically exchange floating-rate interest financial terms and conditions in negotiating new debt in- flows with fixed-rate flows, both calculated on the same struments or as an adverse change in the value of financial notional principal amount. assets/liabilities measured at fair value, which are typically Floating-to-fixed interest rate swaps transform floating-rate fixed-rate debt instruments. financial liabilities into fixed-rate liabilities, thereby neutra- For more information, please see note 41 “Financial instru- lizing the exposure of cash flows to changes in interest ments”. rates. Fixed-to-floating interest rate swaps transform fixed-rate fi- The Enel Group manages interest rate risk through the de- nancial liabilities into floating-rate liabilities, thereby neutra- finition of an optimal financial structure, with the dual goal lizing the exposure of their fair value to changes in interest of stabilizing borrowing costs and containing the cost of rates. funds. Floating-to-floating interest rate swaps permit the exchan- This goal is pursued through the strategic diversification of ge of floating-rate interest flows based on different indexes. the portfolio of financial liabilities by contract type, maturity Some structured borrowings have multi-stage interest and interest rate, and modifying the risk profile of speci- flows hedged by interest rate swaps that at the reporting fic exposures using OTC derivatives, mainly interest rate date, and for a limited time, provide for the exchange of swaps and interest rate options. The term of such contracts fixed-rate interest flows. does not exceed the maturity of the underlying financial lia- bility, so that any change in the fair value and/or cash flows Interest rate options involve the exchange of interest dif- of such contracts is offset by a corresponding change in the ferences calculated on a notional principal amount once fair value and/or cash flows of the hedged position. certain thresholds (strike prices) are reached. These th- Proxy hedging techniques may be used in a number of re- resholds specify the effective maximum rate (cap) or the sidual circumstances, when the hedging instruments for minimum rate (floor) on the debt as a result of the hedge. the risk factors are not available on the market or are not Hedging strategies can also make use of combinations of 266 Annual Report 2015options (collars) that establish the minimum and maximum options are also considered most appropriate in periods of rates at the same time. In this case, the strike prices are uncertainty about future interest rate developments becau- normally set so that no premium is paid on the contract se they make it possible to benefit from any decrease in (zero cost collars). interest rates. Such contracts are normally used when the fixed interest The following table reports the notional amount of interest rate that can be obtained in an interest rate swap is consi- rate derivatives at December 31, 2015 and December 31, dered too high with respect to Enel’s expectations for fu- 2014 broken down by type of contract. ture interest rate developments. In addition, interest rate Millions of euro Notional amount Floating-to-fixed interest rate swaps Fixed-to-floating interest rate swaps Fixed-to-fixed interest rate swaps Floating-to-floating interest rate swaps Interest rate options Total 2015 10,910 853 - 180 50 11,993 2014 5,043 889 100 180 50 6,262 For more details on interest rate derivatives, please see note financial expense associated with unhedged gross debt. 44 “Derivatives and hedge accounting”. These scenarios are represented by parallel increases and Interest rate risk sensitivity analysis There were no changes in the methods and assumptions The Group analyses the sensitivity of its exposure by estima- used in the sensitivity analysis compared with the previous decreases in the yield curve as at the reporting date. ting the effects of a change in interest rates on the portfolio year. of financial instruments. More specifically, sensitivity analysis measures the potential With all other variables held constant, the Group’s profit be- impact on profit or loss and on equity of market scenarios that fore tax would be affected by a change in the level of interest would cause a change in the fair value of derivatives or in the rates as follows. Millions of euro 2015 Change in financial expense on gross long-term floating-rate debt after hedging Change in fair value of derivatives classified as non-hedging instruments Change in fair value of derivatives designated as hedging instruments Cash flow hedges Fair value hedges Pre-tax impact on profit or loss Pre-tax impact on equity Basis points Increase Decrease Increase Decrease 25 25 25 25 28 7 - (8) (28) (7) - 8 - - 183 - - - (183) - 267 Consolidated financial statementsAnnual Report 2015Exchange risk Exchange risk is the risk that the fair value or future cash of the underlying financial liability, so that any change in the flows of a financial instrument will fluctuate because of fair value and/or cash flows of such contracts offsets the changes in exchange rates. corresponding change in the fair value and/or cash flows of For the companies of the Enel Group, the main source of the hedged position. exchange risk is the presence of financial instruments and Cross currency interest rate swaps are used to transform a cash flows denominated in a currency other than its cur- long-term financial liability in foreign currency into an equiva- rency of account and/or functional currency. lent liability in the currency of account or functional currency More specifically, exchange risk is mainly generated with the of the company holding the exposure. following transaction categories: Currency forwards are contracts in which the counterparties > debt denominated in currencies other than the currency agree to exchange principal amounts denominated in diffe- of account or the functional currency entered into by the rent currencies at a specified future date and exchange rate holding company or the individual subsidiaries; (the strike). Such contracts may call for the actual exchange > cash flows in respect of the purchase or sale of fuel or of the two amounts (deliverable forwards) or payment of the electricity on international markets; difference between the strike exchange rate and the pre- > cash flows in respect of investments in foreign currency, vailing exchange rate at maturity (non-deliverable forwards). dividends from unconsolidated foreign companies or the In the latter case, the strike rate and/or the spot rate may purchase or sale of equity investments. be determined as averages of the rates observed in a given The sources of exposure to exchange risk did not change Currency swaps are contracts in which the counterparties with respect to the previous year. enter into two transactions of the opposite sign at different For more details, please see note 41 “Financial instruments”. future dates (normally one spot, the other forward) that pro- vide for the exchange of principal denominated in different period. In order to minimize this risk, the Group normally uses a currencies. variety of over-the-counter (OTC) derivatives such as cross currency interest rate swaps, currency forwards and cur- The following table reports the notional amount of transac- rency swaps. tions outstanding at December 31, 2015 and December 31, The term of such contracts does not exceed the maturity 2014, broken 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 risk on commodities Currency forwards hedging future cash flows in currencies other than the euro Currency swaps hedging commercial paper Currency forwards hedging loans Other currency forwards Total 2015 15,812 4,334 4,330 - 181 11 2014 14,801 4,942 3,552 148 224 - 24,668 23,667 More specifically, these include: purchases and sales of natural gas, purchases of fuel and > CCIRSs with a notional amount of €15,812 million to hed- expected cash flows in currencies other than the euro ge the exchange risk on debt denominated in currencies (€8,494 million at December 31, 2014); other than the euro (€14,801 million at December 31, > currency forwards with a total notional amount of €181 2014); million used to hedge the exchange risk associated with > currency forwards with a total notional amount of €8,664 loans in currencies other than the euro (€224 million at million used to hedge the exchange risk associated with December 31, 2014). 268 Annual Report 2015At December 31, 2015, 39% (35% at December 31, 2014) of Taking account of hedges of exchange risk, the percentage Group long-term debt was denominated in currencies other of debt not hedged against that risk amounted to 14% at than the euro. December 31, 2015 (13% at December 31, 2014). Exchange risk sensitivity analysis These scenarios are represented by the appreciation/depre- The Group analyses the sensitivity of its exposure by estima- ciation of the euro against all of the foreign currencies com- ting the effects of a change in exchange rates on the portfo- pared with the value observed as at the reporting date. lio of financial instruments. There were no changes in the methods and assumptions More specifically, sensitivity analysis measures the potential used in the sensitivity analysis compared with the previous impact on profit or loss and equity of market scenarios that year. would cause a change in the fair value of derivatives or in the With all other variables held constant, the profit before tax financial expense associated with unhedged gross medium/ would be affected as follows: long-term debt. Millions of euro Change in financial expense on gross long-term debt denominated in currencies other than the euro after hedging Change in fair value of derivatives classified as non-hedging instruments Change in fair value of derivatives designated as hedging instruments Cash flow hedges Fair value hedges 2015 Pre-tax impact on profit or loss Pre-tax impact on equity Exchange rate Increase Decrease Increase Decrease 10% 10% 10% 10% - 182 - - - (223) - - - - - - (1,951) 2,385 - - 269 Consolidated financial statementsAnnual Report 2015 Commodity risk The Group is exposed to the risk of fluctuations in the price companies expressly authorized to do so under corporate of commodities mainly associated with the purchase of fuel policies, consist in taking on exposures in energy commodi- for power plants and the purchase and sale of natural gas under indexed contracts, as well as the purchase and sale of ties (oil products, gas, coal, CO2 certificates and electricity in the main European countries) using financial derivatives and electricity at variable prices (indexed bilateral contracts and physical contracts traded on regulated and over-the-counter sales on the electricity spot market). markets, exploiting profit opportunities through arbitrage The exposures on indexed contracts are quantified by bre- transactions carried out on the basis of expected market de- aking down the contracts that generate exposure into the velopments. underlying risk factors. The commodity risk management processes established at As regards electricity sold by the Group, Enel mainly uses fi- the Group level are designed to constantly monitor deve- xed-price contracts in the form of bilateral physical contracts lopments in risk over time and to determine whether the and financial contracts (e.g. contracts for differences, VPP risk levels, as observed for specific analytical dimensions contracts, etc.) in which differences are paid to the counter- (for example, geographical areas, organizational structures, party if the market electricity price exceeds the strike price business lines, etc.), comply with the thresholds consistent and to Enel in the opposite case. The residual exposure in with the risk appetite established by top management. The- respect of the sale of energy on the spot market not hedged se operations are conducted within the framework of formal with such contracts is aggregated by uniform risk factors governance rules that establish strict risk limits. Compliance that can be managed with hedging transactions on the mar- with the limits is verified daily by units that are independent ket. Proxy hedging techniques may be used for the industrial of those undertaking the transactions. Positions are moni- portfolios when the hedging instruments for the risk factors tored monthly, assessing the Profit at Risk, in the case of generating the exposure are not available on the market or industrial portfolios, and daily, calculating Value at Risk, in are not sufficiently liquid, while portfolio hedging techniques the case of the trading book. can be used to assess opportunities for netting intercom- The risk limits for Enel’s proprietary trading are set in terms pany flows. of Value at Risk over a 1-day time horizon and a confidence The Group mainly uses plain vanilla derivatives for hedging level of 95%; the sum of the limits for 2015 is equal to about (more specifically, forwards, swaps, options on commodi- €39 million. ties, futures, contracts for differences). Enel also engages in proprietary trading in order to maintain The following table reports the notional amount of outstan- a presence in the Group’s reference energy commodity mar- ding transactions at December 31, 2015 and December 31, kets. These operations, which are performed only by Group 2014, broken down by type of instrument. Millions of euro Notional amount Forward and futures contracts Swaps Options Embedded derivatives Total For more details, please see note 44 “Derivatives and hedge accounting”. 2015 30,791 5,904 340 - 37,035 2014 26,671 9,359 401 - 36,431 270 Annual Report 2015Sensitivity analysis of commodity risk commodity price curve of +10% and -10%. The following table presents the results of the analysis The impact on pre-tax profit is mainly attributable to the of sensitivity to a reasonably possible change in the com- change in the prices of gas and oil commodities. The im- modity prices underlying the valuation model used in the pact on equity is almost entirely due to changes in the pri- scenario at the same date, with all other variables held ces of gas and coal. The Group’s exposure to changes in constant. The analysis assesses the impact of shifts in the the prices of other commodities is not material. Millions of euro 2015 Pre-tax impact on profit or loss Pre-tax impact on equity Commodity price Increase Decrease Increase Decrease Change in fair value of trading derivatives on commodities Change in fair value of derivatives on commodities designated as hedging instruments 10% 10% (21) - 27 - - - 135 (134) Credit risk The Group’s commercial, commodity and financial operations For the credit risk generated by financial transactions, in- expose it to credit risk, i.e. the possibility that an unexpected cluding those in derivatives, risk is minimized by selecting change in the creditworthiness of a counterparty could have counterparties with high standing from among leading na- an effect on the creditor position, in terms of insolvency (de- tional and international financial institutions, diversifying the fault risk) or changes in its market value (spread risk). portfolio, entering into margin agreements that call for the In recent years, in view of the instability and uncertainty that exchange of cash collateral and/or using netting arrange- have affected the financial markets and an economic crisis ments. An internal assessment system was used again in of global proportions, average collection times have trended 2015 to apply and monitor operational limits for credit risk, upwards. In order to minimize credit risk, credit exposures approved by the Group Risk Committee in respect of finan- are managed at the Region/Country/business line level by cial counterparties at the Region/Country/global business different units, thereby ensuring the necessary segregation line level and at the consolidated level. of risk management and control activities. Monitoring the consolidated exposure is carried out by Enel SpA. To manage credit risk even more effectively, for a number of In particular, the policy for managing credit and the associa- years the Group has carried out non-recourse assignments ted risks provides for the assessment of the creditworthi- of receivables, which have mainly involved specific seg- ness of the main counterparties, the adoption of risk mitiga- ments of the commercial portfolio and, to a lesser extent, tion tools, such as secured and unsecured guarantees and invoiced receivables and receivables to be invoiced of com- standardized contractual frameworks in specific business panies operating in other segments of the electricity indust- areas, and the analysis of credit exposures. ry than retail sales. In addition, at the Group level the policy provides for the use All of the above transactions are considered non-recourse of uniform criteria in all the main Regions/Countries/global transactions for accounting purposes and therefore involved business lines and at the consolidated level in measuring the full derecognition of the corresponding assigned assets commercial credit exposures in order to promptly identify from the balance sheet, as the risks and rewards associated any deterioration in the quality of outstanding receivables with them have been transferred. and any mitigation actions to be taken. As regards the credit risk associated with commodity tran- Concentration of customer credit risk Trade receivables are generated by the Group’s operations sactions, a uniform counterparty assessment system is in many regions and countries (Italy, Spain, Romania, Latin used at the Group level, with local level implementation. America, Russia, France, North America, etc.) with a base of Risk limits defined by the appropriate units of the Regions/ customers and counterparties that is highly diversified, whe- Countries/global business lines have been applied and mo- ther geographically, sectorally (industrial companies, energy nitored. companies, enterprises in retail trade, tourism, communica- 271 Consolidated financial statementsAnnual Report 2015tions, government entities, etc.) or by size (large corporate, mers or counterparties with whom it has generally granular small and medium-sized enterprises, residential customers). credit exposures. Through its subsidiaries, Enel has about 60 million custo- Financial assets past due but not impaired Millions of euro Impaired trade receivables Not past due and not impaired trade receivables Past due but not impaired trade receivables: - less than 3 months - from 3 months to 6 months - from 6 months to 12 months - from 12 months to 24 months - more than 24 months Total Liquidity risk 2015 2,085 8,520 4,277 1,696 505 588 386 1,102 14,882 Liquidity risk is the risk that the Group will encounter difficul- an appropriate level of unconditionally available resources, ty in meeting obligations associated with financial liabilities including liquidity and short-term deposits, available commit- that are settled by delivering cash or another financial asset. ted credit lines and a portfolio of highly liquid asset. The objectives of liquidity risk management policies are: In the long term, liquidity risk is mitigated by maintaining a > ensuring an appropriate level of liquidity for the Group, balanced maturity profile for our debt, access to a range of minimizing the associated opportunity cost; sources of funding on different markets, in different curren- > maintaining a balanced debt structure in terms of the ma- cies and with diverse counterparties. turity profile and funding sources. In the short term, liquidity risk is mitigated by maintaining The Group holds the following undrawn lines of credit: Millions of euro at Dec. 31, 2015 at Dec. 31, 2014 Committed credit lines Uncommitted credit lines Commercial paper Total Expiring within one year Expiring beyond one year Expiring within one year Expiring beyond one year 377 648 9,153 10,178 13,042 - - 13,042 671 425 6,727 7,823 13,456 - - 13,456 Committed credit lines amounted to €13,419 million at the at 10 years in the nominal amount of €1,460 million, paying a Group level, with €13,042 million expiring after 2016. Total avai- coupon of 1.966%. lable resources came to €23,220 million, of which €9,153 mil- The transaction was part of EFI’s liability management pro- lion in commercial paper. gram begun in the final Quarter of 2014 in order to actively In early 2015 Enel Finance International NV carried out an offer For more information, please see note 41 “Financial instru- manage maturities and the Group’s funding costs. to exchange six euro-denominated bonds maturing between ments” in this report. 2016 and 2021 with a new euro-denominated issue maturing 272 Annual Report 2015Maturity analysis The table below summarizes the maturity profile of the Group’s long-term debt. Millions of euro Maturing in Bonds: - listed, fixed rate - listed, floating rate - unlisted, fixed rate - unlisted, floating rate Total bonds Bank borrowings: - fixed rate - floating rate - use of revolving credit lines Total bank borrowings Non-bank borrowings: - fixed rate - floating rate Total non-bank borrowings Less than 3 months From 3 months to 1 year 2,012 1,056 - - 1,339 99 - 64 3,068 1,502 5 150 - 155 60 18 78 132 557 - 689 190 51 241 2017 2018 2019 2020 Beyond 2,204 324 1,376 65 3,969 129 534 1 664 209 69 278 4,922 747 - 66 5,735 345 624 30 999 191 40 231 2,194 217 1,600 282 4,293 79 608 - 687 170 34 204 2,361 14,777 112 - 27 1,521 2,460 732 2,500 19,490 66 592 - 658 192 30 222 391 3,464 - 3,855 1,000 87 1,087 24,432 TOTAL 3,301 2,432 4,911 6,965 5,184 3,380 Commitments to purchase commodities In conducting its business, the Enel Group has entered into The following table reports the undiscounted cash flows as- contracts to purchase specified quantities of commodities sociated with outstanding commitments at December 31, at a certain future date for its own use, which qualify for the 2015. own use exemption provided for under IAS 39. Millions of euro at Dec. 31, 2015 2015-2019 2020-2024 2025-2029 Beyond Commitments to purchase commodities: - electricity - fuels Total 48,733 64,114 112,847 18,383 35,301 53,684 9,730 16,631 26,361 6,835 13,785 10,722 17,557 1,460 15,245 273 Consolidated financial statementsAnnual Report 201543. Offsetting financial assets and financial liabilities At December 31, 2015, the Group did not hold offset positions in assets and liabilities, as it is not the Enel Group’s policy to settle financial assets and liabilities on a net basis. 44. Derivatives and hedge accounting The following tables show the notional amount and the fair va- on the basis of which cash flows are exchanged. This amount lue of derivative financial assets and derivative financial liabilities can be expressed as a value or a quantity (for example tons, eligible for hedge accounting or measured a FVTPL, classified converted into euros by multiplying the notional amount by on the basis of the type of hedge relationship and the hedged the agreed price). Amounts denominated in currencies other risk, broken down into current and non-current instruments. than the euro are converted at the end-year exchange rates The notional amount of a derivative contract is the amount provided by the European Central Bank. Millions of euro Non-current Current Notional amount Fair value Notional amount Fair value at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Fair value hedge derivatives: - on interest rates Total Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Total Trading derivatives: - on interest rates - on exchange rates - on commodities Total TOTAL DERIVATIVE FINANCIAL ASSETS 868 868 883 883 7,090 13,554 37 20,681 50 102 53 205 106 9,078 702 9,886 50 121 3 174 46 46 116 2,163 5 2,284 2 5 6 13 55 55 5 1,163 107 1,275 3 2 - 5 15 15 21 21 25 2,921 1,093 4,039 - 2,064 16,488 18,552 400 2,662 2,755 5,817 15 2,094 14,827 16,936 - - 1 280 326 607 - 63 4,403 4,466 - - - 244 326 570 1 157 4,772 4,930 21,754 10,943 2,343 1,335 22,606 22,774 5,073 5,500 Millions of euro Non-current Current Notional amount Fair value Notional amount Fair value at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Total Trading derivatives: - on interest rates - on exchange rates - on commodities Total TOTAL DERIVATIVE FINANCIAL LIABILITIES 274 3,643 1,991 187 5,821 107 140 93 340 3,635 6,415 742 10,792 107 240 20 367 459 1,006 12 1,477 16 18 7 41 554 1,627 225 2,406 21 10 4 35 95 673 2,028 2,796 100 3,223 17,056 20,379 922 341 2,075 3,338 123 2,716 15,307 18,146 2 96 677 775 65 43 2 4 464 470 75 71 4,626 4,734 4,825 4,971 6,161 11,159 1,518 2,441 23,175 21,484 5,509 5,441 Annual Report 201544.1 Derivatives designated as hedging instruments Derivatives are initially recognized at fair value, at the trade ble to a particular risk associated with an asset, a liability or date of the contract, and are subsequently re-measured at a highly probable transaction that could affect profit or loss. fair value. The effective portion of changes in the fair value of derivati- The method for recognizing the resulting gain or loss depen- ves that are designated and qualify as cash flow hedges is ds on whether the derivative is designated as a hedging in- recognized in other comprehensive income. The gain or loss strument, and if so, on the nature of the item being hedged. relating to the ineffective portion is recognized immediately Hedge accounting is applied to derivatives entered into in in the income statement. order to reduce risks such as interest rate risk, exchange Amounts accumulated in equity are reclassified to profit or risk, commodity risk, credit risk and equity risk when all the loss in the period when the hedged item affects profit or criteria provided for under IAS 39 are met. loss. At the inception of the transaction, the Group documents When a hedging instrument expires or is sold, or when a the relationship between hedging instruments and hedged hedge no longer meets the criteria for hedge accounting but items, as well as its risk management objectives and stra- the hedged item has not expired or been cancelled, any cu- tegy. The Group also analyzes, both at hedge inception and mulative gain or loss existing in equity at that time remains on an ongoing systematic basis, the effectiveness of hedges in equity and is recognized when the forecast transaction is using prospective and retrospective tests in order to deter- ultimately recognized in the income statement. mine whether hedging instruments are highly effective in When a forecast transaction is no longer expected to occur, offsetting changes in the fair values or cash flows of hedged the cumulative gain or loss that was reported in equity is items. immediately transferred to profit or loss. Depending on the nature of the risks to which it is exposed, the Group designates derivatives as hedging instruments in The Group currently uses these hedge relationships to mini- one of the following hedge relationships: mize the volatility of profit or loss. > cash flow hedge derivatives in respect of the risk of: (i) changes in the cash flows associated with long-term floa- ting-rate debt; (ii) changes in the exchange rates associa- Fair value hedges Fair value hedges are used to protect the Group against expo- ted with long-term debt denominated in a currency other sures to adverse changes in the fair value of assets, liabilities than the currency of account or the functional currency in or firm commitments attributable to a particular risk that could which the company holding the financial liability operates; affect profit or loss. (iii) changes in the price of fuels and non-energy commo- Changes in the fair value of derivatives that qualify and are dities denominated in a foreign currency; (iv) changes in designated as hedging instruments are recognized in the in- the price of forecast electricity sales at variable prices; come statement, together with changes in the fair value of and (v) changes in the price of transactions in coal and the hedged item that are attributable to the hedged risk. petroleum commodities; If the hedge is ineffective or no longer meets the criteria for > fair value hedge derivatives involving the hedging of expo- hedge accounting, the adjustment to the carrying amount of sures to changes in the fair value of an asset, a liability or a hedged item for which the effective interest method is used a firm commitment attributable to a specific risk; is amortized to profit or loss over the period to maturity. > derivatives hedging a net investment in a foreign opera- The Group currently makes marginal use of such hedge rela- tion (NIFO), involving the hedging of exposures to exchan- tionships to seize opportunities associated with general deve- ge rate volatility associated with investments in foreign lopments in the yield curve. entities. For more details on the nature and the extent of risks arising from financial instruments to which the Company is expo- sed, please see note 42 “Risk management”. Cash flow hedges Cash flow hedges are used in order to hedge the Group’s exposure to changes in future cash flows that are attributa- 275 Consolidated financial statementsAnnual Report 201544.1.1 Hedge relationships by type of risk hedged Interest rate risk The following table shows the notional amount and the fair transactions outstanding as at December 31, 2015 and De- value of the hedging instruments on the interest rate risk of cember 31, 2014, broken down by type of hedge. Millions of euro Hedging instrument Interest rate swaps Interest rate swaps Total Fair value Notional amount Fair value Notional amount Hedged item at Dec. 31, 2015 at Dec. 31, 2014 Fixed-rate borrowings Floating-rate borrowings 44 853 41 1,004 (342) (298) 10,883 11,736 (537) (496) 4,963 5,967 The following table shows the notional amount and the fair cember 31, 2015 and December 31,2014, broken down by value of hedging derivatives on interest rate risk as at De- type of hedge. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Fair value hedge derivatives: - interest rate swaps 883 904 46 55 - - - - Cash flow hedge derivatives: - interest rate swaps 7,115 506 Total interest rate derivatives 7,998 1,410 117 163 5 60 3,738 4,557 (461) (556) 3,738 4,557 (461) (556) The notional amount of derivatives classified as hedging in- maturing between 2017 and 2020, in order to fix the cost of struments at December 31, 2015 came to €11,736 million, future funding in advance. The value also reflected the reduc- with a corresponding negative fair value of €298 million. tion in the notional amount of amortizing interest rate swaps. The notional amount rose by €5,769 million. More specifically, The improvement in the fair value of €198 million mainly re- interest rate swaps with a total value of €1,342 million ex- flects the positive fair value of the pre-hedge transactions pired, while new derivatives amounted to €7,491 million, of (€114 million) and the general decline in the yield curve during which €7,100 million associated with the pre-hedge strategy the year. implemented in 2015 for the future refinancing of bond issues Cash flow hedge derivatives The following table shows the cash flows expected in coming years from cash flow hedge derivatives on interest rate risk. Millions of euro Fair value Distribution of expected cash flows at Dec. 31, 2015 2016 2017 2018 2019 2020 Beyond Cash flow hedge derivatives on interest rates: - positive fair value - negative fair value 117 (461) 1 (97) 1 (83) (10) (69) 169 (155) (20) (55) (11) (45) 276 Annual Report 2015The following table shows the impact of reserves from cash flow hedge derivatives on interest rate risk on equity during the period, gross of tax effects. Millions of euro Opening balance at January 1, 2014 Changes in fair value recognized in equity (OCI) Changes in fair value recognized in profit or loss Closing balance at December 31, 2014 Opening balance at January 1, 2015 Changes in fair value recognized in equity (OCI) Changes in fair value recognized in profit or loss Closing balance at December 31, 2015 Exchange risk (1,729) 958 130 (641) (641) 13 186 (442) The following table shows the notional amount and the fair transactions outstanding as at December 31, 2015 and De- value of the hedging instruments on the exchange risk of cember 31, 2014, broken down by type of hedged item. Millions of euro Fair value Notional amount Fair value Notional amount at Dec. 31, 2015 at Dec. 31, 2014 Hedging instruments Cross currency interest rate swaps (CCIRSs) Cross currency interest rate swaps (CCIRSs) Cross currency interest rate swaps (CCIRSs) Currency forwards Currency forwards Total Hedged item Fixed-rate borrowings Floating-rate borrowings Future cash flows denominated in foreign currencies Future commodity purchases denominated in foreign currencies Future cash flows denominated in foreign currencies 1,170 15,078 (508) 14,064 25 401 11 (102) 306 (38) 416 321 244 3,058 312 3,674 4 1,341 296 - 21 19,139 (224) 18,496 Cash flow hedges and fair value hedges include: ted in currencies other than the euro, with a negative fair > CCIRSs with a notional amount of €15,078 million used to value of €77 million; hedge the exchange risk on fixed-rate debt denominated > currency forwards with a notional amount of €3,354 mil- in currencies other than the euro, with a positive fair value lion used to hedge the exchange risk associated with of €1,170 million; purchases of natural gas, purchases of fuel and expected > CCIRSs with a notional amount of €707 million used to cash flows in currencies other than the euro, with a fair hedge the exchange risk on floating-rate debt denomina- value of €248 million. 277 Consolidated financial statementsAnnual Report 2015The following table reports the notional amount and fair value of foreign exchange derivatives at December 31, 2015 and December 31, 2014, broken down by type of hedge. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Fair value hedge derivatives: - CCIRSs - - - - - - Cash flow hedge derivatives: - currency forwards - CCIRSs 2,927 13,548 3,520 8,220 Total exchange derivatives 16,475 11,740 256 2,187 2,443 315 1,092 1,407 427 2,237 2,664 175 6,581 6,756 - (8) - (3) (1,094) (1,628) (1,102) (1,631) The notional amount of CCIRSs at December 31, 2015 The notional value of currency forwards at December 31, amounted to €15,785 million (€14,801 million at December 2015 amounted to €3,354 million (€3,695 million at Decem- 31, 2014), an increase of €984 million. Cross currency interest ber 31, 2014), a decrease of €341 million. The exposure to rate swaps with a total value of €346 million expired, while exchange risk, especially that associated with the US dollar, is new derivatives amounted to €109 million. The value also re- mainly due to purchases of natural gas and purchase of fuel. flects developments in the exchange rate of the euro against Changes in the notional amount are connected with normal the main other currencies, which cause their notional amount developments in operations. to increase by €1,221 million. Cash flow hedge derivatives The following table shows the cash flows expected in coming years from cash flow hedge derivatives on exchange risk. Millions of euro Fair value Distribution of expected cash flows at Dec. 31, 2015 2016 2017 2018 2019 2020 Beyond Cash flow hedge derivatives on exchange rates: - positive fair value - negative fair value 2,443 (1,102) 498 (176) 510 (67) 218 (71) 661 (215) 217 (28) 2,818 (474) The following table shows the impact of reserves from cash flow hedge derivatives on exchange risk on equity during the period, gross of tax effects. Millions of euro Opening balance at January 1, 2014 Changes in fair value recognized in equity (OCI) Changes in fair value recognized in profit or loss Closing balance at December 31, 2014 Opening balance at January 1, 2015 Changes in fair value recognized in equity (OCI) Changes in fair value recognized in profit or loss Closing balance at December 31, 2015 278 (84) (1,089) 64 (1,109) (1,109) 753 (258) (614) Annual Report 2015Commodity risk Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Cash flow hedge derivatives Derivatives on power: - swaps - forwards/futures Total derivatives on power Derivatives on coal: - swaps Total derivatives on coal Derivatives on gas and oil: - swaps - forwards/futures Total derivatives on gas and oil Derivatives on CO2: - forwards/futures Total derivatives on CO2 TOTAL DERIVATIVES ON COMMODITIES 79 59 138 6 6 67 715 545 1,149 1,694 - - 124 1,426 782 1,550 204 204 213 213 10 3 13 - - 35 270 305 13 13 50 95 145 - - 41 197 238 50 50 86 175 261 978 978 150 772 152 348 500 718 718 13 1,586 (4) (51) (55) (182) (182) (49) (402) (7) (18) (25) (183) (183) (3) (478) 922 1,599 (451) (481) 54 54 - - (1) (1) - - 1,130 3,457 331 433 2,215 2,817 (689) (689) The table reports the notional amount and fair value of deri- tuations in the price of natural gas, for both purchases and vatives hedging the price risk on commodities at December sales, carried out for oil commodities and gas products with 31, 2015 and at December 31, 2014, broken down by type physical delivery (all-in-one hedges). of hedge. Cash flow hedge derivatives on commodities with a negati- The positive fair value of cash flow hedge derivatives on com- ve fair value regard derivatives on gas and oil commodities modities mainly regards hedges of gas and oil amounting to amounting to €451 million, hedges of coal purchases for the €305 million and derivatives on power and CO2 totaling €26 million. The first category primarily regards hedges of fluc- generation companies amounting to €182 million and deriva- tives on power amounting to €55 million. Cash flow hedge derivatives The following table shows the cash flows expected in coming years from cash flow hedge derivatives on commodity risk. Millions of euro Fair value Distribution of expected cash flows at Dec. 31, 2015 2016 2017 2018 2019 2020 Beyond Cash flow hedge derivatives on commodities: - positive fair value - negative fair value 331 (689) 325 (677) 5 (12) 1 - - - - - - - 279 Consolidated financial statementsAnnual Report 2015The following table shows the impact of reserves from cash flow hedge derivatives on commodity risk on equity during the period, gross of tax effects. Millions of euro Opening balance at January 1, 2014 Changes in fair value recognized in equity (OCI) Changes in fair value recognized in profit or loss Changes in fair value recognized in profit or loss - ineffective portion Closing balance at December 31, 2014 Opening balance at January 1, 2015 Changes in fair value recognized in equity (OCI) Changes in fair value recognized in profit or loss Closing balance at December 31, 2015 (52) (318) 122 - (248) (248) (649) 275 (622) 44.2 Derivatives at fair value through profit or loss The following table shows the notional amount and the fair value of derivatives at FVTPL as at December 31, 2015 and De- cember 31, 2014. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Derivatives at FVTPL Derivatives on interest rates: - interest rate swaps - interest rate options Derivatives on exchange rates: - currency forwards - CCIRs Derivatives on power: - swaps - forwards/futures - options Total derivatives on power Derivatives on coal: - swaps - forwards/futures - options Total derivatives on coal Derivatives on gas and oil: - swaps - forwards/futures - options Total derivatives on gas and oil Derivatives on CO2: - forwards/futures - options Total derivatives on CO2 Derivatives on other commodities: - swaps - forwards/futures - options Total derivatives on other commodities Embedded derivatives TOTAL DERIVATIVES ON COMMODITIES 280 50 - 65 - 2,166 2,215 - - 796 5,995 7 6,798 873 76 - 949 531 7,957 133 8,621 165 - 165 8 - - 8 - 1,207 5,391 104 6,702 1,527 73 3 1,603 645 5,677 99 6,421 68 - 68 35 - 1 36 - 2 - 68 - 73 422 - 495 241 14 - 255 4 - 159 - 155 480 2 637 187 7 3 197 1,538 1,859 236 3,633 2,686 944 278 3,908 21 - 21 5 - - 5 - 19 - 19 10 - 1 11 - 157 50 3,335 28 714 5,879 14 6,607 887 24 2 913 675 8,555 184 9,414 161 - 161 54 - - 54 - 180 50 2,956 - 1,611 5,456 80 7,147 1,742 51 10 1,803 902 5,170 102 6,174 63 - 63 138 - 2 140 - (75) (6) (61) - (60) (399) - (459) (266) (10) (7) (283) (88) (8) (81) - (183) (417) (6) (606) (218) (15) (23) (256) (1,592) (1,974) (288) (3,854) (2,747) (824) (331) (3,902) (7) - (7) (30) - - (30) - (10) - (10) (53) - (2) (55) - 18,757 17,110 4,479 4,935 20,719 18,513 (4,775) (5,006) Annual Report 2015At December 31, 2015 the notional amount of trading deri- in foreign currencies, which were classified as at fair value vatives on interest rates came to €257 million. The change through profit or loss as they did not meet the requirements in the notional compared with December 31, 2014 is attri- for hedge accounting. butable to the expiry of €38 million in derivatives during At December 31, 2015, the notional amount of derivatives 2015 that, although established for hedging purposes, did on commodities came to €33,690 million. not meet the requirements for hedge accounting. The fair The fair value of trading derivatives on commodities classi- value of a negative €79 million improved by €13 million on fied as assets mainly reflects the market valuation of hedges the previous year, mainly due to the general decline in the of gas and oil amounting to €3,633 million and derivatives on yield curve. power amounting to €495 million. At December 31, 2015, the notional amount of derivatives The fair value of trading derivatives on commodities clas- on exchange rates was €5,529 million. The increase in their sified as liabilities mainly regards hedges of gas and oil notional value and the reduction in the associated net fair amounting to €3,854 million and derivatives on power value of €71 million mainly reflected normal operations and amounting to €459 million. developments in exchange rates. In addition, in 2015 cross These values include transactions that, although established currency interest rate swaps with a notional amount of €28 for hedging purposes, did not meet the requirements for million were established to hedge borrowing denominated hedge accounting. 45. Assets measured at fair value The Group determines fair value in accordance with IFRS 13 > Level 2, where the fair value is determined on basis of whenever such measurement is required by the internatio- inputs other than quoted prices included within Level 1 nal accounting standards as a recognition or measurement that are observable for the asset or liability, either directly criterion. (such as prices) or indirectly (derived from prices); Fair value is defined as the price that would be received to > Level 3, where the fair value is determined on the basis of sell an asset or paid to transfer a liability, in an orderly tran- unobservable inputs. saction, between market participants, at the measurement This note also provides detailed disclosures concerning the date (i.e. an exit price). valuation techniques and inputs used to perform these me- The best proxy of fair value is market price, i.e. the current asurements. publically available price actually used on a liquid and active To that end: market. > recurring fair value measurements of assets or liabilities The fair value of assets and liabilities is classified in accor- are those required or permitted by the IFRS in the balance dance with the three-level hierarchy described below, de- sheet at the close of each period; pending on the inputs and valuation techniques used in de- > non-recurring fair value measurements are those required termining their fair value: or permitted by the IFRS in the balance sheet in particular > Level 1, where the fair value is determined on basis of circumstances. quoted prices (unadjusted) in active markets for identical For general information or specific disclosures on the ac- assets or liabilities that the entity can access at the mea- counting treatment of these circumstances, please see note surement date; 2 “Accounting policies and measurement criteria”. 281 Consolidated financial statementsAnnual Report 2015The following table shows, for each class of assets measu- of the reporting period and the level in the fair value hierar- red at fair value on a recurring or non-recurring basis in the chy into which the fair value measurements of those assets financial statements, the fair value measurement at the end are classified. Millions of euro Non-current assets Current assets Notes Fair value Level 1 Level 2 Level 3 Fair value Level 1 Level 2 Level 3 Equity investments in other companies measured at fair value Service concession arrangements Financial investments in funds Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Fair value hedge derivatives: - on interest rates Trading derivatives: - on interest rates - on exchange rates - on commodities Inventories measured at fair value Assets classified as held for sale 24 24 24.1 44 44 44 44 44 44 44 26 30 181 181 - 631 45 116 2,163 5 46 2 5 6 - - - 45 - - 1 - - - 1 - - 631 - 116 2,163 4 46 2 5 5 - - - - - - - - - - - - - - - - - 1 280 326 - - 63 - - - - - 283 - - - - - - 1 280 43 - - 63 4,403 3,071 1,332 65 6,887 65 - - - - - - - - - - - - - - 6,887 The fair value of equity investments in other companies is volatility), discounting expected future cash flows on the determined for listed companies on the basis of the quo- basis of the market yield curve and translating amounts in ted price set on the closing date of the year, while that for currencies other than the euro using exchange rates provi- unlisted companies is based on a reliable valuation of the ded by the European Central Bank. For contracts involving relevant assets and liabilities. commodities, the measurement is conducted using prices, where available, for the same instruments on both regulated “Service concession arrangements” concern electricity di- and unregulated markets. stribution operations in Brazil by Ampla and Coelce and are accounted for in accordance with IFRIC 12. Fair value was In accordance with the new international accounting stan- estimated as the net replacement cost based on the most dards, in 2013 the Group included a measurement of credit recent rate information available and on the general price risk, both of the counterparty (Credit Valuation Adjustment or index for the Brazilian market. CVA) and its own (Debit Valuation Adjustment or DVA), in order to adjust the fair value of financial instruments for the corre- The fair value of derivative contracts is determined using the sponding amount of counterparty risk. More specifically, the official prices for instruments traded on regulated markets. Group measures CVA/DVA using a Potential Future Exposure The fair value of instruments not listed on a regulated mar- valuation technique for the net exposure of the position and ket is determined using valuation methods appropriate for subsequently allocating the adjustment to the individual finan- each type of financial instrument and market data as of the cial instruments that make up the overall portfolio. All of the close of the period (such as interest rates, exchange rates, inputs used in this technique are observable on the market. 282 Annual Report 2015The notional amount of a derivative contract is the amount Finally, “assets classified as held for sale” primarily regard on which cash flows are exchanged. This amount can be ex- Slovenské elektrárne, HydroDolomiti Enel and Compostilla. pressed as a value or a quantity (for example tons, converted The associated fair value is the estimated realizable value, into euros by multiplying the notional amount by the agreed net of disposal prices, as determined on the basis of the do- price). cumentation currently available on the sale of the company. Amounts denominated in currencies other than the euro are More specifically, in the more significant case of Slovenské converted into euros at the year-end exchange rates provi- elektrárne, the overall price is subject to an adjustment that ded by the European Central Bank. will be calculated by independent experts and applied fol- The notional amounts of derivatives reported here do not lowing the closing of the second phase (12 months after necessarily represent amounts exchanged between the receiving the Trial Operation Permit for units 3 and 4 of the parties and therefore are not a measure of the Group’s cre- Mochovce nuclear power plant) on the basis of a set of para- dit risk exposure. For listed debt instruments, the fair value meters, including the evolution of the net financial position is given by official prices. For unlisted instruments the fair of Slovenské elektrárne, developments in energy prices in value is determined using appropriate valuation techniques the Slovak market, operating efficiency levels at Slovenské for each category of financial instrument and market data elektrárne as measured against benchmarks specified in at the closing date of the year, including the credit spreads the agreement, and the enterprise value of units 3 and 4 of Enel SpA. of Mochovce. 45.1 Fair value of other assets For each class of assets not measured at fair value on a re- and the level in the fair value hierarchy into which the fair curring basis but whose fair value must be reported, the fol- value measurements of those assets are classified. lowing table reports the fair value at the end of the period Millions of euro Non-current assets Current assets Notes Fair value Level 1 Level 2 Level 3 Fair value Level 1 Level 2 Level 3 Investment property Equity investments in other companies Inventories 18 24 26 172 7 - - - - 14 - - 158 7 - - - 68 - - - - - - - - 68 The table reports investment property, equity investments The value of equity investments classified in Level 3 decrea- in other companies and inventories measured at cost, who- sed by €5 million compared with 2014 and regards a number se fair value has been estimated at €172 million, €7 million of equity investments of Endesa. and €68 million respectively. The amounts were calculated The value of inventories largely regards property not used with the assistance of appraisals conducted by independent in operations. experts, who used different methods depending on the spe- cific assets involved. 283 Consolidated financial statementsAnnual Report 201546. Liabilities measured at fair value The following table reports for each class of liabilities mea- of the reporting period and the level in the fair value hierar- sured at fair value on a recurring or non-recurring basis in the chy into which the fair value measurements are categorized. financial statements the fair value measurement at the end Millions of euro Non-current liabilities Current liabilities Notes Fair value Level 1 Level 2 Level 3 Fair value Level 1 Level 2 Level 3 Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Trading derivatives: - on interest rates - on exchange rates - on commodities Contingent consideration Payables for put options granted to minority shareholders Liabilities included in disposal groups classified as held for sale 44 44 44 44 44 44 40 40 31 459 1,006 12 16 18 7 - 21 - - - 1 - - 2 - - - 459 1,006 11 16 18 5 - - - - - - - - - - 21 - - - 2 2 115 562 2 96 677 65 43 - - 4,626 4,052 36 793 5,364 - - - 65 43 574 - - - - - - - - - 36 793 5,364 Contingent consideration regards a number of equity in- for the liability associated with the options on a number of vestments held by the Group in North America, whose fair Latin American companies (€21 million) and Maicor Wind value was determined on the basis of the contractual terms (€15 million). and conditions. The “liabilities included in disposal groups classified as held The item “payables for put options granted to minority sha- for sale“ mainly regard Slovenské elektrárne. The fair value reholders” includes the liability for the options on Enel Di- is the estimated realizable value, net of disposal prices, as stributie Muntenia and Enel Energie Muntenia in the total determined on the basis of the documentation currently amount of €778 million, determined on the basis of the exer- available on the sale of the company. cise conditions in the associated contracts, and €36 million 46.1 Fair value of other liabilities For each class of liabilities not measured at fair value in the and the level in the fair value hierarchy into which the fair balance sheet but whose fair value must be reported, the value measurements of those liabilities are classified. following table reports the fair value at the end of the period Millions of euro Bonds: - fixed rate - floating rate Bank borrowings: - fixed rate - floating rate Non-bank borrowings: - fixed rate - floating rate Total 284 Notes Fair value Level 1 Level 2 Level 3 41.3.1 41.3.1 41.3.1 41.3.1 41.3.1 41.3.1 41,083 5,383 1,256 6,843 2,012 341 56,918 39,356 2,237 - - - - 41,593 1,727 3,146 1,256 6,843 2,012 341 15,325 - - - - - - - Annual Report 201547. Related parties As an operator in the field of generation, distribution, tran- or indirectly controlled by the Italian State, the Group’s con- sport and sale of electricity and the sale of natural gas, Enel trolling shareholder. carries out transactions with a number of companies directly The table below summarizes the main types of transactions carried out with such counterparties. Related party Relationship Nature of main transactions Acquirente Unico - Single Buyer Fully controlled (indirectly) by the Ministry for the Economy and Finance Purchase of electricity for the enhanced protection market GME - Energy Markets Operator Fully controlled (indirectly) by the Ministry for the Economy and Finance GSE - Energy Services Operator Fully controlled (directly) by the Ministry for the Economy and Finance Indirectly controlled 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 subsidized electricity Payment of A3 component for renewable resource incentives Sale of electricity on the Ancillary Services Market Purchase of transport, dispatching and metering services Directly controlled by the Ministry for the Economy and Finance Sale of electricity transport services Purchase of fuels for generation plants, storage services and natural gas distribution Directly controlled by the Ministry for the Economy and Finance Purchase of IT services and supply of goods Fully controlled (directly) by the Ministry for the Economy and Finance Purchase of postal services Terna Eni Group Finmeccanica Group Poste Italiane Group Finally, Enel also maintains relationships with the pension All transactions with related parties were carried out on nor- funds FOPEN and FONDENEL, as well as Fondazione Enel mal market terms and conditions, which in some cases are and Enel Cuore, an Enel non-profit company devoted to pro- determined by the Authority for Electricity, Gas and the Wa- viding social and healthcare assistance. ter System. 285 Consolidated financial statementsAnnual Report 2015The following tables summarize transactions with related outstanding at December 31, 2015 and December 31, 2014 parties, associated companies and joint arrangements and carried out during the period. Acquirente Unico GME Terna Eni GSE Poste Italiane Group Other Key management personnel Associates and joint Total in financial Total 2015 arrangements Overall total 2015 statements % of total 195 290 - 3 11 - - - 37 - - - 102 - - - 115 16 - 26 60 3 - - Poste Italiane Group GSE Other Key management Associates and joint Overall total at Total in financial personnel Total at Dec. 31, 2015 arrangements Dec. 31, 2015 statements % of total - - - - - - - - - - - - - - - - - 5,508 311 - 6,877 2,332 54 (24) - 894 105 - 4 2,874 13 534 185 37 75 3 15 212 99 - - 29 43 2 30 - 37 1 - - - 73,076 2,582 1,563 37,644 16,457 2,654 168 4,969 12,797 2,381 2,898 1,549 11,775 11,222 5,583 314 15 7,089 2,431 54 (24) 29 937 135 2 4 2,911 14 534 185 37 7.6% 12.2% 1.0% 18.8% 14.8% 2.0% -14.3% 0.6% 7.3% 0.1% 4.7% 0.3% 24.7% 0.1% 5 - 5 - 38 1 - 8 - 15 - 2 4 27 4 1 27 14 68 - 69 - 113 45 - - Eni 116 - - - 184 1,256 - - 150 21 - - - - Millions of euro Income statement Revenue from sales and services Other revenue Other financial income Electricity, gas and fuel purchases Services and other materials Other operating expenses Net income/(expense) from commodity contracts measured at fair value Other financial expense - - - 2,468 1,190 1,503 - - 5 - - - 3,695 1,553 136 1,464 1 3 - - 91 - - - 1,954 3 (24) - Millions of euro Balance sheet Trade receivables Other current financial assets Other current assets Other non-current liabilities Trade payables Other current liabilities Other information Guarantees issued Guarantees received Commitments Acquirente Unico GME Terna - - - - 620 - - - - 217 473 - 4 - 373 - 280 - - - 25 - 376 8 253 - 2 286 Annual Report 20152,468 1,190 1,503 37 115 Millions of euro Income statement Revenue from sales and services Other revenue Other financial income Electricity, gas and fuel purchases Services and other materials Other operating expenses Net income/(expense) from commodity contracts measured at fair value Other financial expense Millions of euro Balance sheet Trade receivables Other current financial assets Other current assets Other non-current liabilities Trade payables Other current liabilities Other information Guarantees issued Guarantees received Commitments 3,695 1,553 136 1,464 91 1,954 102 - - - 1 3 - - - - - - - - - - 5 - 3 (24) - 25 - - 8 - 2 217 473 280 253 - - - - - - 4 - - - - 113 45 Eni 116 - - - - - - - - - 150 21 195 290 - 3 11 - - - - - - - - - 68 69 620 373 376 184 1,256 38 - - - - - - 5 - 5 - 1 - 8 - 16 - 26 60 3 - - 15 - 2 4 4 27 1 27 14 Acquirente Unico GME Terna Eni GSE Group Other Poste Italiane Key management personnel Associates and joint Total 2015 arrangements Overall total 2015 Total in financial statements % of total - - - - - - - - 5,508 311 - 6,877 2,332 54 (24) - 75 3 15 212 99 - - 29 5,583 314 15 7,089 2,431 54 (24) 29 73,076 2,582 1,563 37,644 16,457 2,654 168 4,969 7.6% 12.2% 1.0% 18.8% 14.8% 2.0% -14.3% 0.6% Acquirente Unico GME Terna GSE Group Other Poste Italiane Key management personnel Total at Dec. 31, 2015 Associates and joint arrangements Overall total at Dec. 31, 2015 Total in financial statements % of total - - - - - - - - - 894 - 105 4 2,874 13 534 185 37 43 2 30 - 37 1 - - - 937 2 135 4 2,911 14 534 185 37 12,797 2,381 2,898 1,549 11,775 11,222 7.3% 0.1% 4.7% 0.3% 24.7% 0.1% 287 Consolidated financial statementsAnnual Report 2015Acquirente Unico GME Terna Eni GSE Poste Italiane Group Other Key management personnel Associates and joint Total in financial Total 2014 arrangements Overall total 2014 statements % of total Millions of euro Income statement Revenue from sales and services Other revenue Other financial income Electricity, gas and fuel purchases Services and other materials Other operating expenses Net income/(expense) from commodity contracts measured at fair value Other financial expense 3,087 1,150 1,124 - - - - - 4,395 1,690 - 3 17 - 163 - - - 4 - 64 1,886 4 29 - Millions of euro Balance sheet Trade receivables Other current assets Other non-current liabilities Trade payables Other current liabilities Non-current derivative financial liabilities Other information Guarantees received Commitments Acquirente Unico GME Terna - 1 - 444 7 - 762 382 - - - - - - - - 544 13 - 406 1 24 - 1 1 - 1,229 77 46 - - Eni 127 1 - 443 - - 150 19 256 353 - 1 4 - - - GSE 24 102 - 1,006 - - - - 25 - - - 119 - - - 63 5 - 2 46 - - - Poste Italiane Group Other Key management Associates and joint Overall total at Total in financial personnel Total at Dec. 31, 2014 arrangements Dec. 31, 2014 statements % of total 5 5 - 45 1 - 4 18 14 5 2 29 - - 24 11 - - - - - - - - - - - - - - - - 5,705 363 - 7,381 2,295 53 46 - 1,158 134 3,073 2 2 24 178 49 46 4 23 214 145 - - 28 62 8 - 86 1 - - - 73,328 2,463 1,248 36,928 17,179 2,362 (225) 5,540 12,022 3,465 1,464 13,419 10,827 2,441 5,751 367 23 7,595 2,440 53 46 28 1,220 142 3,159 2 3 24 178 49 7.8% 14.9% 1.8% 20.6% 14.2% 2.2% -20.4% 0.5% 10.1% 4.1% 0.1% 23.5% - 1.0% In November 2010, the Board of Directors of Enel SpA ap- of the provisions of Article 2391-bis of the Italian Civil Code proved a procedure governing the approval and execution and the implementing regulations issued by CONSOB. of transactions with related parties carried out by Enel SpA In 2015, no transactions were carried out for which it was directly or through subsidiaries. The procedure (available at necessary to make the disclosures required in the rules on http://www.enel.com/en-GB/group/governance/rules/rela- transactions with related parties adopted with CONSOB Re- ted_parties/) sets out rules designed to ensure the transpa- solution 17221 of March 12, 2010, as amended with Resolu- rency and procedural and substantive propriety of transac- tion 17389 of June 23, 2010. tions with related parties. It was adopted in implementation 288 Annual Report 2015Millions of euro Income statement Revenue from sales and services Other revenue Other financial income Electricity, gas and fuel purchases Services and other materials Other operating expenses Net income/(expense) from commodity contracts measured at fair value Other financial expense Millions of euro Balance sheet Trade receivables Other current assets Other non-current liabilities Trade payables Other current liabilities Non-current derivative financial liabilities Other information Guarantees received Commitments 3,087 1,150 1,124 25 4,395 1,690 64 1,229 163 1,886 119 17 - - - - - 3 - 1 - - - - - - - - - - - - - - - 444 7 4 - 4 29 - 544 13 - 1 - 1 24 1 - 77 46 - - - - - Eni 127 1 150 19 256 353 - 1 4 - - - - - - - - 24 102 762 382 406 443 1,006 - - - - - - 5 5 - 1 - 45 4 18 63 46 5 - 2 - - - 14 29 5 2 - - 24 11 Acquirente Unico GME Terna Eni GSE Group Other Poste Italiane Key management personnel Associates and joint Total 2014 arrangements Overall total 2014 Total in financial statements % of total - - - - - - - - 5,705 363 - 7,381 2,295 53 46 - 46 4 23 214 145 - - 28 5,751 367 23 7,595 2,440 53 46 28 73,328 2,463 1,248 36,928 17,179 2,362 (225) 5,540 7.8% 14.9% 1.8% 20.6% 14.2% 2.2% -20.4% 0.5% Acquirente Unico GME Terna GSE Group Other Poste Italiane Key management personnel Total at Dec. 31, 2014 Associates and joint arrangements Overall total at Dec. 31, 2014 Total in financial statements % of total - - - - - - - - 1,158 134 2 3,073 2 24 178 49 62 8 - 86 1 - - - 1,220 142 2 3,159 3 24 178 49 12,022 3,465 1,464 13,419 10,827 2,441 10.1% 4.1% 0.1% 23.5% - 1.0% 289 Consolidated financial statementsAnnual Report 201548. 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, 2015 at Dec. 31, 2014 Change 6,701 4,304 2,397 48,733 64,114 1,725 1,905 2,895 119,372 126,073 54,384 63,605 1,782 1,785 2,345 123,901 128,205 (5,651) 509 (57) 120 550 (4,529) (2,132) For more details on the expiry of commitments and guarantees, please see the section “Commitments to purchase com- modities” in note 42. 290 Annual Report 201549. Contingent liabilities and assets Porto Tolle thermal plant - Air pollution - Criminal proceedings against Enel directors and employees 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 suits with the Ministry and private parties (environmental associations and a number of resident individuals, who have received no payments from Enel during the proceedings) remain open. On July 10, 2014, the decision of the Venice Court of Appe- The Court of Adria, in a ruling issued on March 31, 2006, al was filed ordering the defendants, jointly with Enel/Enel convicted former directors and employees of Enel for a num- Produzione, to pay damages in the amount of €312,500, plus ber of incidents of air pollution caused by emissions from more than €55,000 in legal expenses. The Ministry’s request the Porto Tolle thermoelectric plant. The decision held the for calculation of the amount of damages it claimed it was defendants and Enel (as a civilly liable party) jointly liable for owed was deemed inadmissible, as grounds for barring such the payment of damages for harm to multiple parties, both action arose in the course of the criminal proceedings. In natural persons and public authorities. Damages for a num- the meantime the Court issued a general conviction with ber of mainly private parties (individuals and environmental damages to be awarded in a separate decision and orde- associations), were set at the amount of €367,000. The cal- red payment of legal costs. Enel ledged an appeal with the culation of the amount of damages owed to certain public Court of Cassation in February 2015 of the ruling of the Veni- entities (Ministry for the Environment, a number of public ce Court of Appeal of July 10, 2014 and is currently waiting entities of Veneto and Emilia Romagna, including the area’s for the date of the hearing to be set. park agencies) was postponed to a later civil trial, although a In August 2011, the Public Prosecutor’s Office of Rovigo “provisional award” of about €2.5 million was immediately asked that a number of directors, former directors, officers, due. former officers and employees of Enel and Enel Produzione An appeal was lodged against the ruling of the Court of Adria be remanded for trial on the charge of willful omission to and on March 12, 2009, the Court of Appeal of Venice partial- take precautionary actions to prevent a disaster in respect of ly reversed the lower court decision. It found that the former the alleged emissions from the Porto Tolle plant. Subsequen- directors had not committed a crime and that there was no tly, the public prosecutor filed charges of willfully causing a environmental damage and therefore ordered recovery of disaster. During 2012, the pre-trial hearing judge of Rovigo, the provisional award already paid. The prosecutors and the granting the request of the Public Prosecutor’s Office of Ro- civil claimants lodged an appeal against the ruling with the vigo, ordered the committal for trial of all of the accused for Court of Cassation. In a ruling on January 11, 2011, the Court both offences. The Ministry for the Environment, the Mini- of Cassation granted the appeal, overturning the decision of stry of Health and other actors, mainly local authorities in the Venice Court of Appeal, and referred the case to the ci- Emilia Romagna and Veneto, as well as the park agencies of vil section of the Venice Court of Appeal to rule as regards the area, joined the case as injured parties, seeking unspeci- payment of damages and the division of such damages fied damages from the above individuals, without citing Enel among the accused. As regards amounts paid to a number or Enel Produzione as liable parties. Evidence was submit- of public entities in Veneto, Enel has already made payment ted during 2013. During the year, as part of the agreement under a settlement agreement reached in 2008. With a suit mentioned earlier, most of the public entities withdrew their lodged in July 2011, the Ministry for the Environment, the suits. public entities of Emilia Romagna and the private actors who At the hearing of March 31, 2014, the Court sitting en banc had already participated as injured parties in the criminal issued its ruling of first instance, acquitting all of the accu- case asked the Venice Court of Appeal to order Enel SpA and sed of the charge of willful omission to take precautionary Enel Produzione to pay civil damages for harm caused by the safety measures. The Court also acquitted all of the accused emissions from the Porto Tolle power station. The amount of the charge of willfully causing a disaster, with the excep- of damages requested for economic and environmental los- tion of the two former Chief Executive Officers of Enel SpA ses was about €100 million, which Enel contested. During (although the Court did not grant the request for recognition 2013, an agreement was reached – with no admission of of aggravating circumstances as provided for when the di- 291 Consolidated financial statementsAnnual Report 2015saster actually occurs). The former Chief Executive Officers to hear the testimony of the final witnesses called by the were then ordered to pay unspecified damages in a separate other accused. civil action, with a total provisional ruling of €410,000 and payment of court costs for the remaining civil parties to the action. The Court’s full ruling was filed at the end of Sep- tember 2014. The decision was appealed by the two former Chief Executive Officers and by the public prosecutor at the start of November 2014. Further appeals were later filed by (i) the Chief Executive Officer in office until 2014, despite having been acquitted, in order to obtain the denial of the grounds for appeal of the prosecutor and a broader acquittal than that obtained in the first trial; (ii) two local authorities that had not initially participated; (iii) the two Ministries (En- vironment and Health) and (iv) the Italia Nostra association. The date of the hearing for arguments before the Venice Court of Appeal has not yet been set. Brindisi Sud thermal generation plant - Criminal proceedings against Enel employees Out-of-court disputes and litigation connected with the blackout of September 28, 2003 In the wake of the blackout that occurred on September 28, 2003, numerous claims were filed against Enel Distribuzione for automatic and other indemnities for losses. These claims gave rise to substantial litigation before justices of the pe- ace, mainly in the regions of Calabria, Campania and Basi- licata, with a total of some 120,000 proceedings. Charges in respect of such indemnities could be recovered in part under existing insurance policies. Most of the initial rulings by these judges found in favor of the plaintiffs, while appella- te courts have nearly all found in favor of Enel Distribuzione. The Court of Cassation has also consistently ruled in favor of Enel Distribuzione. At December 31, 2015 pending cases numbered about 18,000 as a result of additional appeals fi- led. In addition, in view of the rulings in Enel’s favor by both A criminal proceeding is under way before the Court of Brin- the Courts of Appeal and the Court of Cassation, the flow of disi concerning the Brindisi Sud thermal plant. A number of new claims has come to a halt. Beginning in 2012, a num- employees of Enel Produzione – cited as a liable party in civil ber of actions for recovery were initiated, which continue, to litigation during 2013 – have been accused of causing cri- obtain repayment of amounts paid by Enel in execution of minal damage and dumping of hazardous substances with the rulings in the courts of first instance. regard to the alleged contamination of land adjacent to the In May 2008, Enel served its insurance company (Cattoli- plant with coal dust as a result of actions between 1999 and ca) a summons to ascertain its right to reimbursement of 2011. At the end of 2013, the accusations were extended amounts paid in settlement of unfavorable rulings. The case to cover 2012 and 2013. As part of the proceeding, injured also involved a number of reinsurance companies in the pro- parties, including the Province and City of Brindisi, have ceedings, which have challenged Enel’s claim. In a ruling of submitted claims for total damages of about €1.4 billion. The October 21, 2013, the Court of Rome granted Enel’s peti- argument phase is under way. tion, finding the insurance coverage to be valid and ordering Criminal proceedings are also under way before the Courts Cattolica, and consequently the reinsurance companies, to of Reggio Calabria and Vibo Valentia against a number of em- hold Enel harmless in respect of amounts paid or to be paid ployees of Enel Produzione for the offense of illegal waste to users and their legal counsel as well as, within the limits disposal in connection with alleged violations concerning the established by the policies, to pay defense costs. disposal of waste from the Brindisi plant. Enel Produzione On the basis of that ruling, in October 2014, Enel filed suit has not been cited as a liable party for civil damages. against Cattolica with the Court of Rome to obtain a quan- After the filing of the findings of the new expert witnesses tification of the amounts due to Enel and payment of those requested by the Court, the proceedings before the Court of amounts by Cattolica. Reggio Calabria were adjourned until March 31, 2016 to con- The first hearing with the parties in court was set, after a tinue the questioning of the new expert witnesses begun number of postponements, for July 18, 2016, to allow Catto- on February 17, 2016. The proceedings before the Court of lica to carry out additional summons. Vibo Valentia were adjourned until March 22, 2016 in order Subsequently, Cattolica appealed the ruling of the court of 292 Annual Report 2015first instance of October 21, 2013, before the Rome Court of SpA and Enelpower, in presenting their defense, contested Appeal, asking that it be overturned. all aspects of the foundation of the plaintiff’s case and they The suit was adjourned until February 23, 2018 for final ple- took all steps available to them to defend their interests. adings. BEG litigation On April 22, 2014, in response to a motion filed by Enel and Enelpower, the court revoked the previous ruling issued against the companies freezing assets of around $600 mil- lion. The suit is pending and no measures, preliminary or otherwise, have been taken by the court. On April 27, 2015, Following an arbitration proceeding initiated by BEG SpA in Enel SpA and Enelpower SpA asked for the case to be Italy, Enelpower obtained a ruling in its favor in 2002, which transferred from the New York State Courts to the Federal was upheld by the Court of Cassation in 2010, which enti- Courts. In a ruling of March 10, 2016, the Federal Court de- rely rejected the complaint with regard to alleged breach by nied the motion of Enel SpA and Enelpower SpA, confirming Enelpower of an agreement concerning the construction of the jurisdiction of the New York State Court, where the case a hydroelectric power station in Albania. is proceeding. Subsequently, BEG, acting through its subsidiary Albania BEG Ambient Shpk, filed suit against Enelpower and Enel On June 2, 2014 Albania BEG Ambient obtained an order SpA in Albania concerning the matter, obtaining a ruling, from the court in the Hague, based upon the preliminary upheld by the Albanian Supreme Court of Appeal, ordering injunction, freezing up to €440 million held with a number Enelpower and Enel to pay tortious damages of about €25 of entities and the establishment of a lien on the shares of million for 2004 as well as an unspecified amount of tortious two subsidiaries of Enel SpA in that country. Enel SpA and damages for subsequent years. Following the ruling, Alba- Enelpower SpA challenged that ruling and on July 1, 2014, nia BEG Ambient demanded payment of more than €430 the Dutch court, in granting the petition of Enel and Enelpo- million. wer, provisionally determined the value of the suit at €25 million and ordered the removal of the preliminary injunction The European Court of Human Rights, with which Enelpo- subject to the issue of a bank guarantee in the amount of wer SpA and Enel SpA had filed an appeal for violation of €25 million by Enel and Enelpower. Enel and Enelpower the right to a fair trial and the rule of law by the Republic of have appealed this ruling. Albania, rejected the petition as inadmissible. The ruling was On July 3, 2014, Albania BEG Ambient sought to obtain a purely procedural and did not address the substance of the second order to freeze assets. Following the hearing of Au- suit. gust 28, 2014, the court in the Hague granted a preliminary injunction for the amount of €425 million on September 18, In February 2012, Albania BEG Ambient filed suit against 2014. Enel and Enelpower have appealed this injunction. In a Enel SpA and Enelpower SpA with the Tribunal de Grande ruling of February 9, 2016, the Hague Court of Appeal upheld Instance in Paris in order to render the ruling of the Albanian the appeals, ordering the revocation of the preliminary injun- court enforceable in France. Enel SpA and Enelpower SpA ctions subject to the pledging of a guarantee by Enel of €440 challenged the suit. The proceeding is still under way and the million and a counter-guarantee by Albania BEG Ambient of Court has issued no preliminary or definitive rulings so far. about €50 million (the estimated value of the losses of Enel Subsequently, again at the initiative of Albania BEG Ambient, and Enelpower from the seizure of assets and the pledge of Enel France was served with two “Saise Conservatoire de bank guarantees). Créances” (orders for the precautionary attachment of recei- At the end of July 2014, Albania BEG Ambient filed suit in vables) to conserve any receivables of Enel SpA in respect the Netherlands to render the ruling of the Albanian court of Enel France. J.P. Morgan Bank Luxembourg SA was also enforceable in that country. At the end of January 2016, the served with an analogous order in respect of any receivables final hearing was held and the decision will be issued on of Enel SpA. May 4, 2016. In March 2014, Albania BEG Ambient filed suit against Enel Albania BEG Ambient also filed suits in Ireland and Luxem- SpA and Enelpower SpA in New York to render the ruling of bourg to render the ruling of the Court of Tirana enforceable the Albanian court enforceable in the State of New York. Enel in those two countries. In Ireland, the court issued a ruling 293 Consolidated financial statementsAnnual Report 2015on March 8, 2016 upholding the defense of Enel and Enelpo- wer, finding that Ireland had no jurisdiction. The ruling will be approved in the coming weeks. In Luxembourg, the procee- ding is still under way and Enel and Enelpower are challen- Red Eléctrica de España arbitration - Spain ging the claims put forth by Albania BEG Ambient. The court On July 1, 2010, in compliance with legal requirements, En- has issued no ruling. desa Distribución Eléctrica (“EDE”) signed a contract with Red Eléctrica de España (“REE”) for the sale of assets con- With a ruling of June 16, 2015, the first level was completed sisting of the transmission network owned by EDE. The pri- in the additional suit lodged by Enelpower SpA and Enel SpA ce was set at about €1,400 million. The contract provided for with the Court of Rome asking the Court to ascertain the a price adjustment if remuneration decreased or increased liability of BEG SpA for having evaded compliance with the following the liquidation carried out by the Comisión Nacio- arbitration ruling issued in Italy in favor of Enelpower SpA nal de los Mercados y la Competencia (CNMC) by Decem- through the legal action taken by Albania BEG Ambient. With ber 31, 2013. this action, Enelpower SpA and Enel SpA have asked the REE’s interpretation of Ministerial Order IET/2443/2013, pu- Court to find BEG liable and order it to pay damages in the blished in December 2013, would produce a lower remune- amount that the other could be required to pay to Albania ration than that provided for in the contract and, on that ba- BEG Ambient in the event of the enforcement of the senten- sis, the company undertook an arbitration proceeding before ce issued by the Albanian courts. With the ruling, the Court the Corte Civil y Mercantil de Arbitraje (CIMA), asking for an of Rome found that BEG SpA did not have standing to be adjustment of the sale price. sued, or alternatively, that the request was not admissible The value of the claim was subsequently quantified at €94 for lack of an interest for Enel SpA and Enelpower SpA to million. In November 2015, a settlement was reached to end sue, as the Albanian ruling had not yet been declared enfor- the arbitration proceeding (and any possible litigation). ceable in any court. The Court ordered the setting off of court costs. Enel SpA and Enelpower SpA appealed the ruling be- fore the Rome Court of Appeal, asking that it be overturned in full. Violations of Legislative Decree 231/2001 The following two cases for alleged violation of Legislative Decree 231/2001 concerning the administrative liability of le- gal persons are pending. One involves Enel Produzione and one involves Enel Distribuzione, for omission of accident prevention measures: > for an accident involving an employee of a subcontrac- tor at the Enel Federico II plant at Brindisi in 2009, Enel Produzione has been charged with administrative liability for negligent personal injury. The trial in the court of first instance ended on March 8, 2016 with the acquittal of the Enel employees and the Company for offenses under Legislative Decree 231/2001; > for a fatal accident involving an employee of a subcon- tractor in Palermo in 2008, Enel Distribuzione has been charged with administrative liability for manslaughter. The trial is proceeding. Basilus litigation (formerly Meridional) - Brazil The Brazilian construction company Basilus S/A Serviço, Emprendimiento y Participações (formerly Meridional) held a contract for civil works with the Brazilian company CELF (owned by the State of Rio de Janeiro), which withdrew from the contract. As part of its privatization, CELF transferred its assets to Ampla Energia e Serviços SA (Ampla). In 1998, Basilus filed suit against Ampla, arguing that the transfer had infringed its rights and that it had been defrauded. Ampla obtained favorable judgments in the courts of first and second instance. Although the second-level decision was adjudicated Basilus lodged a special appeal (mandado de segurança) in September 2010 asking for the adverse ru- ling to be overturned. That request was denied. Subsequently Basilus lodged a new appeal with the Tribunal Superior de Justiça, which was denied. Basilius has appea- led the decision. The amount involved in the dispute is about R$1,344 million (about €311 million). 294 Annual Report 2015CIEN litigation - Brazil 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 result 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, Tractebel sued CIEN, which submitted its defense. CIEN ci- ted force majeure as a result of the Argentine crisis as the main argument in its defense. Out of court, Tractebel has indicated that it plans to acquire 30% of the interconnection line involved in the dispute. In March 2014, the court granted CIEN’s motion to suspend the proceedings in view of the existence of other litigation pending between the parties. The amount involved in the dispute is estimated at about R$118 million (about €27 million), plus unspecified dama- ges. For analogous reasons, in May 2010 Furnas also filed suit against CIEN for failure to deliver electricity, requesting payment of about R$520 million (about €121 million), in ad- dition to unspecified damages. In alleging non-performance by CIEN, Furnas is also see- king to acquire ownership (in this case 70%) of the intercon- nection line. CIEN’s defense is similar to the earlier case. The claims put forth by Furnas were rejected by the trial court in August 2014. Furnas lodged an appeal against the latter decision and the proceedings are continuing. Cibran litigation - Brazil Companhia Brasileira de Antibióticos (Cibran) has filed a pla has appealed the ruling and the appeal is under way. In another pending case, on June 1, 2015, the courts issued a ruling ordering Ampla to pay R$80,000 (about €18,000) in non-pecuniary damages as well as R$96,465,103 (about €22 million) in pecuniary damages on the basis of an expert appraisal, plus interest. Ampla appealed the decision. The value of all the disputes is estimated at about R$374 million (about €86 million). Coperva litigation - Brazil As part of the project to expand the grid in rural areas of Bra- zil, in 1982 Companhia Energética do Ceará SA (“Coelce”), then owned by the Brazilian government and now an Enel Group company, had entered into contracts for the use of the grids of a number of cooperatives established specifical- ly to pursue the expansion project. The contracts provided for the payment of a monthly fee by Coelce, which was also required to maintain the networks. Those contracts, between cooperatives established in spe- cial circumstances and the then public-sector company, do not specifically identify the grids governed by the agree- ments, which has prompted a number of the cooperatives to sue Coelce asking for, among other things, a revision of the fees agreed in the contracts. These actions include the suit filed by Cooperativa de Eletrificação Rural do V do Acarau Ltda (Coperva) with a value of about R$179 million (about €42 million). Coelce was granted rulings in its favor from the court of first instance and the Court of Appeal, but Coperva filed a further appeal (Embargo de Aclaración) and a decision is pending. El Quimbo (Colombia) number of suits against Ampla Energia e Serviços SA (Am- A number of legal actions (“acciones de grupo” and “ac- pla) to obtain damages for alleged losses incurred as a re- ciones populares”) brought by residents and fishermen in sult of the interruption of service by the Brazilian distribution the affected area are pending with regard to the El Quim- company. The court ordered a unified technical appraisal for bo project for the construction of a 400 MW hydroelectric those cases, the findings of which were partly unfavorable plant in the region of Huila (Colombia). More specifically, to Ampla. The latter challenged the findings, asking for a the first Acción de grupo, currently in the preliminary stage, new study. The proceedings concerning that petition are was brought by around 1,140 residents of the municipali- pending. ty of Garzón, who claim that the construction of the plant In September 2014, the court of first instance issued a ru- would reduce their business revenues by 30%. A second ling against Ampla in one of the various suits noted above, action was brought, between August 2011 and December levying a penalty of about R$200,000 (about €46,000) as 2012, by residents and businesses/associations of five mu- well as other damages to be quantified at a later stage. Am- nicipalities of Huila claiming damages related to the closing 295 Consolidated financial statementsAnnual Report 2015of a bridge (Paso El Colegio). With regard to acciones po- bian pesos (about €5.5 million). pulares, or class action lawsuits, in 2008 a suit was filed by a number of residents of the area demanding, among other things, that the environmental permit be suspended. Another Acción popular was brought by a number of fish farming companies over the alleged impact that filling the Quimbo basin would have on fishing in the Betania basin downstream from Quimbo. In February 2015, the Court ordered the precautionary suspension of filling operations until a number of specific requirements have been met. The precautionary suspension was subsequently modified to permit filling to proceed, which began on June 30, 2015. However, on July 3, 2015 CAM (the regional environmental authority) issued a measure (“medida preventiva”) again or- dering filling operations to be suspended temporarily. In view of the technical impossibility of suspending filling operations, on July 17, 2015 Emgesa received a notice mo- difying the precautionary measure to prohibit generation activities until ANLA (the national environmental authority) certifies that the company removed the biomass and forest waste from the Quimbo reservoir basin. In September 2015, ANLA issued two reports which in general confirm that the company had fulfilled the require- ments. Consequently, on September 21, 2015 the company asked the court to lift the precautionary suspension. Pen- ding the ruling, as an energy emergency has been declared, the Ministry of Energy issued a decree authorizing Emgesa to begin generation. On December 16, 2015, the Constitutional Court ruled that the presidential decree was unconstitutional and as from that date Emgesa suspended electricity generation. On December 24, 2015, the Ministero Minas y Energia and the AUNAP (the authority for agriculture and fishing) filed a joint motion asking the criminal court to authorize genera- tion as a precautionary measure. On January 8, 2016, the court granted the precautionary measure requested by the Ministry and the AUNAP, authorizing the temporary and im- mediate resumption of generation at El Quimbo. The pre- cautionary measure granted by the court would remain in force until the Huila court issued a ruling on the substance of the case, i.e. the revocation or upholding of the precautio- nary measure previously issued by the local administrative court. With a decision of February 22, 2016, the Huila court issued a ruling allowing generation to continue for six months. The court ordered Emgesa to prepare a technical design that would ensure compliance with oxygen level requirements and to provide collateral of about 20,000,000,000 Colom- 296 Nivel de Tensión Uno proceedings - Colombia This dispute involves an “acción de grupo” brought by Cen- tro Médico de la Sabana hospital and other parties against Codensa seeking restitution of allegedly excess rates. The action is based upon the alleged failure of Codensa to apply a subsidized rate that they claim the users should have paid as Tensión Uno category users (voltage of less than 1 kV) and owners of infrastructure, as established in Resolution 82/2002, as amended by Resolution 97/2008. The suit is at a preliminary stage. The estimated value of the proceeding is about 337,626,840,000 Colombian pesos (about €96 mil- lion). SAPE (formerly Electrica) arbitration proceedings - Romania On June 11, 2007, Enel SpA entered into a Privatization Agre- ement with SC Electrica SA for the privatization of Electrica Muntenia Sud (“EMS”). The accord provided for the sale to Enel of 67.5% of the Romanian company. In accordance with the unbundling rules, in September 2008 the distribu- tion and electricity sales operations were transferred to two new companies, Enel Distributie Muntenia (“EDM”) and Enel Energie Muntenia (“EEM”). In December 2009, Enel transferred the entire capital of the two companies to Enel Investment Holding BV (“EIH”). On July 5, 2013, EMS notified Enel SpA, EIH, EDM and EEM (limited to a number of claims) of a request for arbi- tration before the International Chamber of Commerce in Paris, claiming damages for alleged violations of specific clauses of the Privatization Agreement. More specifically, the plaintiff claimed payment of penalties of about €800 million, plus interest and additional unspeci- fied damages. The proceeding is under way. A hearing was held in the first week of June 2015, with the arbitration ruling expected to be issued by the end of April 2016. On September 29, 2014, SAPE notified Enel and Enel In- vestment Holding that it had submitted a further arbitration request to the International Court of Arbitration in Paris see- Annual Report 2015king around €500 million (plus interest) in connection with Finally, VV lodged a further suit with the District Court of the put option contained in the Privatization Agreement. Bratislava seeking restitution of the fees paid by VV to SE The put option gives SAPE the right to sell a 13.57% stake for the transfer of the assets in the privatization. This latter in Enel Distributie Muntenia and Enel Energie Muntenia. proceeding has also been suspended pending the decision The proceeding is under way and a hearing is expected to in the proceeding undertaken by the PPO. be held in July 2016. Gabcˇíkovo dispute - Slovakia Slovenské elektrárne (“SE”) is involved in a number of ca- ses before the national courts concerning the 720 MW Gabcˇ ikovo hydroelectric plant, which is administered by Vo- dohospodárska Výsatavba Štátny Podnik (“VV”) and whose operation and maintenance, as part of the privatization of SE in 2006, had been entrusted to SE for a period of 30 years under a management agreement (the VEG Operation Agreement). Immediately after the closing of the privatization, the Public Procurement Office (PPO) filed suit with the Court of Brati- slava seeking to void the VEG Operation Agreement on the basis of alleged violations of the regulations governing pu- blic tenders, qualifying the contract as a service contract and as such governed by those regulations. In November 2011 the court of first instance ruled in favor of SE, whereupon the PPO appealed the decision. In parallel with the PPO action, VV also filed a number of su- its, asking in particular for the voidance of the VEG Operation Agreement and for SE to pay VV the revenue from the sale of electricity generated by the plant since 2006. SE considers the claims of VV to be unfounded and is conte- sting the various suits, which have been suspended pending a decision in the proceeding launched by the PPO. On March 9, 2015, the decision of the appeals court overturned the ruling of the court of first instance and voided the contract. SE lodged an extraordinary appeal against that decision and the request for arbitration with the Vienna International Ar- bitral Centre (“VIAC”) under the VEG Indemnity Agreement. Under that accord, which had been signed as part of the pri- vatization between the National Property Fund of the Slovak Republic and SE, the latter is entitled to an indemnity in the event of the early termination of the VEG Operation Agree- ment for reasons not attributable to SE. In April 2015, SE had also received a notice from VV deman- ding payment of about €490 million for alleged unjustified enrichment from the operation of the plant in 2006-2015. SE rejected the demand. Dispute between Energia XXI Energias Renováveis e Consultoria Limitada and Enel Green Power España In 1999 Energia XXI filed for arbitration against MADE (now Enel Green Power España) for alleged losses incurred due to the early termination of an agency contract for the sale of wind generators and wind farms of Enel Green Power España in Portugal and Brazil. With its ruling of November 21, 2000, the arbitration board found that the termination of the contract by MADE was illegitimate and ordered it to pay: (i) legal costs; (ii) the fixed portion of the monthly fee for the period from July 21, 1999 (date of termination of contract) to October 9, 2000 (expiration date of the contract), equal to about €50,000; (iii) lost profits to be determined in respect of contracts for at least 15 MW of capacity. Following the arbitration ruling, two civil court cases began: > the first appeal was lodged by MADE with the Tribunal Judicial de Primera Instancia asking for the arbitration ruling to be voided. The case is still pending with the court of first instance following referral by the Court of Appeal (subsequently confirmed by the Supreme Court of Appeal on September 26, 2013), which granted Enel Green Power España’s appeal of the admission of briefs. Following questioning of the witnesses of the two par- ties, the Tribunal Judicial de Primera Instancia moved to the judgement stage; > the second appeal was lodged by Energia XXI on May 9, 2006, with the Civil Court of Lisbon, with which Energia XXI asked for Enel Green Power España to be ordered to pay the amount determined in the arbitration ruling (the losses for which Energia XXI now puts at €546 mil- lion). Enel Green Power España considers the claim to be unfounded. Acting on a petition by Enel Green Power España, the court has so far suspended the case pen- ding resolution of the first suit. 297 Consolidated financial statementsAnnual Report 2015CIS and Interporto Campano 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 withholding tax. In December 2005, Ampla Energia e Serviços SA carried out On December 4, 2009 and August 4, 2010 Enel Green a spin-off in favor of Ampla Investimentos e Serviços SA that Power SpA signed, with Interporto Campano and Centro involved the transfer of the residual FRN debt and the asso- Ingrosso Sviluppo Campania Gianni Nappi SpA (“CIS”), re- ciated rights and obligations. spectively, a leasehold agreement with a term of more than On November 6, 2012, the Camara Superior de Recursos nine years and a leasehold estate for the rooftops of the Fiscales (the highest level of administrative courts) issued a industrial sheds of the CIS and Interporto Campano in order ruling against Ampla, for which the company promptly asked to build and operate a photovoltaic plant. Two fires subse- that body for clarifications. On October 15, 2013, Ampla was quently broke out at those sheds: the first occurred on April notified of the denial of the request for clarification (“Embar- 22, 2011, during the construction of the plant, while the go de Declaración”), thereby upholding the previous adverse second broke out on March 26, 2012. decision. The company provided security for the debt and on Following the fires, CIS undertook two arbitration procee- June 27, 2014 continued litigation before the ordinary courts dings, on November 3, 2012 and May 23, 2014, respec- (“Tribunal de Justiça”). tively, with the latter undertaken together with Interporto The amount involved in the dispute at December 31, 2015 Campano. was about €262 million. In the arbitration ruling filed on January 31, 2015, the ru- ling of the arbitration board in the first proceeding found In 2002, the State of Rio de Janeiro changed the deadlines against the contractor as well as contributory negligence for payment of the ICMS (Imposto sobre Circulação de Mer- on the part of both CIS and Enel Green Power (“EGP”), cadorias and Serviços) by withholding agents (to the 10th, ordering EGP to pay CIS about €2.5 million, equal to half 20th and 30th of each month – Ley Benedicta). Owing to of the damages originally admitted for indemnification. In liquidity problems, between September 2002 and Februa- the second arbitration proceeding, CIS and Interporto Cam- ry 2005, Ampla Energia e Serviços continued to pay the pano sought the termination of the leasehold estate and ICMS in compliance with the previous system (the 5th day the more-than-9-year lease as well as damages for alleged of the subsequent month). Despite an informal agreement, losses following breaches by EGP quantified in the amount the Brazilian tax authorities issued an assessment for late of about €65 million, of which about €35 million for costs payment of the ICMS (“multa de demora”). Ampla appea- incurred in dismantling the photovoltaic plants. EGP asked led the measure (the highest level of administrative courts), for the suits to be dismissed and filed a counter-claim for arguing that the penalties imposed were not due owing to damages of about €40 million. The proceeding is at a pre- the application of a number of amnesties granted between liminary stage. Tax litigation in Brazil 2004 and 2006. On October 25, 2015, Ampla filed the ruling issued by the Supreme Court of Brasilia (published on Octo- ber 2, 2015 and not contested by the tax authorities), which in granting the appeal of Ampla ruled that the change in the deadlines for the payment of the ICMS was unconstitutional. In 1998, Ampla Energia e Serviços SA (Ampla) financed the The amount involved in the dispute at December 31, 2015 acquisition of Coelce with the issue of bonds in the amount was about €66 million. of $350 million (“Fixed Rate Notes” - FRN) subscribed by its Panamanian subsidiary, which had been established to The States of Rio de Janeiro and Ceará issued a number of raise funds abroad. Under the special rules then in force, tax assessments against Ampla Energia e Serviços (for the subject to maintaining the bond until 2008, the interest paid years 1996-1999 and 2007-2012) and Companhia Energética by Ampla to its subsidiary was not subject to withholding do Ceará (for the years 2003, 2004 and 2006-2009), chal- tax in Brazil. lenging the deduction of ICMS in relation to the purchase However, the financial crisis of 1998 forced the Panamanian of certain non-current assets. In March 2015, new asses- company to refinance itself with its Brazilian parent, which sments were issued (for 2010 and for the period from 2012 for that purpose obtained loans from local banks. The tax to July 2014) with a value of about €8 million. The companies 298 Annual Report 2015challenged the assessments, arguing that they correctly de- application of the accounting standards it had adopted. The ducted the tax and asserting that the assets, the purchase Brazilian tax authorities, however, asserted – during an au- of which generated the ICMS, are intended for use in their dit – that the accounting treatment was incorrect and that electricity distribution activities. One of the administrative the effects of the cancellation should have been recognized proceedings ended with a ruling partially in Ampla’s favor, through profit or loss. As a result, the corresponding value with a reduction in the amount due to the tax authorities. (about €202 million) was reclassified as a payment of inco- Ampla has appealed the remainder. me to non-residents and, therefore, subject to withholding The amount involved in the disputes totaled approximately tax of 15%. €47 million at December 31, 2015. On December 2, 2014, the company appealed the initial ru- ling, arguing that its accounting treatment was correct. It On November 4, 2014, the Brazilian tax authorities issued an should be noted that the accounting treatment adopted by assessment against Endesa Brasil SA (now Enel Brasil SA) the company was agreed with the external auditor and also alleging the failure to apply withholding tax to payments of confirmed by a specific legal opinion issued by a local firm allegedly higher dividends to non-resident recipients. specializing in corporate law. More specifically, in 2009, Endesa Brasil, as a result of the The overall amount involved in the dispute at December 31, first-time application of the IFRS-IAS, had cancelled goodwill, 2015 was about €54 million. recognizing the effects in equity, on the basis of the correct 50. Events after the reporting period Integration with Enel Green Power shares they hold in EGP with Enel shares; and > Enel will exchange the shares corresponding to its stake in the spun-off assets with Enel shares, which will be im- mediately cancelled in accordance with Article 2504-ter, On January 11, 2016, the Extraordinary Shareholders’ Mee- paragraph 2, and Article 2506-ter, paragraph 5, of the Ita- ting of Enel SpA (“Enel”) approved the partial non-proportio- lian Civil Code. nal spin-off of Enel Green Power SpA (“EGP”) into Enel (the The Spin-Off will be carried out on the basis of an exchange “Spin-Off”). Prior to the Enel Meeting on the same date, the ratio of 0.486 newly issued Enel shares for each EGP share Extraordinary Shareholders’ Meeting of EGP also approved tendered for exchange, with no cash adjustment. As a re- the Spin-Off. More specifically, the Extraordinary Sharehol- sult, as of the effective date of the Spin-Off, EGP will reduce ders’ Meeting of Enel approved, without amendment or ad- its share capital by an amount equal to the value of the spun- dition, the spin-off project, which envisages: off assets, while Enel will increase its share capital to serve > the assignment by EGP to Enel of the spun-off assets, es- the Spin-Off. Enel will issue up to 770,588,712 new shares sentially represented by: (i) the 100% stake held by EGP – which will rank for dividend pari passu and with a par value in Enel Green Power International, a Dutch holding com- of €1.00 each – to be assigned to minority shareholders of pany that holds investments in companies operating in EGP in accordance with the exchange ratio. the renewable energy sector in North, Central and South The shareholders of EGP that do not approve the Spin-Off America, Europe, South Africa and India; and (ii) the as- will be entitled to exercise the right of withdrawal pursuant sets, liabilities, contracts and other legal relationships as- to Article 2437, paragraph 1, letter a) of the Italian Civil Code sociated with those investments; and (the “Right of Withdrawal”), or the right to have their EGP > the retention by EGP of all remaining assets and liabilities shares purchased by Enel pursuant to Article 2506-bis, pa- other than those that are part of the spun-off assets (and ragraph 4, of the Italian Civil Code (the “Right of Sale”). The thus, essentially, all Italian operations and a small number Right of Withdrawal and the Right of Sale may be exercised of remaining foreign investments). at the unit settlement value for EGP shares, determined in Since the transaction involves a non-proportional spin-off, it accordance with Article 2437-ter, paragraph 3, of the Italian envisages that: Civil Code, which is equal to €1.780 per EGP share. At the > shareholders of EGP other than Enel may exchange all the end of the offer period, those rights had been validly exer- 299 Consolidated financial statementsAnnual Report 2015cised for 16,406,123 ordinary shares of EGP for an aggre- gate amount of €29.2 million. The shares represent around 0.33% of EGP’s share capital. The total value of the shares involved is therefore below the threshold of €300 million, set as a condition for the completion of the Spin-Off. The shares were offered on an optional pre-emption basis to the shareholders of EGP pursuant to Article 2437-quater of the Italian Civil Code, from February 19, 2016 to March 21, 2016 inclusive. Enel announced its intention to fully exercise the option right for the purchase of the shares it is entitled to, as well as to exercise the right of pre-emption for any shares unsold pursuant to Article 2437-quater, paragraph 3, of the Italian Civil Code. The effectiveness of the Right of Withdrawal and the Right of Sale and therefore the settle- ment procedure for the shares, as well as the completion of the offer on an optional pre-emption basis are subject to the completion of the Spin-Off, which is expected to occur by the end of the 1st Quarter of 2016. The Spin-Off will take statutory effect as from the last of the registrations of the Spin-Off instrument with the Rome Company Register; as from the same date, transactions in- volving the spun-off assets will be recognized in the Enel financial statements, with the start of accounting and tax effects. Subject to the condition precedent specified above, the closing of the Spin-Off is scheduled to take place by the end of the 1st Quarter of 2016. Bond buy-back Framework agreement with Bank of China and SINOSURE On January 20, 2016, Enel, Bank of China (a leader in the Chinese banking sector as well as the most internationali- zed and diversified bank in China), and the China Export & Credit Insurance Corporation (“SINOSURE”) signed a non- binding framework agreement to promote the development by Enel Group companies, in particular Enel Green Power, of projects on a worldwide basis with the participation of Chinese companies acting as engineering, procurement and construction contractors and/or suppliers. Under the agre- ement, Bank of China will provide Enel and its subsidiaries with a credit line of up to $1 billion backed by SINOSURE. The framework agreement, which provides the main terms and conditions of the facilities that can be granted, will re- main in force for a period of five years, with the possibility of extension if mutually agreed by the parties. Enel’s new corporate identity On January 26, 2016, the Group’s new corporate identity was unveiled at the headquarters of the Endesa subsidiary in Madrid. On the same occasion, the new logos of Enel Green Power and Endesa were also revealed within the con- On January 14, 2016, within the framework of its program text of the new identity. to optimize its liability structure through active management The new identity represents the pursuit of the “Open Po- of maturities and the cost of funding, Enel launched a non- wer” strategy announced last November in London on the binding voluntary offer to repurchase in cash up to a nominal occasion of Enel’s Capital Markets Day. It is founded on €500,000,000 of two series of bonds previously issued by openness as the keystone of the strategic and operational Enel itself. At the end of the offer period (January 20, 2016) approach of the Group. More specifically, “Open Power” Enel decided to exercise the option envisaged in the offer seeks to: documentation to increase the original nominal amount in- > open access to electricity for more people; volved in the buy-back and so decided to purchase: > open the world of energy to new technology; > a nominal €591,088,000 of bonds maturing on June 20, > open energy management to individuals; 2017, following the application of the allotment ratio of > open power to new uses; 92.5715%; > open up to more partnerships. > a nominal €158,919,000 of bonds maturing on June 12, The new brand strategy transmits the image of Enel as a 2018, following the application of the allotment ratio of modern, open, flexible, responsive utility capable of leading 100%. the energy transition. The Group has introduced a colorful The settlement date of the offer was January 25, 2016. new visual system – which includes the logos – that reflects the flexible and dynamic principles of “Open Power”. The new visual identity and the new logo are composed of a rich 300 Annual Report 2015palette of color to reflect the variety of the energy spectrum, Planners, Landscape Architects and Conservators. The me- the multifaceted nature of a Group present in more than 30 morandum is intended to promote the energy upgrading countries and the growing diversification of the services we of buildings and the architectural quality of the solutions. It offer in a global energy system. also seeks to foster joint policies and actions and propose The brand renewal also included the unveiling of the new legislation to raise the quality of the installation of efficient website enel.com, a site focused on users and access technologies, ensure environmental benefits and dignity via mobile applications. During 2016, the updating of the and, at the same time, generate savings for the public. The Group’s entire online presence will be completed. memorandum sets out a collaborative program to encoura- Start-up program in Israel On February 10, 2016, Enel announced the launch of a techno- logical support program for start-ups in Israel, a country with such a high concentration of innovative tech companies that it boasts its own version of Silicon Valley, called Silicon Wadi. As part of the program, Enel will create a company to sup- port start-ups, acting as a business incubator headquartered in Tel Aviv. It is scheduled to open its doors in May. Each year, up to eight start-ups will be selected from among key local companies, which will be able to benefit from a customized support program in collaboration with Enel. One of the program’s objectives – in addition to developing individual start-ups – is to establish a presence in Israel’s in- novation ecosystem, one of the most advanced in the world, leveraging venture capital funds, universities and a collabo- ration with the Office of the “Chief Scientist“ of Israel’s Mi- nistry of the Economy. The support company with select the start-ups using public tenders for projects based on Enel’s broad range of techno- logical priorities. Once selected the start-ups will have ac- cess to Enel engineers and technology experts, who will help them develop their business and their technology, using company facilities for testing and leveraging the Group’s commercial and technological experience. Each project will receive support for at least six months. Memorandum of understanding between architects and Enel Energia ge and develop approaches to integration and cooperation. Enel Energia will provide Italian architects with permanent ongoing training initiatives – compliant with the rules gover- ning life-long training of the National Council of Architects – in order to keep them up to date on innovation in efficient re- sidential technologies, their characteristics, benefits and key installation and permitting issues. The underlying principle of the agreement is that training and research are priority stra- tegic factors for growth and progress, and so it is necessary to invest in the sector in a manner adequate to the needs of the society and economy of local communities. Enel Green Power wins renewables tender in Peru On February 18, 2016, Enel Green Power (“EGP”), acting through its subsidiary Enel Green Power Perú, was awar- ded the right to sign 20-year energy supply contracts for 126 MW wind power, 180 MW solar PV and 20 MW of hydro capacity following the renewables tender launched by the Peruvian government through the energy regulator OSI- NERGMIN. With 326 MW awarded in the tender, EGP will become by 2018 the main renewable player in Peru and the only company operating plants of three different renewable technologies in the country. EGP will be investing about $400 million in the construc- tion of the renewables facilities, which are expected to enter into operation by 2018, in line with the investments outlined in the company’s current strategic plan. The 20-year supply contracts awarded to EGP provide for the sale of specified volumes of energy generated by the plants. Nazca wind project will be built in the Marcona district, which is located in Peru’s southern coastal area, more specifically in the Ica department, an area blessed by high level of wind resources. This project, with a total installed capacity of 126 MW, once On February 17, 2016, Enel Energia signed a memorandum up and running, will generate about 600 GWh per year, while of understanding with the National Council of Architects, avoiding the emission of around 370,000 metric tons of CO2 301 Consolidated financial statementsAnnual Report 2015into the atmosphere. The 180 MW Rubi photovoltaic project will be built in the Moquegua district, which is located in Peru’s southern area, more specifically in the Moquegua de- partment, an area which enjoys high levels of solar radiation. Once up and running, the solar facility will generate approxi- mately 440 GWh per year, avoiding the emission of around 270,000 metric tons of CO2 into the atmosphere. The hydro project Ayanunga, whose capacity amounts to an approxi- mate 20 MW, will be built in the Monzón district, which is located in Peru’s central area, more specifically in the Huánu- co department. Once up and running, the hydro plant will ge- nerate annually about 140 GWh, while avoiding the emission of around 109,000 metric tons of CO2 into the atmosphere. Disposal of Hydro Dolomiti Enel On February 29, 2016, the sale by the subsidiary Enel Produ- zione entire 49% stake in Hydro Dolomiti Enel Srl (“HDE”) to Fedaia Holdings Sàrl (“Fedaia”), a Luxembourg-based subsidiary of Macquarie European Infrastructure Fund 4 (“MEIF4”), was completed. The price for the sale was fina- lized at €335.4 million, in line with the agreement signed on November 13, 2015 between Enel Produzione and Fe- daia. Enel Produzione’s stake in HDE was sold to the Italian company Fedaia Investments Srl, which was designated as the purchaser by Fedaia and is also controlled by MEIF4. The completion of the transaction follows clearance from the EU Antitrust Authority, which was the final outstanding condi- tion precedent provided for in the sale agreement. 302 Annual Report 2015303 Consolidated financial statementsAnnual Report 2015Declaration of the Chief Executive Officer and the officer responsible for the preparation of corporate financial reports 304 Annual Report 2015Declaration of the Chief Executive Officer and the officer responsible for the preparation of the consolidated financial report of the Enel Group at December 31, 2015, 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 1. The undersigned Francesco Starace and Alberto De Paoli, 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, 2015 and December 31, 2015. 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, 2015: a. have been prepared in compliance with the international accounting standards recognized in the European Union pursuant to Regulation 2002 /1606/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, included in the Annual Report 2015 and accompanied by the consolidated financial statements of the Enel Group at December 31, 2015, 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 22, 2016 Francesco Starace Alberto De Paoli Chief Executive Officer of Enel SpA Officer responsible for the preparation of corporate financial reports Declaration of the Chief Executive Officer and the officer responsible 305 Annual Report 2015Separate financial statements of Enel SpA 306 Annual Report 2015307 Separate financial statements of Enel SpAAnnual Report 2015Financial statements Income statement Euro Revenue Revenue from sales and services Other revenue and income Costs Consumables Services, leases and rentals Personnel Depreciation, amortization and impairment losses Other operating expenses Operating income Income from equity investments Financial income from derivatives Other financial income Financial expense from derivatives Other financial expense Income before taxes Income taxes NET INCOME FOR THE YEAR Notes 4.a 4.b 2015 2014 of which with related parties of which with related parties 237,437,374 237,707,512 244,732,151 244,663,410 7,705,720 6,409,403 920,520 92,914 [Subtotal] 245,143,094 245,652,671 5.a 5.b 5.c 5.d 5.e 1,570,962 1,426,297 199,160,903 72,721,157 184,864,554 57,699,240 175,679,876 327,066,874 119,589,202 543,329,226 (32,288) 23,773,659 272,708 19,256,153 (317,979) [Subtotal] 727,252,274 (482,109,180) 868,465,432 (622,812,761) 6 7 8 7 8 2,024,387,668 2,024,387,668 1,818,272,847 1,818,272,847 3,357,787,018 499,950,787 2,190,314,832 459,596,620 177,252,784 160,415,399 221,643,785 194,191,141 3,024,073,367 2,248,211,467 1,954,373,400 1,169,367,271 1,243,796,482 1,353,550 1,377,093,325 3,142,675 [Subtotal] 1,291,557,621 809,448,441 9 (201,206,058) 1,010,654,499 898,764,739 275,951,978 (282,250,536) 558,202,514 308 Annual Report 2015Statement of comprehensive income for the year Euro Notes 2015 2014 Net income for the year 1,010,654,499 558,202,514 Other comprehensive income recyclable to profit or loss Effective portion of change in the fair value of cash flow hedges Income/(Loss) recognized directly in equity recyclable to profit or loss Other comprehensive income not recyclable to profit or loss 55,191,519 (73,365,668) 55,191,519 (73,365,668) Remeasurements of employee benefit liabilities (6,262,322) 7,140,604 Income/(Loss) recognized directly in equity not recyclable to profit or loss Income/(Loss) recognized directly in equity (6,262,322) 7,140,604 22 48,929,197 (66,225,064) TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 1,059,583,696 491,977,450 309 Separate financial statements of Enel SpAAnnual Report 2015Notes 10 11 12 13 14 15 16 at Dec. 31, 2015 at Dec. 31, 2014 of which with related parties of which with related parties 7,318,430 13,979,194 372,601,084 7,795,187 11,405,854 382,572,824 38,984,404,315 38,754,068,086 2,590,475,105 317,479,879 1,979,171,296 818,817,602 107,178,537 71,448,713 146,490,819 116,989,366 409,088,037 164,342,076 466,782,285 176,864,784 [Subtotal] 42,485,044,702 41,748,286,351 283,402,770 277,741,015 131,944,125 126,901,064 319,245,633 624,614,245 298,808,858 25,645,428 280,273,785 50,482,464 3,402,558,948 3,130,256,153 5,040,376,082 4,222,947,341 459,912,939 421,632,813 243,507,371 208,144,734 17 18 14 19 20 21 5,925,363,202 [Subtotal] 10,689,292,350 53,174,337,052 6,972,042,465 13,292,758,073 55,041,044,424 Balance sheet Euro ASSETS Non-current assets Property, plant and equipment Intangible assets Deferred tax assets Equity investments Derivatives Other non-current financial assets Other non-current assets Current assets Trade receivables Tax receivables Derivatives Other current financial assets Other current assets Cash and cash equivalents TOTAL ASSETS 310 Annual Report 20159,403,357,795 9,113,576,853 6,061,293,373 558,202,514 25,136,430,535 17,287,754,222 301,792,836 16,242,515 251,979,935 Euro Notes LIABILITIES AND SHAREHOLDERS’ EQUITY at Dec. 31, 2015 at Dec. 31, 2014 of which with related parties of which with related parties Shareholders’ equity Share capital Reserves Retained earnings/(Loss carried forward) Profit for the period 9,403,357,795 9,162,506,050 5,303,025,796 1,010,654,499 TOTAL SHAREHOLDERS’ EQUITY 22 24,879,544,140 Non-current liabilities Long-term borrowings Employee benefits Provisions for risks and charges Deferred tax liabilities Derivatives Other non-current liabilities Current liabilities Short-term borrowings Current portion of long-term borrowings Trade payables Derivatives Other current financial liabilities Other current liabilities 14,502,714,348 290,995,396 53,892,853 290,738,493 23 24 25 12 14 26 2,716,865,899 1,364,781,681 2,483,607,608 469,314,078 243,205,378 242,742,934 286,974,494 286,925,885 [Subtotal] 18,098,412,367 20,628,351,610 23 23 27 14 28 30 4,914,568,035 3,243,027,360 4,745,815,106 4,319,403,537 3,061,764,326 2,362,593,688 164,019,523 59,244,803 138,773,087 54,531,005 366,838,872 275,854,022 359,151,436 233,714,323 642,802,743 83,534,943 694,402,099 54,139,432 1,046,387,046 354,456,409 975,526,863 396,492,507 TOTAL LIABILITIES TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY [Subtotal] 10,196,380,545 28,294,792,912 9,276,262,279 29,904,613,889 53,174,337,052 55,041,044,424 311 Separate financial statements of Enel SpAAnnual Report 2015Statement of changes in shareholders’ equity Euro At January 1, 2014 Other changes Allocation of 2013 net income: - dividends - legal reserve - retaining earnings Comprehensive income for the year: - income/(loss) recognized directly in equity - net income for the year At December 31, 2014 At January 1, 2015 Other changes Allocation of 2014 net income: - dividends - legal reserve - retaining earnings Comprehensive income for the year: - income/(loss) recognized directly in equity - net income for the year Share capital and reserves (note 22) Share capital Share premium reserve Legal reserve Reserve pursuant to Law 292/1993 net employee benefit measurement of financial Retained earnings/(Loss Total shareholders’ liabilities/(assets) instruments carried forward) Net income for the year 9,403,357,795 5,292,076,658 1,880,671,559 2,215,444,500 68,241,934 (16,808,984) (259,825,692) 5,911,368,935 1,372,360,952 25,866,887,657 Reserve from remeasurement of Reserve from - - - - - - - - - - - - - - - - - - - - - - - - 9,403,357,795 9,403,357,795 5,292,076,658 5,292,076,658 1,880,671,559 1,880,671,559 2,215,444,500 2,215,444,500 68,243,876 68,243,876 (9,668,380) (9,668,380) (333,191,360) (333,191,360) 6,061,293,373 6,061,293,373 - - - - - - - - - - - - - - - - - - - - - - - - Other sundry reserves 1,942 - - - - - - - - - - - 7,140,604 (73,365,668) - - - - - - - - - - (1,222,436,514) (1,222,436,514) 149,924,438 (149,924,438) 558,202,514 558,202,514 558,202,514 (66,225,064) 558,202,514 25,136,430,535 25,136,430,535 (846,302,202) (470,167,889) (1,316,470,091) 88,034,625 (88,034,625) equity 1,942 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (6,262,322) 55,191,519 1,010,654,499 1,010,654,499 48,929,197 Total at December 31, 2015 9,403,357,795 5,292,076,658 1,880,671,559 2,215,444,500 68,243,876 (15,930,702) (277,999,841) 5,303,025,796 1,010,654,499 24,879,544,140 312 Annual Report 2015Euro At January 1, 2014 Other changes - dividends - legal reserve - retaining earnings Allocation of 2013 net income: Comprehensive income for the year: - income/(loss) recognized directly in equity - net income for the year At December 31, 2014 At January 1, 2015 Other changes Allocation of 2014 net income: - dividends - legal reserve - retaining earnings Comprehensive income for the year: - income/(loss) recognized directly in equity - net income for the year 9,403,357,795 9,403,357,795 5,292,076,658 5,292,076,658 1,880,671,559 1,880,671,559 2,215,444,500 2,215,444,500 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Share capital and reserves (note 22) Share capital Share premium reserve Legal reserve 292/1993 Reserve pursuant to Law Other sundry reserves Reserve from remeasurement of net employee benefit liabilities/(assets) Reserve from measurement of financial instruments Retained earnings/(Loss carried forward) Net income for the year Total shareholders’ equity 9,403,357,795 5,292,076,658 1,880,671,559 2,215,444,500 68,241,934 (16,808,984) (259,825,692) 5,911,368,935 1,372,360,952 25,866,887,657 1,942 - - - - - 68,243,876 68,243,876 - - - - - - - - - - - - - - - 1,942 (1,222,436,514) (1,222,436,514) - - - 149,924,438 (149,924,438) - - - 7,140,604 (73,365,668) - (9,668,380) (9,668,380) - (333,191,360) (333,191,360) - - - - - - - - - - 6,061,293,373 6,061,293,373 - - 558,202,514 558,202,514 558,202,514 - (66,225,064) 558,202,514 25,136,430,535 25,136,430,535 - (846,302,202) (470,167,889) (1,316,470,091) - - 88,034,625 (88,034,625) - - (6,262,322) 55,191,519 - - - - - 48,929,197 1,010,654,499 1,010,654,499 Total at December 31, 2015 9,403,357,795 5,292,076,658 1,880,671,559 2,215,444,500 68,243,876 (15,930,702) (277,999,841) 5,303,025,796 1,010,654,499 24,879,544,140 313 Separate financial statements of Enel SpAAnnual Report 2015Statement of cash flows Euro Notes Income before taxes Adjustments for: Amortization and impairment losses of intangible assets and property, plant and equipment Exchange rate adjustments of foreign currency assets and liabilities Accruals to provisions Dividends from subsidiaries, associates and other companies 2015 of which with related parties 2014 of which with related parties 809,448,441 275,951,978 5.d 12,603,102 11,703,869 274,383,043 49,937,771 287,123,443 24,534,294 6 (2,024,387,668) (2,024,387,668) (1,818,272,847) (1,818,272,847) Net financial (income)/expense 452,404,251 1,589,198,831 623,640,479 524,292,099 (Gains)/Losses from disposals and other non- monetary items Cash flows from operating activities before changes in net current assets Increase/(Decrease) in provisions 314,602,481 535,184,427 (111,008,579) (28,744,537) (60,134,357) (55,266,390) (Increase)/Decrease in trade receivables 17 (151,458,645) (150,839,951) 84,189,474 82,062,633 (Increase)/Decrease in financial and non-financial assets/liabilities 402,341,325 (414,927,710) 54,102,343 (233,456,295) Increase/(Decrease) in trade payables 27 25,246,436 4,713,798 (73,343,882) (27,896,752) Interest income and other financial income collected 1,778,925,604 827,993,050 774,010,519 470,312,293 Interest expense and other financial expense paid (2,528,964,520) (764,118,403) (1,369,270,987) (148,092,677) Dividends from subsidiaries, associates and other companies Income taxes paid (consolidated taxation mechanism) Cash flows from operating activities (a) Investments in property, plant and equipment and intangible assets Disposals of property, plant and equipment and intangible assets Investments in entities Disposals of equity investments Cash flows from investing/disinvesting activities (b) Financial debt (new long-term borrowing) Financial debt (repayments and other net changes) Net change in long-term financial payables/ (receivables) Net change in short-term financial payables/ (receivables) Dividends paid Cash flows from financing activities (c) Increase/(Decrease) in cash and cash equivalents (a+b+c) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 6 2,024,387,668 2,024,387,668 1,818,272,847 1,818,272,847 (348,876,817) 1,061,847,935 (246,793,145) 925,766,422 10-11 (14,699,685) (14,419,589) (10,940,364) (10,406,565) 10-11 - - 13 13 23 23 (546,800,000) (546,800,000) (200,000) (200,000) 1,861,291 1,861,291 - (559,638,394) - (2,394,106,607) (11,140,364) 1,602,264,514 (1,103,409,596) (346,634,658) 45,540,653 (974,482,447) 2,508,323,348 (15,837,605) 4,632,587,974 2,682,474,947 22 (1,316,470,887) (1,548,888,804) (1,222,435,833) 2,934,524,612 (1,046,679,263) 3,849,150,670 21 21 6,972,042,465 5,925,363,202 3,122,891,795 6,972,042,465 314 Annual Report 2015Notes to the separate financial statements 1 Form and content of the financial statements Company, directly and through Enel Insurance NV, provides insurance coverage. As the Parent Company, Enel SpA has prepared the conso- lidated financial statements of the Enel Group for the year ending December 31, 2015, which form an integral part of this Annual Report pursuant to Article 154-ter, paragraph 1, of the Consolidated Law on Financial Intermediation (Legi- Enel SpA is a corporation (società per azioni) that operates in slative Decree 58 of February 24, 1998). the electricity and gas sector and has its registered office in Viale Regina Margherita 137, Rome, Italy. On March 22, 2016, the Board of Directors authorized the pu- In its capacity as holding company, Enel SpA sets the strategic blication of these financial statements at December 31, 2015. objectives for the Group and its subsidiaries and coordinates These financial statements have undergone statutory audi- their activities. The activities that Enel SpA performs in respect ting by Reconta Ernst & Young SpA. of the other Group companies as part of its management and coordination function, including with regard to the Company’s organizational structure, can be summarized as follows: Basis of presentation > Holding company functions, associated with the coordi- The separate financial statements for the year ended De- nation of governance processes at the Group level: cember 31, 2015 have been prepared in accordance with - Administration, Finance and Control; international accounting standards (International Accounting - Human Resources and Organization; Standards - IAS and International Financial Reporting Stan- - Communications; - Legal and Corporate Affairs; - Innovation and Sustainability; - European Affairs; - Audit. dards - IFRS) issued by the International Accounting Stan- dards Board (IASB), the interpretations of the International Fi- nancial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC), recognized in the European Union pursuant to Regulation 2002/1606/EC and in effect as of the close of the year. All of these standards and > Global business line functions, which are responsible interpretations are hereinafter referred to as the “IFRS-EU”. for coordination and development of their business in all The financial statements have also been prepared in confor- the geographical areas in which the Group operates: mity with measures issued in implementation of Article 9, - Global Infrastructure and Networks; paragraph 3, of Legislative Decree 38 of February 28, 2005. - Global Generation. The financial statements consist of the income statement, the statement of comprehensive income, the balance sheet, > Global service functions, which are responsible at the the statement of changes in shareholders’ equity and the sta- Group level for coordinating all information technology tement of cash flows and the related notes. and purchasing activities: - Global Purchasing; - Global ICT. The assets and liabilities reported in the balance sheet are clas- sified on a “current/non-current basis”, with separate reporting of assets held for sale and liabilities included in disposal groups held for sale, if any. Current assets, which include cash and cash Enel SpA performs, both directly and through the subsidia- equivalents, are assets that are intended to be realized, sold or ry Enel Finance International NV, a centralized treasury fun- consumed during the normal operating cycle of the Company ction for the Group (with the exception of the Endesa and or in the 12 months following the close of the financial year; Enersis Groups), thereby ensuring that the companies have current liabilities are liabilities that are expected to be settled access to the money and capital markets. Furthermore, the during the normal operating cycle of the Company or within the 315 Separate financial statements of Enel SpAAnnual Report 201512 months following the close of the financial year. rement criteria” for the consolidated financial statements. The income statement is classified on the basis of the nature The financial statements have been prepared on a going of costs, with separate reporting of net income/(loss) from concern basis using the cost method, with the exception of continuing operations and net income/(loss) from any discon- items measured at fair value in accordance with IFRS, as ex- tinued operations. plained in the measurement bases applied to each individual The indirect method is used for the statement of cash flows, item in the consolidated financial statements. with separate reporting of any cash flows by operating, inve- The financial statements are presented in euro, the functional sting and financing activities associated with discontinued ope- currency of the Company, and the figures shown in the notes rations, if any. are reported in millions of euro unless stated otherwise. The income statement, the balance sheet and the statement of The financial statements provide comparative information in cash flows report transactions with related parties, the definition respect of the previous period. of which is given in the section “Accounting policies and measu- 2 Accounting policies and measurement criteria The accounting policies and measurement criteria are the same, where applicable, as those adopted in the prepara- tion of the consolidated financial statements, to which the reader should refer for more information, with the exception of those regarding equity investments in subsidiaries and associated companies. Subsidiaries are all entities over which Enel SpA has control. The Company controls an entity when it is exposed to or has rights to variable returns deriving from its involvement and has the ability, through the exercise of its power over the investee, to affect its returns. Power is defined as ha- ving the concrete ability to direct the significant activities of the entity by virtue of the existence of substantive rights. Associates comprise those entities in which Enel SpA has a significant influence. Significant influence is the power to parti- cipate in the financial and operating policy decisions of investe- es but not exercise control or joint control over those entities. Equity investments in subsidiaries and associates are me- asured at cost. Cost is adjusted for any impairment losses, which are reversed where the reasons for their recognition no longer obtain. The carrying amount resulting from the reversal may not exceed the original cost. Where the loss pertaining to Enel SpA exceeds the carrying amount of the investment and the Company is obligated to perform the legal or constructive obligations of the investee or in any event to cover its losses, the excess with respect to the carrying amount is recognized in liabilities in the pro- vision for risks and charges. In the case of a disposal, without economic substance, of an investment to an entity under common control, any diffe- rence between the consideration received and the carrying amount of the investment is recognized in equity. Dividends from equity investments are recognized in profit or loss when the shareholders’ right to receive them is established. Dividends and interim dividends payable to third parties are recognized as changes in equity at the date they are appro- ved by the Shareholders’ Meeting and the Board of Direc- tors, respectively. 3 Recent accounting standards For information on recent accounting standards, please refer to the corresponding section of the notes to the consolidated financial statements. 316 Annual Report 2015Information on the Income Statement Revenue 4.a Revenue from sales and services - €237 million “Revenue from sales and services” is comprised of: Millions of euro Services Group companies Non-Group counterparties Total revenue from sales and services 2015 237 - 237 2014 245 - 245 Change (8) - (8) Revenue from “services” amounted to €237 million and es- to certain Group companies, partly offset by an increase in sentially regard services provided by the Company to subsi- revenue from communication activities. diaries as part of its management and coordination function “Revenue from sales and services” breaks down by geo- and the rebilling of sundry expenses incurred by it but per- graphical area as follows: taining to the subsidiaries. That revenue, which is affected by > €179 million in Italy (€206 million in 2014); the new organizational structure of the Group and the new > €30 million in the European Union (€34 million in 2014); remuneration system of the Parent Company, decreased by > €8 million in non-EU Europe (€5 million in 2014); €8 million compared with the previous year, mainly due to a > €20 million in other countries (none in 2014). reduction in management fees and technical fees charged 4.b Other revenue and income - €8 million “Other revenue and income” came to €8 million in 2015, mainly regarding seconded personnel, up €7 million from the previous year (€1 million in 2014). Costs 5.a Consumables - €1 million Purchases of “consumables” came to €1 million, unchanged from the previous year. They comprise purchases from non- Group suppliers of consumable materials of various kinds. 5.b Services, leases and rentals - €199 million Costs for “services, leases and rentals” break down as follows. Millions of euro Services Leases and rentals Total services, leases and rentals 2015 182 17 199 2014 170 15 185 Change 12 2 14 317 Separate financial statements of Enel SpAAnnual Report 2015Costs for “services”, totaling €182 million, concerned costs by €13 million, mainly due to higher costs incurred in respect for services provided by third parties in the amount of €124 of IT services and training provided by the subsidiary Enel million (€126 million in 2014) and services provided by Group Italia Srl, and the increase in costs with Enel Iberoamérica companies totaling €57 million (€44 million in 2014). More SL for seconded personnel performing global service acti- specifically, the decrease in costs for services provided by vities. third parties, equal to €2 million, is mainly attributable to Costs for “leases and rentals” mainly comprise costs for the decline in advertising, communication and print cam- leasing assets from the subsidiary Enel Servizi Srl. They paign expenses as a consequence of the new organizational increased by €1 million compared with the previous year, structure adopted by the Group, which transferred part of essentially due to higher costs in respect of third parties for communication activities from the holding company to the vehicle leases and costs for rental and leasing of buildings Countries. owned by the subsidiary Enel Italia Srl. Costs for services rendered by Group companies increased 5.c Personnel - €176 million Personnel costs break down as follows. Millions of euro Wages and salaries Social security costs Post-employment benefits Other long-term benefits Other costs and other incentive plans Total Notes 24 24 25 2015 97 30 (4) 11 42 176 2014 Change 71 24 5 9 11 120 26 6 (9) 2 31 56 “Personnel” costs amounted to €176 million, an increase of The item “post-employment benefits” includes cost for defi- €56 million compared with 2014, essentially the result of the ned benefit plans and for defined contribution plans. In more rise in “wages and salaries” and the related social security detail, costs for defined contribution plans amounted to €5 costs (totaling €32 million, essentially attributable to the in- million for 2015, an increase of €2 million compared with crease in the workforce), the increase in costs for the new 2014 as a result of the expansion of the workforce. agreements for voluntary termination benefits under Article 4 of the Fornero Act (€31 million), and a decrease in other costs The table below shows the average number of employees connected with the termination of the collective rules on elec- by category compared with the previous year, and the actual tricity discounts, with the extinguishment and reversal of the number of employees at December 31, 2015. associated provision as of December 31, 2015 (€10 million). Average number Headcount 2015 212 549 337 1,098 2014 100 384 306 790 Change at Dec. 31, 2015 112 165 31 308 211 548 339 1,098 Senior managers Middle managers Office staff Total 318 Annual Report 20155.d Depreciation, amortization and impairment losses - €327 million Millions of euro Depreciation Amortization Impairment losses Total 2015 3 9 315 327 2014 3 9 531 543 Change - - (216) (216) “Depreciation, amortization and impairment losses”, Enel Trade SpA (€250 million) and Enel Ingegneria e Ricerca amounting to €327 million (€543 million in 2014), decreased SpA (€65 million), while in 2014 they included impairment by €216 million compared with the previous year. More spe- of €531 million on the investments in Enel Produzione SpA cifically, amortization and depreciation totaled €12 million, (€512 million) and Enel Ingegneria e Ricerca SpA (€19 mil- unchanged compared with 2014. lion). In 2015, impairment losses amounted to €315 million, re- For more information on the criteria adopted in determining flecting the impairment recognized on the investments in those losses, please see note 13 below. 5.e Other operating expenses - €24 million “Other operating expenses” amounted to €24 million, up €5 provision was established as at December 31, 2015, following million on the previous year, mainly due to the provision of €3 the termination, as from January 1, 2016, of the agreement on million for the compensation to be following the elimination rate subsidies granted to retired employees and their survivors. of the electricity discount benefit for retired employees. The Operating income amounted to a negative €482 million, an improvement of €141 million compared with the pre- vious year, essentially due to the effect of the recognition in 2014 of greater impairment losses on equity investments in the amount of €216 million and greater higher costs in 2015 for personnel (€56 million) and rentals and leases (€14 million). 6. Income from equity investments - €2,024 million Income from equity investments, amounting to €2,024 mil- (€1,545 million) and the special dividend distributed by Enel lion, entirely collected in 2015, regards dividends approved by Iberoamérica SL (€479 million). the shareholders’ meetings of the subsidiaries and associates Millions of euro Dividends from subsidiaries and associates Enel Produzione SpA Enel Distribuzione SpA Enelpower SpA Enel.Factor SpA Enel Italia Srl Enel Energia SpA Enel Servizio Elettrico SpA Enel Green Power SpA Enel Iberoamérica SL CESI SpA Dividends from other entities Emittenti Titoli SpA Total 2015 2,023 - 1,245 - - 9 159 - 109 500 1 1 1 2014 1,818 223 1,373 1 3 7 16 85 109 - 1 - - 2,024 1,818 Change 205 (223) (128) (1) (3) 2 143 (85) - 500 - 1 1 206 319 Separate financial statements of Enel SpAAnnual Report 2015 7. Net financial income/(expense) from derivatives - €334 million This item breaks down as follows. Millions of euro Income from derivatives - on behalf of Group companies: income from derivatives at fair value through profit or loss - on behalf of Enel SpA: - income from fair value hedge derivatives - income from cash flow hedge derivatives - income from derivatives at fair value through profit or loss Total income from derivatives Expense on derivatives - on behalf of Group companies: - expense on derivatives at fair value through profit or loss - on behalf of Enel SpA: - expense on fair value hedge derivatives - expense on cash flow hedge derivatives - expense on derivatives at fair value through profit or loss Total expense from derivatives TOTAL NET FINANCIAL INCOME/(EXPENSE) FROM DERIVATIVES 2015 2,813 2,813 545 33 435 77 3,358 2,824 2,824 200 27 102 71 3,024 334 2014 1,726 1,726 464 39 415 10 2,190 1,737 1,737 217 - 167 50 1,954 236 Change 1,087 1,087 81 (6) 20 67 1,168 1,087 1,087 (17) 27 (65) 21 1,070 98 Net income from derivatives amounted to €334 million (€236 loss (€46 million) and higher net expense on fair value hedge million in 2014) and essentially reflects the net income from derivatives (€33 million), all entered into on behalf of Enel derivatives entered into on behalf of Enel SpA. SpA on both interest rates and exchange rates. The increase of €98 million over 2014 reflected the combi- ned effect of a decrease in net financial expense on cash For more details on derivatives, please see note 31 “Finan- flow hedge derivatives (€85 million), an increase in net fi- cial instruments” and note 33 “Derivatives and hedge ac- nancial income on derivatives at fair value through profit or counting”. 320 Annual Report 20158. Other net financial income/(expense) - €(1,066) million This item breaks down as follows. Millions of euro Other financial income Interest income at the effective interest rate Interest income at the effective interest rate on long-term financial assets Interest income at the effective interest rate on short-term financial assets Total Positive exchange rate differences Income on fair value hedges - post-hedge adjustment Other income Total other financial income Other financial expense Interest expense Interest expense on bank borrowings Interest expense on bonds Interest expense on other borrowings Total Negative exchange rate differences Interest expense on post-employment and other employee benefits Fair value hedge charges - adjustment of hedged items Other financial expense Total other financial expense TOTAL OTHER NET FINANCIAL INCOME/(EXPENSE) 2015 2014 Change 5 155 160 5 4 8 177 25 930 1 956 279 6 - 2 1,243 (1,066) 6 206 212 10 - - 222 67 968 3 1,038 293 9 26 11 1,377 (1,155) (1) (51) (52) (5) 4 8 (45) (42) (38) (2) (82) (14) (3) (26) (9) (134) 89 Other net financial expense amounted to €1,066 million, (totaling €160 million). The decrease in net financial expense mainly reflecting the interest expense on borrowings (€956 of €89 million over 2014 was primarily caused by a reduction million) and negative exchange rate differences (€279 mil- in interest expense on financial debt (€82 million) and mainly lion), partly offset by short and long-term interest income reflects changes in debt during the year. 9. Income taxes - €(201) million Millions of euro Current taxes Deferred tax income Deferred tax expense Total 2015 (197) (2) (2) (201) 2014 (299) 8 9 (282) Change 102 (10) (11) 81 Income taxes for 2015 showed a creditor position of €201 received from the subsidiaries and the deductibility of Enel million, mainly as a result in the reduction in the tax base SpA’s interest expense for the Group’s consolidated taxation for the corporate income tax (IRES) compared with income mechanism in accordance with corporate income tax law before taxes due to the exclusion of 95% of the dividends (Article 96 of the Uniform Income Tax Code). 321 Separate financial statements of Enel SpAAnnual Report 2015The difference of €81 million on the previous year reflected ticle 87 of the Uniform Income Tax Code. both the difference between the two years in the amount of dividends received from subsidiaries and the writedown The following table reconciles the theoretical tax rate with of equity investments meeting the requirements under Ar- the effective tax rate. Millions of euro Income before taxes Theoretical corporate income taxes (IRES) (27.5%) Tax decreases: - dividends from equity investments - prior-year writedowns - other Tax increases: - writedowns for the year - accruals to provisions - prior-year expense - other Total current income taxes (IRES) IRAP Difference on estimated income taxes from prior years Total deferred tax items - of which impact of change in tax rate - of which changes for the year - of which changes in estimates for previous years TOTAL INCOME TAXES 2015 810 223 (529) (10) (11) 86 17 2 32 (190) - (7) (4) 7 (11) - (201) % rate 27.5% -65.3% -1.2% -1.4% 10.6% 2.1% 0.2% 4.0% -23.5% - -0.9% -0.5% % rate 27.5% -172.1% -5.1% -8.0% 55.1% 3.6% 1.1% 1.1% -96.7% - -11.6% 6.2% 2014 276 76 (475) (14) (22) 152 10 3 3 (267) - (32) 17 - 9 8 -24.8% (282) -102.2% 322 Annual Report 2015 Information on the Balance Sheet Assets 10. Property, plant and equipment - €7 million Developments in property, plant and equipment for 2014 and 2015 are set out in the table below. Millions of euro Cost Accumulated depreciation Balance at Dec. 31, 2013 Capital expenditure Depreciation Total changes Cost Accumulated depreciation Balance at Dec. 31, 2014 Capital expenditure Depreciation Total changes Cost Accumulated depreciation Balance at Dec. 31, 2015 Land Buildings Plant and machinery Industrial and commercial equipment Other assets Leasehold improvements 1 - 1 - - - 1 - 1 - - - 1 - 1 3 (2) 1 - - - 3 (2) 1 - - - 3 (2) 1 3 (3) - - - - 3 (3) - - - - 3 (3) - 5 (5) - - - - 5 (5) - - - - 5 (5) - 19 (18) 1 - - - 19 (18) 1 - - - 19 (18) 1 31 (25) 6 2 (3) (1) 33 Total 62 (53) 9 2 (3) (1) 64 (28) (56) 5 2 (3) (1) 35 (31) 4 8 2 (3) (1) 66 (59) 7 “Property, plant and equipment” totaled €7 million, a decre- the period (€3 million). “Leasehold improvements” mainly ase of €1 million compared with the previous year, essential- regard the renovation and safety work on a number of buil- ly attributable to the negative net balance between capital dings housing Enel SpA’s headquarters. expenditure during the year (€2 million) and depreciation for 323 Separate financial statements of Enel SpAAnnual Report 201511. Intangible assets - €14 million “Intangible assets”, all of which have a finite useful life, break down as follows. Millions of euro Balance at Dec. 31, 2013 Capital expenditure Assets entering service Amortization Total changes Balance at Dec. 31, 2014 Capital expenditure Assets entering service Amortization Total changes Balance at Dec. 31, 2015 Industrial patents and intellectual property rights Other intangible assets under development Total 10 - 9 (9) - 10 - 13 (9) 4 14 1 9 (9) - - 1 13 (14) - (1) - 11 9 - (9) - 11 13 (1) (9) 3 14 “Industrial patents and intellectual property rights” relate with the previous year, essentially attributable to assets en- mainly to costs incurred in purchasing software as well as tering service (€13 million) and amortization for the year (€9 related evolutionary maintenance. Amortization is calculated million). Assets entering service essentially relate to softwa- on a straight-line basis over the item’s residual useful life re systems to manage consolidated and global reporting, (three years on average). risk and centralized finance systems. The amount of the item increased by €4 million as compared 324 Annual Report 201512. Deferred tax assets and liabilities - €373 million and €291 million Changes in “deferred tax assets” and “deferred tax liabilities”, grouped by type of timing difference, are shown below. Millions of euro Deferred tax assets Nature of temporary differences: - accruals to provisions for risks and charges and impairment losses - derivatives - other items Total Deferred tax liabilities Nature of temporary differences: - measurement of financial instruments - other items Total Excess net deferred IRES tax assets after any offsetting Excess net deferred IRAP tax liabilities after any offsetting at Dec. 31, 2014 Total Increase/(Decrease) taken to income statement Increase/(Decrease) taken to equity Other changes at Dec. 31, 2015 Total 28 314 41 383 243 9 252 172 (41) 1 - 1 2 - (2) (2) - (13) 1 (12) 41 - 41 (21) - 21 - - - - 8 301 64 373 284 7 291 136 (54) “Deferred tax assets” totaled €373 million (€383 million at The amount of deferred tax assets and liabilities was deter- December 31, 2014), a decrease of €10 million compared mined by applying the rates of 27.5% for IRES for provisions with the previous year, mainly attributable to lower deferred and reversals expected for 2016, while for provisions that re- tax assets in respect of the fair value measurement of cash fer to periods after 2016, as provided for by law, the rate was flow hedges (€13 million) and to an increase in deferred tax adjusted to 24.0% (the effect of the change in the rate led assets associated with accruals to provisions for risks and to the reversal of a total of €10 million from equity and of €7 charges and other items (€3 million, of which €2 million re- million from profit or loss). In addition, deferred tax liabilities cognized in profit or loss and €1 million in equity). only also included the rate of 5.57% for IRAP (taking account “Deferred tax liabilities” totaled €291 million, an increase of of regional surtaxes). The amount of deferred tax assets was €39 million (€252 million at December 31, 2014), due largely determined without applying IRAP as in the coming years to deferred taxes in respect of the fair value measurement we do not expect to earn income subject to IRAP sufficient of cash flow hedges (€41 million). to reverse the temporary deductible differences. 325 Separate financial statements of Enel SpAAnnual Report 201513. Equity investments - €38,984 million The table below shows the changes during the year for each and end of the year, as well as the list of investments held in investment, with the corresponding values at the beginning subsidiaries, associates and other companies. Millions of euro Original cost (Writedowns)/ Revaluations Other changes - IFRIC 11 and IFRS 2 at Dec. 31, 2014 Carrying amount % holding Capital contributions and loss coverage Acquisitions/ (Disposals)/ (Settlements)/ (Repayments) Formation/ Contributions (+/-)/Mergers (+/-)/ Changes in 2015 A) Subsidiaries Enel Produzione SpA 4,892 (512) 4,384 100.0 46 4,054 110 901 3,640 8,498 189 - 1,321 18,300 18 5 525 70 1,414 - (19) - - - - (4,473) (159) - (8) - - - (41) (54) - - 4 1 2 - 1 2 - - - - - - - 3 - - - 28 4,056 110 902 3,642 4,025 30 - 1,313 18,300 18 5 487 16 1,414 - 43,983 (5,266) 13 38,730 23 23 5 1 - 6 - - (5) - - (5) - - - - - - 23 23 - 1 - 1 100.0 100.0 100.0 100.0 68.3 100.0 100.0 - 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 42.7 4.3 10.0 1.0 - 40 - - 500 - - - - - - - - - - - 2 542 - - - - - - - - - - - - - - - - - - - - - - (2) (2) - - - - - - Enel Ingegneria e Ricerca SpA Enel Distribuzione SpA Enel Servizio Elettrico SpA Enel Trade SpA Enel Green Power SpA Enel Investment Holding BV Enelpower SpA Enel Open Fiber SpA Enel Energia SpA Enel Iberoamérica SL Enel.Factor SpA Enel Sole Srl Enel Italia Srl Enel.Newhydro Srl Enel Finance International NV Enel Oil & Gas SpA Total C) Associates CESI SpA Total D) Other companies Elcogas SA Emittenti Titoli SpA Idrosicilia SpA Total TOTAL 326 44,012 (5,271) 13 38,754 542 (2) (315) 230 44,557 (5,586) 13 38,984 (Demergers) Value adjustments Balance Original cost Revaluations IFRS 2 amount % holding Other changes - (Writedowns)/ IFRIC 11 and Carrying at Dec. 31, 2015 4,384 100.0 - - - - - - - - - - - - - - - - 5 5 - - - - - - 5 (65) (25) (250) 250 5 - - - - - - - - - - - - - - - - - - - - 4,892 86 4,054 110 1,401 3,640 8,498 189 5 1,321 18,300 18 5 525 70 1,414 - 44,528 23 23 5 1 - 6 (512) (84) (250) (4,473) (159) (8) (41) (54) - - - - - - - - - - - - - (5) (5) 4 1 2 - 1 2 3 - - - - - - - - - - - - - - - - 3 4,056 110 1,152 3,642 4,025 30 5 1,313 18,300 18 5 487 16 23 23 - 1 - 1 100.0 100.0 100.0 100.0 68.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 42.7 4.3 10.0 1.0 (315) 230 (5,581) 13 38,960 1,414 100.0 - - - - - - - - - - - - - - - - - - - - - - - Annual Report 2015Other changes (Writedowns)/ - IFRIC 11 and Carrying amount at Dec. 31, 2014 Enel Produzione SpA 4,892 (512) 4,384 100.0 A) Subsidiaries Enel Ingegneria e Ricerca SpA Enel Distribuzione SpA Enel Servizio Elettrico SpA Enel Trade SpA Enel Green Power SpA Enel Investment Holding BV Enelpower SpA Enel Open Fiber SpA Enel Energia SpA Enel Iberoamérica SL Enel.Factor SpA Enel Sole Srl Enel Italia Srl Enel.Newhydro Srl Enel Finance International NV Enel Oil & Gas SpA Total C) Associates CESI SpA Total D) Other companies Elcogas SA Emittenti Titoli SpA Idrosicilia SpA Total TOTAL 46 4,054 110 901 3,640 8,498 189 - 1,321 18,300 18 5 525 70 1,414 - 23 23 5 1 - 6 (19) (4,473) (159) (8) (41) (54) - - - - - - - - - - - - - - (5) (5) 4 1 2 - 1 2 3 - - - - - - - - - - - - - - - - 28 4,056 110 902 3,642 4,025 30 - 1,313 18,300 18 5 487 16 1,414 - 23 23 1 - - 1 100.0 100.0 100.0 100.0 68.3 100.0 100.0 - 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 42.7 4.3 10.0 1.0 40 500 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 43,983 (5,266) 13 38,730 2 542 (2) (2) 44,012 (5,271) 13 38,754 542 (2) Millions of euro Original cost Revaluations IFRS 2 % holding coverage (Repayments) (Demergers) Value adjustments Balance Original cost Changes in 2015 Capital Acquisitions/ contributions (Disposals)/ and loss (Settlements)/ Formation/ Contributions (+/-)/Mergers (+/-)/ - - - - - - - - 5 - - - - - - - - 5 - - - - - - 5 Other changes - IFRIC 11 and IFRS 2 (Writedowns)/ Revaluations at Dec. 31, 2015 (512) (84) - - (250) - (4,473) (159) - (8) - - - (41) (54) - - 4 1 2 - 1 2 - - - - - - - 3 - - - Carrying amount % holding 4,384 100.0 3 4,056 110 1,152 3,642 4,025 30 5 1,313 18,300 18 5 487 16 100.0 100.0 100.0 100.0 68.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1,414 100.0 - - (5,581) 13 38,960 - - (5) - - (5) - - - - - - 42.7 4.3 10.0 1.0 23 23 - 1 - 1 - (65) - - (250) - - - - - - - - - - - - - (25) - - 250 - - - 5 - - - - - - - - (315) 230 - - - - - - - - - - - - 4,892 86 4,054 110 1,401 3,640 8,498 189 5 1,321 18,300 18 5 525 70 1,414 - 44,528 23 23 5 1 - 6 (315) 230 44,557 (5,586) 13 38,984 327 Separate financial statements of Enel SpAAnnual Report 2015The table below reports changes in equity investments in 2015. Millions of euro Increases Recapitalization of Enel Oil & Gas SpA Recapitalization of Enel Trade SpA Recapitalization of Enel Ingegneria e Ricerca SpA Formation of Enel Open Fiber SpA Total Decreases Disposal to Enel Trade SpA of interest held in Enel Oil & Gas SpA Writedown of equity investment in Enel Ingegneria e Ricerca SpA Writedown of equity investment in Enel Trade SpA Total NET CHANGE 2 500 40 5 547 (2) (65) (250) (317) 230 The net increase in the value of equity investments in subsi- ultra-wide band fiber optic electronic communications net- diaries, associates and other companies, equal to €230 mil- works; lion, is attributable to: > the writedown of €65 million on the interest held in Enel > the recapitalization of Enel Oil & Gas SpA in January in the Ingegneria e Ricerca SpA to take account of losses caused amount of €2 million, allocated to “Other reserves”, in order by the contraction in operating activities due to a reduction to enable the company to meet its operational and financial in the Group’s investments in conventional generation and requirements. In November, the investment was sold to the provision associated with the union agreement on the Enel Trade SpA for €2 million, corresponding to the value of application of Article 4 of Law 92/2012 (the Fornero Act); the company’s equity; > the writedown of the equity investment in Enel Trade SpA, > the recapitalization on December 4, 2015, of the subsidiary in the amount of €250 million, to take account of the losses Enel Trade SpA through the waiver of part of the financial posted by the company, connected with developments in receivable due from that company on the intercompany the energy commodity market and in the upstream busi- current account in the amount of €500 million, which was ness. That impairment loss led to the adjustment of the allocated to an available equity reserve; carrying amount of the investment to the value produced > the recapitalization, on December 15, 2015, of the subsi- in the impairment test, which was conducted using the di- diary Enel Ingegneria e Ricerca SpA through the waiver of scounted cash flow approach. Accordingly, although that part of the financial receivable due from that company on value still exceeds the book equity value of the subsidiary, the intercompany current account in the amount of €40 the results of the test confirm that it is fully recoverable. million, which was allocated to an available equity reserve; > the formation, on December 21, 2015, with the payment The following table reports the main assumptions used in de- of share capital of €5 million wholly owned by Enel SpA, termining the impairment losses of Enel Ingegneria e Ricerca of Enel Open Fiber SpA, created to develop high-speed SpA and Enel Trade SpA. Millions of euro Original cost Growth rate (1) Discount rate pre-tax WACC (2) Explicit period of cash flows Terminal value (3) Enel Ingegneria e Ricerca SpA Enel Trade SpA 68 1,402 2.00% 1.90% 9.25% 9.37% 5 years 5 years Perpetuity Perpetuity at Dec. 31, 2015 (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. 328 Annual Report 2015The recoverable value of the equity investments recognized operating costs, capital expenditure, industrial and com- through the impairment tests was estimated by calculating mercial organization and developments in the main ma- the equity value of the investments through an estimate of croeconomic variables (inflation, nominal interest rates their value in use using discounted cash flow models, which and exchange rates) and commodity prices. The explicit involve estimating expected future cash flows and applying period of cash flows considered in impairment testing an appropriate discount rate, selected on the basis of mar- was five years; ket inputs such as risk-free rates, betas and market risk pre- > for subsequent years, taking account of assumptions miums. concerning long-term developments in the main variables For the purpose of comparing value with the carrying that determine cash flows, the average residual useful life amount of the investments, the enterprise value resulting of assets or the duration of the concessions. from the estimation of future cash flows was converted into More specifically, the terminal value was calculated as a per- the equity value by subtracting the net financial position of petuity or annuity. the investee. Cash flows were determined on the basis of the best infor- The share certificates for Enel SpA’s investments in Italian mation available at the time of the estimate and drawn: subsidiaries are held in custody at Monte dei Paschi di Siena. > for the explicit period, from the 5-year 2016-2020 busi- The following table reports the share capital and sharehol- ness plan approved by the Board of Directors of the Pa- ders’ equity of the investments in subsidiaries, associates rent Company containing forecasts for volumes, revenue, and other companies at December 31, 2015. Registered office Currency Share capital (euro) Shareholders’ equity (millions of euro) Prior year income/ (loss) (millions of euro) Carrying amount (millions of euro) % holding A) Subsidiaries Enel Produzione SpA Enel Ingegneria e Ricerca SpA Enel Distribuzione SpA Enel Servizio Elettrico SpA Enel Trade SpA Enel Green Power SpA (1) Rome Rome Rome Rome Rome Rome Enel Investment Holding BV (1) Amsterdam Enelpower SpA Enel Open Fiber SpA Enel Energia SpA Enel Iberoamérica SL Enel.Factor SpA Enel Sole Srl Enel Italia Srl Enel.Newhydro Srl Milan Rome Rome Madrid Rome Rome Rome Rome Enel Finance International NV Amsterdam Euro Euro Euro Euro Euro Euro Euro Euro Euro Euro Euro Euro Euro Euro Euro Euro 1,800,000,000 30,000,000 2,600,000,000 10,000,000 90,885,000 1,000,000,000 1,593,050,000 2,000,000 5,000,000 302,039 500,000,000 12,500,000 4,600,000 50,000,000 1,000,000 4,244 29 4,730 69 480 9,630 4,245 30 5 1,785 23,482 52 63 388 19 1,478,810,370 1,486 C) Associates CESI SpA D) Other companies Milan Euro 8,550,000 Elcogas SA (2) Puertollano Emittenti Titoli SpA (2) Idrosicilia SpA (2) Milan Milan Euro Euro Euro 809,690 4,264,000 22,520,000 101 (79) 16 43 330 (37) 1,613 (29) (255) 264 (593) - - 395 435 4 8 (22) 1 31 9 (68) 10 3 100.0 100.0 100.0 100.0 100.0 68.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 42.7 4.3 10.0 1.0 4,384 3 4,056 110 1,152 3,642 4,025 30 5 1,313 18,300 18 5 487 16 1,414 23 - 1 - (1) The figures for shareholders’ equity and the results for the period refer to the Group. (2) The figures for share capital, shareholders’ equity and net income refer to the financial statements at December 31, 2014. The carrying amounts of the equity investments in Enel and Enel Trade SpA are considered to be recoverable even Produzione SpA, Enel Italia Srl, Enel Servizio Elettrico SpA though they individually exceed the respective sharehol- 329 Separate financial statements of Enel SpAAnnual Report 2015ders’ equity at December 31, 2015. This circumstance is As regards the subsidiary Enel Investment Holding BV, de- not felt to represent an impairment loss in respect of the spite equity exceeding the book equity of the company, it investment but rather a temporary mismatch between the was nevertheless thought appropriate to conduct an impai- two amounts. More specifically: rment test at December 31, 2015, essentially owing to the > in the case of Enel Produzione, it is due essentially to adverse performance of the controlling stake that it holds in a decline in the fair value of a number of balance sheet Enel Russia, a company operating in the thermal generation items that are reflected in shareholders’ equity; sector, for which an impairment loss was recognized during > as to Enel Italia Srl and Enel Servizio Elettrico SpA, it is the year. attributable to the retroactive application of “IAS 19 - Em- ployee benefits” in 2013, which involved the recognition Equity investments in other companies at December 31, of net actuarial losses and that necessarily had an impact 2015 all regard unlisted companies and are measured at on the companies’ shareholders’ equity. As these losses cost, as the fair value cannot be reliably determined. are not monetary in nature, they will be recovered in futu- The investment in Elcogas was written off in 2014 and sin- re years with no cash outflow for the subsidiaries. ce January 1, 2015 the company has been in liquidation. Millions of euro Equity investments in unlisted companies measured at cost Elcogas SA Emittenti Titoli SpA Idrosicilia SpA at Dec. 31, 2015 at Dec. 31, 2014 1 - 1 - 1 - 1 - 14. Derivatives - €2,591 million, €299 million, €2,717 million, €367 million Millions of euro Non-current Current at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Derivative financial assets Derivative financial liabilities 2,591 2,717 1,979 2,484 299 367 280 359 For more details about the nature, recognition and classification of derivative financial assets and liabilities, please see notes 31 “Financial instruments” and 33 “Derivatives and hedge accounting”. 330 Annual Report 201515. Other non-current financial assets - €107 million The aggregate is composed of the following: Millions of euro Prepaid expenses Other non-current financial assets included in net financial debt Total Notes at Dec. 31, 2015 at Dec. 31, 2014 Change 15.1 30 77 107 25 121 146 5 (44) (39) “Prepaid expenses” are essentially accounted for by resi- February 12, 2015 in the amount of €9.4 billion. The renego- dual transaction costs on the €10 billion revolving credit fa- tiation involved a general reduction in the cost of the faci- cility agreed on April 19, 2010, between Enel, Enel Finance lity and extended its term until 2020. The item reports the International and Mediobanca, as well as those in respect non-current portion of those costs and their reversal through of the Forward Start Facility Agreement signed on February profit or loss depends on the type of fee involved and the 8, 2013, and the subsequent renegotiation of the facility on maturity of the credit line. 15.1 Other non-current financial assets included in net financial debt - €77 million Millions of euro Financial receivables Due from subsidiaries Other financial receivables Total Notes at Dec. 31, 2015 at Dec. 31, 2014 Change 31.1.1 72 5 77 117 4 121 (45) 1 (44) Financial receivables due from subsidiaries, amounting crued on the interest-rate risk hedging contracts, as well as to €72 million, refers to receivables in respect of the as- the repayment of the principal upon maturity of each loan. sumption by Group companies of their share of financial The decrease of €45 million is attributable to the reclassifi- debt. The terms of the agreements call for the rebilling of cation under other current financial assets of the portion of the related finance costs and the income and expenses ac- receivables falling due within 12 months. 16. Other non-current assets - €409 million This item can be broken down as follows. Millions of euro Tax receivables Receivable from subsidiaries for assumption of supplementary pension plan liabilities Other long-term receivables Total at Dec. 31, 2015 at Dec. 31, 2014 Change 244 162 3 409 290 173 4 467 (46) (11) (1) (58) 331 Separate financial statements of Enel SpAAnnual Report 2015“Tax receivables” regard the tax credit in respect of the sion plan. The terms of the agreement state that the Group claim for reimbursement submitted by Enel SpA on its own companies concerned are to reimburse the costs of extin- behalf for 2003 and on its own behalf and as the consolida- guishing defined benefit obligations of the Parent Company, ting company for 2004-2011 for excess income tax paid as which are recognized under “Employee benefits”. a result of not partially deducting IRAP in calculating taxable On the basis of actuarial forecasts made using current as- income for IRES purposes. This item decreased by €46 mil- sumptions, the portion due beyond five years of the “recei- lion over the previous year due to the partial reimbursement vable from subsidiaries for assumption of supplementary of €39 million in respect of the installments for 2004-2007 pension plan liabilities” came to €100 million (€111 million at and the recalculation of the value of the receivable for inte- December 31, 2014) . rest following the reimbursement from the Revenue Agency. The item “receivable from subsidiaries for assumption of essentially regard the receivable due from Enel Ingegneria supplementary pension plan liabilities” in the amount of €162 e Ricerca SpA for the sale in 2011 of the interest held in “Other long-term receivables” amounted to €3 million and million refers to receivables in respect of the assumption by Sviluppo Nucleare Italia Srl. Group companies of their share of the supplementary pen- 17. Trade receivables - €283 million The item breaks down as follows. Millions of euro Customers: - other receivables Total Trade receivables due from subsidiaries TOTAL at Dec. 31, 2015 at Dec. 31, 2014 Change 7 7 276 283 6 6 126 132 1 1 150 151 “Trade receivables due from subsidiaries” primarily regard the revenue associated with those services, as well as chan- the management and coordination services and other activi- ges in in collection times. ties performed by Enel SpA on behalf of Group companies. Trade receivables due from subsidiaries break down as fol- The increase of €150 million is linked with developments in lows. 332 Annual Report 2015Millions of euro Subsidiaries Enel Iberoamérica SL Enel Produzione SpA Enel Distribuzione SpA Enel Green Power SpA Endesa SA Enel Servizio Elettrico SpA Enel Trade SpA Enel Energia SpA Enel Italia Srl Slovenské elektrárne AS Enel.si Srl Enel Green Power North America Inc. Enel Sole Srl Enel Russia PJSC Endesa Distribución Eléctrica SL Endesa Generación SA Endesa Energía SA Enel Romania Srl Enel Brasil SA Empresa de Distribución Eléctrica de Lima Norte SAA Edegel SA Other Total Trade receivables by geographical area are shown below. Millions of euro Italy EU Non-EU Europe Other Total at Dec. 31, 2015 at Dec. 31, 2014 Change 1 23 44 17 (1) 3 5 7 78 16 1 1 - 18 19 3 4 4 15 2 2 14 276 1 18 7 7 - (1) 3 21 - 17 6 1 2 16 16 (2) 6 4 - - - 4 126 - 5 37 10 (1) 4 2 (14) 78 (1) (5) - (2) 2 3 5 (2) - 15 2 2 10 150 at Dec. 31, 2015 at Dec. 31, 2014 Change 181 56 22 24 283 66 47 18 1 132 115 9 4 23 151 18. Tax receivables - €319 million Income tax receivables at December 31, 2015 amounted to dit for current 2015 taxes (€189 million) and the receivable €319 million and essentially regard the Company’s IRES cre- with respect to consolidated IRES for 2015 (€127 million). 333 Separate financial statements of Enel SpAAnnual Report 201519. Other current financial assets - €3,403 million This item can be broken down as follows. Millions of euro Other current financial assets included in net financial debt Other sundry current financial assets Total Notes 19.1 at Dec. 31, 2015 at Dec. 31, 2014 3,052 351 3,403 4,693 347 5,040 Change (1,641) 4 (1,637) 19.1 Other current financial assets included in net financial debt - €3,052 million Millions of euro Notes at Dec. 31, 2015 at Dec. 31, 2014 Change Financial receivables due from Group companies: - short-term financial receivables (intercompany current accounts) - current portion of receivables for assumption of loans Financial receivables due from others: - other financial receivables 31.1.1 31.1.1 - cash collateral for margin agreements on OTC derivatives 31.1.1 Total 2,912 4,018 46 8 86 3,052 - 3 672 4,693 (1,106) 46 5 (586) (1,641) “Other current financial assets included in net financial companies on the intercompany current account (€1,106 debt”, amounting to €3,052 million at December 31, 2015, million), only partly offset by current portion of receivables refer to “financial receivables due from Group companies” in respect of the assumption by Group companies of their (€2,958 million) and “financial receivables due from others share of financial debt (€46 million). (€94 million). “Financial receivables due from others” decreased by €581 “Financial receivables due from Group companies” decrea- million, essentially attributable to the reduction in cash col- sed by €1,060 million over December 31, 2014, due to the lateral paid to counterparties for OTC derivatives on interest decline in short-term financial receivables due from Group rates and exchange rates. 20. Other current assets - €460 million At December 31, 2015, the item broke down as follows. Millions of euro Tax receivables Other receivables due from Group companies Receivables due from others Total at Dec. 31, 2015 at Dec. 31, 2014 Change 21 422 17 460 33 208 3 244 (12) 214 14 216 “Other current assets” increased by €216 million as compa- “Tax receivables” amounted to €21 million, primarily ac- red with December 31, 2014. counted for by the VAT credit for the Group (€14 million) and other receivables with respect to prior-year income taxes (€7 334 Annual Report 2015million). The decrease of €12 million on the previous year is (€312 million), and VAT receivables in respect of participating essentially due to the decline in the VAT credit for the Group. in the Group VAT mechanism (€110 million). The increase of “Other receivables due from Group companies” mainly €214 million on the previous year is essentially attributable comprise IRES receivables in respect of the Group compa- to the increase in intercompany IRES receivables connected nies participating in the consolidated taxation mechanism with the consolidated taxation mechanism (€196 million). 21. Cash and cash equivalents - €5,925 million Cash and cash equivalents are detailed in the following table. Millions of euro Bank and post office deposits Cash and cash equivalents on hand Total at Dec. 31, 2015 at Dec. 31, 2014 5,925 - 5,925 6,972 - 6,972 Change (1,047) - (1,047) Cash and cash equivalents amounted to €5,925 million, a ber of bonds, as well as normal operations connected with decrease of €1,047 million compared with December 31, the central treasury function performed by Enel SpA. 2014, mainly due to the impact of the repayment of a num- 335 Separate financial statements of Enel SpAAnnual Report 2015 Liabilities 22. Shareholders’ equity - €24,880 million Shareholders’ equity amounted to €24,880 million, down a total of €1,316 million), as approved by the shareholders €256 million compared with December 31, 2014. The de- on May 28, 2015, as well as comprehensive income for the crease is essentially attributable to the distribution of the year (€1,060 million). dividend for 2014 in the amount of €0.14 euro per share (for Share capital - €9,403 million At December 31, 2015 (as at December 31, 2014), the sha- February 24, 1998, as well as other available information, no re capital of Enel SpA amounted to €9,403,357,795 fully shareholders held more than 2% of the total share capital, subscribed and paid up, represented by 9,403,357,795 ordi- apart from the Ministry for the Economy and Finance, which nary shares with a par value of €1.00 each. holds 25.50%, Norges Bank (with a 2.018% stake, which fell At the same date, based on the shareholders register and below 2% on January 8, 2016) and CNP Assurances (2.87%, the notices submitted to CONSOB and received by the held as at June 23, 2015 for asset management purposes). Company pursuant to Article 120 of Legislative Decree 58 of Other reserves - €9,163 million Share premium reserve - €5,292 million The share premium reserve did not change compared with It also includes €29 million in respect of the stock option reserve and €20 million for other reserves. the previous year. Legal reserve - €1,881 million The legal reserve, equal to 20.0% of share capital, did not Reserve from measurement of financial instruments - €(277) million At December 31, 2015, the item was entirely represented change compared with the previous year. by the reserve from measurement of cash flow hedge de- Reserve pursuant to Law 292/1993 - €2,215 million The reserve shows the remaining portion of the value adjustments carried out when Enel was transformed from a public entity to a joint-stock company. In the case of a distribution of this reserve, the tax treatment rivatives with a negative value of €277 million (net of the positive tax effect of €17 million). Reserve from remeasurement of net em- ployee benefit liabilities/(assets) - €(16) million At December 31, 2015, the employee benefit plan reserve for capital reserves as defined by Article 47 of the Uniform amounted to €16 million (net of the positive tax effect of €3 Income Tax Code shall apply. million). The reserve includes all actuarial gains and losses Other sundry reserves - €68 million Other sundry reserves include €19 million related to the re- serve for capital grants, which reflects 50% of the grants recognized directly in equity, as the corridor approach is no longer permitted under the revised version of “IAS 19 - Em- ployee benefits”. received from Italian public entities and EU bodies in ap- The table below provides a breakdown of changes in the plication of related laws for new works (pursuant to Article reserve from measurement of financial instruments and the 55 of Presidential Decree 917/1986), which is recognized in reserve from remeasurement of net employee benefit liabi- equity in order to take advantage of tax deferment benefits. lities/(assets) in 2014 and 2015. 336 Annual Report 2015Gross gains/ (losses) recognized in equity for the year Gross released to income statement At Jan. 1, 2014 Taxes at Dec. 31, 2014 Gross gains/ (losses) recognized in equity for the year Gross released to income statement Taxes at Dec. 31, 2015 (259) 173 (248) 2 (332) 441 (334) (52) (277) (17) 10 - (3) (10) (5) - (1) (16) (276) 183 (248) (1) (342) 436 (334) (53) (293) Millions of euro Reserve from measurement of cash flow hedge instruments Gains/(Losses) from the remeasurement of net employee benefit liabilities/ (assets) Gains/(Losses) recognized directly in equity Retained earnings/(Loss carried forward) - €5,303 million For 2015, the item shows a decrease of €758 million, attribu- amount of €846 million for the distribution of dividends to sha- table to the resolution of the Shareholders’ Meeting of May reholders and the allocation to “retained earnings” of part of 28, 2015, which provided for the use of this reserve in the the net income for 2014, equal to €88 million. Net income - €1,011 million Net income for 2015 amounted to €1,011 million. The table below shows the availability of shareholders’ equity for distribution. Millions of euro Share capital Capital reserves: - share premium reserve Income reserves: - legal reserve - reserve pursuant to Law 292/1993 - reserve from measurement of financial instruments - reserve for capital grants - stock option reserve - reserve from remeasurement of net employee benefit liabilities/(assets) - other Retained earnings/(Loss carried forward) Total amount available for distribution at Dec. 31, 2015 Possible uses Amount available 9,403 5,292 1,881 2,215 (277) 19 29 (16) 20 5,303 23,869 ABC B ABC ABC ABC ABC ABC 5,292 2,215 19 (1) 29 (2) 20 5,303 12,878 12,875 A: for capital increases. B: to cover losses. C: for distribution to shareholders. (1) Regards lapsed options. (2) Not distributable in the amount of €3 million regarding options granted by the Parent Company to employees of subsidiaries that have lapsed. There are no restrictions on the distribution of the reserves sion costs or research and development costs, or departu- pursuant to Article 2426, paragraph 1(5) of the Italian Civil res pursuant to Article 2423, paragraph 4, of the Italian Civil Code since there are no unamortized start-up and expan- Code. 337 Separate financial statements of Enel SpAAnnual Report 2015Note that in the three previous years, the available reserve Enel’s goals in capital management are focused on the cre- denominated “retained earnings/(loss carried forward)“ has ation of value for shareholders, safeguarding the interests been used in the amount of €846 million for the distribution of stakeholders and ensuring business continuity, as well of dividends to shareholders. as on maintaining sufficient capitalization to ensure cost- effective access to outside sources of financing, so as to adequately support growth in the Group’s business. 22.1 Dividends The table below shows the dividends paid by the Company in 2014 and 2015. Amount distributed (in millions of euro) Net dividend per share (in euro) Dividends paid in 2014 Dividends for 2013 Interim dividend for 2014 Special dividends Total dividends paid in 2014 Dividends paid in 2015 Dividends for 2014 Interim dividend for 2015 Special dividends Total dividends paid in 2015 1,223 - - 1,223 1,316 - - 1,316 0.13 - - 0.13 0.14 - - 0.14 A remaining dividend in respect of 2015, equal to €0.16 per 2016. These financial statements do not reflect the distribu- share, amounting to a total dividend of €1,627 million, was tion of this dividend for 2015 to shareholders. proposed at the Shareholders’ Meeting called for May 26, 22.2 Capital management The Company’s objectives for managing capital comprise and adjusts that structure when changes in economic con- safeguarding the business as a going concern, creating va- ditions so require. There were no substantive changes in lue for stakeholders and supporting the development of the objectives, policies or processes in 2015. Group. In particular, the Group seeks to maintain an adequa- To this end, the Company constantly monitors developments te capitalization that enables it to achieve a satisfactory re- in the level of its debt in relation to equity. The situation at turn for shareholders and ensure access to external sources December 31, 2015 and 2014 is summarized in the following of financing, in part by maintaining an adequate rating. table. In this context, the Company manages its capital structure Millions of euro Non-current financial position Net current financial position Non-current financial receivables and long-term securities Net financial debt Shareholders’ equity Debt/equity ratio at Dec. 31, 2015 at Dec. 31, 2014 (14,503) 1,001 77 (13,425) 24,880 (0.54) (17,288) 4,556 121 (12,611) 25,136 (0.50) Change 2,785 (3,555) (44) (814) (256) (0.04) 338 Annual Report 201523. Borrowings - €14,503 million, €3,062 million, €4,914 million Millions of euro Non-current Current at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Long-term borrowings Short-term borrowings 14,503 - 17,288 - 3,062 4,914 2,363 4,746 For more details about the nature, recognition and classification of borrowings, please see note 31 “Financial instruments”. 24. Employee benefits - €291 million The Company provides its employees with a variety of be- The item includes accruals made to cover post-employment nefits, including termination benefits, additional months’ benefits under defined benefit plans and other long-term pay, indemnities in lieu of notice, loyalty bonuses for achie- benefits to which employees are entitled under statute, con- vement of seniority milestones, supplementary pension tract or other form of employee incentive scheme. plans, supplementary healthcare plans, additional indemnity These obligations, in accordance with IAS 19, were determi- for FOPEN pension contributions, FOPEN pension contribu- ned using the projected unit credit method. tions in excess of deductible amount and personnel incenti- The following table reports the change during the year in the ve plans. Following the termination of the collective rules on defined benefit obligation, as well as a reconciliation of the electricity discounts, as at December 31, 2015, the electrici- defined benefit obligation with the obligation recognized in ty discount provision for reduced price electricity for retired the balance sheet at December 31, 2015 and December 31, employees was extinguished and reversed (€10 million). 2014. Millions of euro 2015 2014 Pension benefits Electricity discount Health insurance Other benefits Total Pension benefits Electricity discount Health insurance Other benefits Total CHANGES IN ACTUARIAL OBLIGATION Actuarial obligation at January 1 Current service cost Interest expense Actuarial (gains)/losses arising from changes in financial assumptions Experience adjustments Past service cost (Gains)/Losses arising from settlements Other payments Other changes Actuarial obligation at December 31 242 11 6 5 - 6 (1) - (33) 5 230 - - - - - (10) (1) - - 35 - 1 - - - - (2) 3 37 14 11 - - - - - (4) 3 24 302 17 6 - 6 (1) (10) (40) 11 291 273 11 - 8 (7) (3) - - (29) - 242 - - - 1 - - (1) - 11 37 - 1 (2) 1 - - (2) - 35 15 10 - - - - - 336 10 9 (9) (1) - - (11) (43) - - 14 302 339 Separate financial statements of Enel SpAAnnual Report 2015Millions of euro (Gains)/Losses charged to profit or loss Service cost Interest expense (Gains)/Losses arising from settlements Total Millions of euro Remeasurement of (gains)/losses in OCI Actuarial (gains)/losses on defined benefit plans Other changes Total 2015 16 6 (10) 12 2015 6 - 6 2014 10 9 - 19 2014 (10) - (10) The current service cost for employee benefits in 2015 discounts, with the extinguishment and reversal of the provision amounted to €17 million, recognized under personnel costs as at December 31, 2015. (€10 million in 2014), while the interest cost from the accretion of the liability amounted to €6 million (€9 million in 2014). Gains The main actuarial assumptions used to calculate the liabilities from settlement of €10 million are attributable to the decrease arising from employee benefits, which are consistent with tho- in other costs for the termination of the collective rules on rate se used the previous year, are set out below. Discount rate Rate of wage increases Rate of increase in healthcare costs 2015 0.50%-2.15% 1.6%-3.6% 2.6% 2014 0.50%-2.15% 1.6%-3.6% 2.6% The following table reports the outcome of a sensitivity at the end of the year in the actuarial assumptions used in analysis that demonstrates the effects on the liability for estimating the obligation. healthcare plans as a result of changes reasonably possible Millions of euro Healthcare plans: ASEM An increase of 0.5% in discount rate A decrease 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 (2) 2 2 2 2 5 1 25. Provisions for risks and charges - €53 million The “provisions for risks and charges” cover potential liabi- In determining the balance of the provision, we have taken lities that could arise from legal proceedings and other di- account of both the charges that are expected to result from sputes, without considering the effects of rulings that are court judgments and other dispute settlements for the year expected to be in the Company’s favor and those for which and an update of the estimates for positions arising in pre- any charge cannot be quantified with reasonable certainty. vious years not related to the transferred business units. 340 Annual Report 2015The following table shows changes in provisions for risks and charges. Millions of euro Accruals Reversals Utilization at Dec. 31, 2014 Other changes Total at Dec. 31, 2015 Taken to income statement Provision for litigation, risks and other charges: - litigation - other Total Provision for early retirement incentives TOTAL 12 3 15 1 16 3 3 6 32 38 - - - - - - - - (1) (1) - - - - - of which current portion 15 3 18 2 20 15 6 21 32 53 The net increase in the litigation provision amounted to blished on December 31, 2015, following the elimination €3 million, essentially reflecting new labor disputes and of the electricity discount benefit for retired personnel the revision of estimates for a number of outstanding di- with effect from January 1, 2016 after the termination of sputes. the agreement on rate discounts for retired personnel and The provision covers disputes in Italy and essentially re- their survivors. gards labor litigation (€10 million) and litigation concer- The increase in the provision for early retirement incenti- ning tender contracts (€3 million). ves (€32 million) is due largely to the increase in costs fol- The increase of €3 million in other provisions is essen- lowing the signing of new agreements for voluntary ter- tially attributable to the “compensation” provision, esta- minations under Article 4 of the Fornero Act (€31 million). 26. Other non-current liabilities - €243 million “Other non-current liabilities” amounted to €243 million in respect of the subsidiaries is balanced by the recognition (€287 million at December 31, 2014). They essentially regard of non-current tax receivables (note 16). The decrease of €44 the debt towards Group companies that arose following Enel million for the year is essentially attributable to the partial SpA’s request (submitted in its capacity as the consolidating reimbursement of that receivable in respect of the instal- company) for reimbursement for 2004-2011 of the additional ments for 2004-2007 (€39 million) and the redetermination income taxes paid as a result of not deducting part of IRAP of the debt following the reimbursement. in computing taxable income for IRES purposes. The liability 341 Separate financial statements of Enel SpAAnnual Report 201527. Trade payables - €164 million Millions of euro Trade payables: - due to third parties - due to Group companies Total at Dec. 31, 2015 at Dec. 31, 2014 Change 105 59 164 85 54 139 20 5 25 “Trade payables” include payables due to third parties of bles due to Group companies of €59 million (€54 million at €105 million (€85 million at December 31, 2014) and paya- December 31, 2014). Trade payables due to subsidiaries at December 31, 2015 break down as follows. Millions of euro Subsidiaries Enel Produzione SpA Enel Ingegneria e Ricerca SpA Enel Servizio Elettrico SpA Enel Trade SpA Enel Italia Srl Enel Iberoamérica SL Enel.Factor SpA Endesa SA Enel Russia PJSC Sviluppo Nucleare Italia Srl Other Total at Dec. 31, 2015 at Dec. 31, 2014 Change 1 1 1 1 36 8 2 1 4 - 4 59 1 - - 1 25 - 12 4 4 3 4 54 - 1 1 - 11 8 (10) (3) - (3) - 5 Trade payables break down by geographical area as follows. at Dec. 31, 2015 at Dec. 31, 2014 Change 132 18 10 4 164 123 9 5 2 139 9 9 5 2 25 Millions of euro Suppliers Italy EU Non-EU Europe Other Total 342 Annual Report 201528. Other current financial liabilities - €643 million “Other current financial liabilities” mainly regard interest expense accrued on debt outstanding at end-year. Millions of euro Deferred financial liabilities Other items Total Notes 31.2.1 31.2.1 at Dec. 31, 2015 at Dec. 31, 2014 Change 584 59 643 649 45 694 (65) 14 (51) “Deferred financial liabilities” consist of interest expense both financial expense on hedge derivatives on commodity accrued on financial debt, while the “other items” essen- exchange rates and interest expense on intercompany cur- tially include amounts due to Group companies that accrued rent accounts. in 2015 but will be settled in the following year, comprising 29. Net financial position and long-term financial receivables and securities - €13,425 million The following table shows the net financial position and long-term financial receivables and securities on the basis of the items on the balance sheet. Millions of euro Long-term borrowings Short-term borrowings Current portion of long-term borrowings Non-current financial assets included in debt Current financial assets included in debt Cash and cash equivalents Total Notes at Dec. 31, 2015 at Dec. 31, 2014 23 23 23 15.1 19.1 21 14,503 4,914 3,062 77 3,052 5,925 13,425 17,288 4,746 2,363 121 4,693 6,972 12,611 Change (2,785) 168 699 (44) (1,641) (1,047) 814 343 Separate financial statements of Enel SpAAnnual Report 2015Pursuant to the CONSOB instructions of July 28, 2006, the ber 31, 2015, reconciled with net financial debt as reported following table reports the net financial position at Decem- in the report on operations. Millions of euro Bank and post office deposits Liquidity Current financial receivables Short-term bank debt Short-term portion of long-term bank debt Other short-term financial payables Short-term financial debt Net short-term financial position Bonds Long-term borrowings Long-term financial position NET FINANCIAL POSITION as per CONSOB instructions Long-term financial receivables NET FINANCIAL DEBT at Dec. 31, 2015 at Dec. 31, 2014 Change of which with related parties of which with related parties 5,925 5,925 3,052 (2) (3,062) (4,912) (7,976) 1,001 (14,503) (14,503) (14,503) (13,502) 77 (13,425) 2,958 (3,243) 72 6,972 6,972 4,693 (3) (2,363) (4,743) (7,109) 4,556 (17,288) (17,288) (17,288) (12,732) 121 (12,611) 4,018 (4,320) 117 (1,047) (1,047) (1,641) 1 (699) (169) (867) (3,555) 2,785 2,785 2,785 (770) (44) (814) 30. Other current liabilities - €1,046 million “Other current liabilities” mainly concern payables due to in the consolidated IRES taxation mechanism, as well as the the tax authorities and to the Group companies participating Group VAT system. Millions of euro Tax payables Payables due to Group companies Payables due to employees, recreational/assistance associations Payables due to social security institutions Payables due to customers for security deposits and reimbursements Other Total at Dec. 31, 2015 at Dec. 31, 2014 650 354 24 11 1 6 1,046 540 396 20 8 1 10 975 Change 110 (42) 4 3 - (4) 71 “Tax payables” amounted to €650 million and essentially re- lion. They consist of €233 million in payables in respect of gard amounts due to tax authorities for consolidated IRES the IRES liability under the consolidated taxation mechanism (€643 million). The increase as compared with the previous (€316 million at December 31, 2014) and €121 million in re- year amounted to €110 million, essentially due to the increa- spect of Group VAT (€77 million at December 31, 2014). The se in the debtor position with tax authorities for consolidated decrease of €42 million essentially reflects developments in IRES. the debtor positions noted above. “Payables due to Group companies” amounted to €354 mil- 344 Annual Report 201531. Financial instruments 31.1 Financial assets by category The following table shows the carrying amount for each ca- rately hedging derivatives and derivatives measured at fair tegory of financial assets provided by IAS 39, broken down value through profit or loss. into current and non-current financial assets, showing sepa- Millions of euro Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Loans and receivables Financial assets available for sale 31.1.1 31.1.2 Financial assets at fair value through profit or loss Derivative financial assets at FVTPL Total Derivative financial assets designated as hedging instruments Cash flow hedge derivative financial assets Fair value hedge derivative financial assets 33 33 33 Total TOTAL 107 1 1,668 1,668 888 35 923 2,699 146 1 1,283 1,283 656 40 696 2,126 9,611 - 299 299 - - - 12,144 - 280 280 - - - 9,910 12,424 For more details on the recognition and classification of current and non-current derivative financial assets, please see note 33 “Derivatives and hedge accounting”. 31.1.1 Loans and receivables The following table shows loans and receivables by nature, broken down into current and non-current financial assets. Millions of euro Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 Notes at Dec. 31, 2015 at Dec. 31, 2014 Cash and cash equivalents Trade receivables Financial receivables due from Group companies Receivables for assumption of share of financial debt Receivables on intercompany current accounts Short-term loan granted to Enel Finance International NV Current portion of receivables for assumption of loans 19.1 Other financial receivables Total Financial receivables due from others Cash collateral for margin agreements on OTC derivatives Other financial receivables Total TOTAL - - - - 21 17 15.1 72 117 - - - - 72 - 35 35 107 19.1 19.1 19.1 - - - - 117 - 29 29 146 5,925 283 - 2,912 - 46 173 3,131 86 186 272 6,972 132 - 4,018 - - 205 4,223 672 145 817 9,611 12,144 The primary changes compared with 2014 related to: lion, essentially attributable to the repayment of a num- > a decrease in “cash and cash equivalents” of €1,047 mil- ber of bonds; 345 Separate financial statements of Enel SpAAnnual Report 2015 > a decrease in “financial receivables due from Group totaling €539 million, mainly as a result of a decline in companies” totaling €1,137 million, largely reflecting the cash collateral paid to counterparties for OTC derivatives decrease in receivables on the intercompany current ac- transactions on interest rates and exchange rates (€586 count held with Group companies (€1,106 million); million). > a decrease of “financial receivables due from others” 31.1.2 Financial assets available for sale Financial assets available for sale amounted to €1 million “equity investment in other entities” and is carried at cost. and are represented by the equity investment held by Enel The value is unchanged with respect to 2014. SpA in Emittenti Titoli SpA. The investment is classified as an 31.2 Financial liabilities by category The following table shows the carrying amount for each ca- parately hedging derivatives and derivatives measured at fair tegory of financial liabilities provided by IAS 39, broken down value through profit or loss. into current and non-current financial liabilities, showing se- Millions of euro Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Financial liabilities measured at amortized cost Financial liabilities at fair value through profit or loss Derivative financial liabilities at FVTPL Total Derivative financial liabilities designated as hedging instruments Cash flow hedge derivatives Total TOTAL 31.2.1 14,503 17,288 8,783 7,942 33 33 1,687 1,687 1,030 1,030 17,220 1,295 1,295 1,189 1,189 19,772 367 367 - - 358 358 1 1 9,150 8,301 For more details on the recognition and classification of cur- For more details about fair value measurement, please see rent and non-current derivative financial liabilities, please see note 34 “Fair value measurement”. note 33 “Derivatives and hedge accounting”. 31.2.1 Financial liabilities measured at amortized cost The following table shows financial liabilities at amortized cost by nature, broken down into current and non-current financial Non-current Current Notes at Dec. 31, 2015 at Dec. 31, 2014 Notes at Dec. 31, 2015 at Dec. 31, 2014 23 14,503 17,288 - - - - - - 23 27 28 14,503 17,288 3,062 4,914 164 643 8,783 2,363 4,746 139 694 7,942 liabilities. Millions of euro Long-term borrowings Short-term borrowings Trade payables Other current financial liabilities Total 346 Annual Report 2015Borrowings Long-term borrowings (including the current portion due within 12 months) - €17,565 million Long-term borrowings, which refer exclusively to bonds, de- grouped by type of borrowing and type of interest rate. For nominated in euros and other currencies, including the cur- listed debt instruments, the fair value is given by official pri- rent portion due within 12 months (equal to €3,062 million), ces. For unlisted debt instruments, fair value is determined amounted to €17,565 million at December 31, 2015. using valuation techniques appropriate for each category of The following table shows the nominal values, carrying financial instrument and the associated market data for the amounts and fair values of long-term borrowings at Decem- reporting date, including the credit spreads of the Group. ber 31, 2015, including the portion due within 12 months, Millions of euro Nominal value Carrying amount Current portion Portion due in more than 12 months Fair value Nominal value Carrying amount Current portion Portion due in more than 12 months Fair value at Dec. 31, 2015 at Dec. 31, 2014 Carrying amount Change Bonds: - fixed rate 14,693 14,586 1,999 12,587 17,001 15,414 15,284 1,000 14,284 18,166 (698) - floating rate 2,986 2,979 1,063 1,916 2,931 4,380 4,367 1,363 3,004 4,311 (1,388) Total 17,679 17,565 3,062 14,503 19,932 19,794 19,651 2,363 17,288 22,477 (2,086) Total fixed-rate borrowings Total floating- rate borrowings 14,693 14,586 1,999 12,587 17,001 15,414 15,284 1,000 14,284 18,166 (698) 2,986 2,979 1,063 1,916 2,931 4,380 4,367 1,363 3,004 4,311 (1,388) TOTAL 17,679 17,565 3,062 14,503 19,932 19,794 19,651 2,363 17,288 22,477 (2,086) The balance for bonds is reported net of €808 million in re- please see note 32 “Risk management”, while for more de- spect of the unlisted floating-rate “Special series of bonds tails about fair value measurement inputs, please see note reserved for employees 1994-2019”, which Enel SpA holds 34 “Fair value measurement”. in its portfolio. For more details about the maturity analysis of borrowings, and interest rate. The table below shows long-term borrowings by currency Long-term borrowings by currency and interest rate Millions of euro Carrying amount Nominal value Current average nominal interest rate Current effective interest rate at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2015 Euro US dollar Pound sterling Total non-euro currencies TOTAL 16,056 1,012 2,583 3,595 19,651 13,691 1,130 2,744 3,874 17,565 13,751 1,148 2,780 3,928 17,679 4.4% 8.8% 6.5% 4.7% 9.2% 6.7% 347 Separate financial statements of Enel SpAAnnual Report 2015The table below reports changes in the nominal value of long-term debt. Millions of euro Nominal value Repayments New borrowing at Dec. 31, 2014 Own bonds repurchased Exchange differences Nominal value at Dec. 31, 2015 Bonds Total 19,794 19,794 (2,363) (2,363) - - (31) (31) 279 279 17,679 17,679 Compared with December 31, 2014, the nominal value of €2,363 million in repayments, €31 million in repurchases of long-term debt decreased by €2,115 million, the net result of own bonds and €279 million in exchange losses. New borrowings There were no transactions involving new borrowings in 2015. as other hybrid financial instruments issued and greater seniority than equity instruments; The main long-term borrowings of Enel SpA are governed by > prohibition on mergers with other companies, the sale or covenants that are commonly adopted in international business leasing of all or a substantial part of the company’s assets practice. These borrowings are represented by the bond issues to another company, unless the latter succeeds in all obli- carried out within the framework of the Global Medium-Term gations of the issuer. Notes Program, issues of subordinated unconvertible hybrid The main covenants for the Forward Start Facility Agreement bonds, the €9.4 billion Forward Start Facility Agreement agreed and the loan agreements between Enel SpA and UniCredit SpA on February 8, 2013 by Enel SpA and Enel Finance International are substantially similar and can be summarized as follows: NV with a pool of banks and the loans granted by UniCredit > negative pledge clauses, under which the borrower and, SpA in April 2014 and July 2015. in some cases, significant subsidiaries may not establish The main covenants in respect of the bond issues in the Global mortgages, liens or other encumbrances on all or part of Medium-Term Notes Program of Enel and Enel Finance Inter- their respective assets to secure certain financial liabili- national NV can be summarized as follows: ties, with the exception of expressly permitted encum- > negative pledge clauses under which the issuer and the brances; guarantor may not establish or maintain (except under > disposals clauses, under which the borrower and, in statutory requirement) mortgages, liens or other encum- some cases, the subsidiaries of Enel may not dispose brances on all or part of its assets or revenue, to secure of their assets or a significant portion of their assets or certain financial borrowings, unless the same restrictions operations, with the exception of expressly permitted di- are extended equally or pro rata to the bonds in question; sposals; > pari passu clauses, under which bonds and the associated > pari passu clauses, under which the payment underta- guarantees constitute a direct, unconditional and unse- kings of the borrower have the same seniority as its other cured obligation of the issuer and the guarantor, do not unsecured and unsubordinated payment obligations; grant preferential rights among them and have at least > change of control clauses, which are triggered in the the same seniority as other present and future unsubor- event: (i) control of Enel is acquired by one or more par- dinated and unsecured bonds of the issuer and the gua- ties other than the Italian State or (ii) Enel or any of its rantor; subsidiaries transfer a substantial portion of the Group’s > cross-default clauses, under which the occurrence of a assets to parties outside the Group such that the financial default event in respect of a specified financial liability reliability of the Group is significantly compromised. The (above a threshold level) of the issuer, the guarantor or occurrence of one of the two circumstances may give significant subsidiaries constitutes a default in respect of rise to: (a) the renegotiation of the terms and conditions the liabilities in question, which may become immedia- of the financing or (b) compulsory early repayment of the tely repayable. financing by the borrower; The main covenants covering the hybrid bonds can be summa- > cross-default clauses, under which the occurrence of a rized as follows: default event in respect of a specified financial liability > subordination clauses: each hybrid bond is subordinate to (above a threshold level) of the borrower or significant all other bonds of the issuer and has the same seniority subsidiaries constitutes a default in respect of the liabi- 348 Annual Report 2015lities in question, which may become immediately repa- example, insolvency, bankruptcy proceedings or the entity yable. ceases trading. All the financial borrowings considered specify “events of de- None of the covenants indicated above has been triggered to fault” typical of international business practice, such as, for date. Debt structure after hedging The following table shows the effect of the hedges of foreign currency risk on the gross long-term debt structure (including portions maturing in the next 12 months). Millions of euro at Dec. 31, 2015 at Dec. 31, 2014 Impact of hedging instruments Debt structure after hedging Initial debt structure Carrying amount Notional amount % Initial debt structure Carrying amount Notional amount % Impact of hedging instruments Debt structure after hedging Euro US dollar Pound sterling 13,691 13,751 77.8% 3,928 17,679 16,056 16,145 81.6% 3,649 19,794 1,130 2,744 1,148 2,780 6.5% 15.7% (1,148) (2,780) - - 1,012 2,583 1,030 2,619 5.2% 13.2% (1,030) (2,619) - - Total 17,565 17,679 100.0% - 17,679 19,651 19,794 100.0% - 19,794 The following table shows the effect of the hedges of interest rate risk on the gross long-term debt outstanding at the re- porting date. Outstanding gross debt at Dec. 31, 2015 at Dec. 31, 2014 Floating rate Fixed rate Total Before hedging After hedging Before hedging After hedging 16.9% 83.1% 100.0% 20.6% 79.4% 100.0% 22.1% 77.9% 100.0% 19.2% 80.8% 100.0% Short-term borrowings - €4,914 million The following table shows short-term borrowings at December 31, 2015, by nature. Millions of euro Borrowings from non-Group counterparties Short-term bank borrowings (ordinary current account) Cash collateral for CSAs on OTC derivatives received Total Borrowings from Group counterparties Short-term borrowings from Group companies (on intercompany current accounts) Other short-term borrowings from Group companies Total TOTAL at Dec. 31, 2015 at Dec. 31, 2014 Change 2 1,669 1,671 3,243 - 3,243 4,914 3 423 426 3,820 500 4,320 4,746 (1) 1,246 1,245 (577) (500) (1,077) 168 Short-term borrowings amounted to €4,914 million (€4,746 on interest rates and exchange rates; million in 2014), up €168 million over the previous year, > the €577 million decrease in “short-term borrowings from mainly due to: Group companies” attributable to an improvement in the > the €1,246 million increase in cash collateral received debtor position on the intercompany current account held from counterparties for transactions in OTC derivatives with subsidiaries; 349 Separate financial statements of Enel SpAAnnual Report 2015 > the €500 million decrease in “other short-term borrowings It should be specified that the fair value of current bor- from Group companies” as a result of drawings made rowings equals their carrying amount as the impact of di- on the Intercompany Short Term Deposit Agreement, the scounting is not significant. short-term credit line with Enel Finance International NV. 31.2.2 Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss, broken million) financial liabilities, refer solely to derivative financial down into current (€367 million) and non-current (€1,687 liabilities. 31.2.3 Net gains and losses The following table shows net gains and losses by category of financial instruments, excluding derivatives. Millions of euro Net gains/(losses) of which: impairment/reversal of impairment Available-for-sale financial assets Loans and receivables 1 5 - 7 Financial liabilities measured at amortized cost (1,229) (1,319) - 1 - at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 For more details on net gains and losses on derivatives, please see note 7 “Net financial income/(expense) from derivatives”. 350 Annual Report 201532. Risk management 32.1 Financial risk management objectives and policies As part of its operations, the Company is exposed to a varie- es/global business lines, which define the roles and re- ty of financial risks, notably market risks (including interest sponsibilities for those involved in managing, monitoring rate risk and exchange risk), credit risk and liquidity risk. and controlling risks, ensuring the organizational separa- Enel’s governance arrangements for financial risk envisage: tion of units involved in managing the Group’s business > specific internal committees, formed of members of the and those responsible for managing risk; Group’s top management and chaired by the CEO, which > the specification of operational limits at both the Group le- are responsible for strategic policy-making and oversight vel and at the level of individual Regions/Countries/global of risk management; business lines for the various types of risk. These limits > the establishment of specific policies set at both the are monitored periodically by the risk management units. Group level and at the level of individual Regions/Countri- 32.2 Market risks Market risk is the risk that the value of financial and non- During 2015, no overshoots of the threshold values set by financial assets or liabilities and the associated expected regulators for the activation of clearing obligations (EMIR - cash flows could change owing to changes in market pri- European Market Infrastructure Regulation 648/2012 of the ces. European Parliament) were detected. As part of its operations as an industrial holding company, Enel SpA is exposed to different market risks, notably the The volume of transactions in financial derivatives outstan- risk of changes in interest rates and exchange rates. ding at December 31, 2015 is reported below, with specifi- Interest rate risk and exchange risk are primarily generated calculated at the year-end exchange rates provided by the by the presence of financial instruments. European Central Bank, where denominated in currencies cation of the notional amount of each class of instrument as The main financial liabilities held by the Company include other than the euro. bonds, bank borrowings (including revolving credit facilities and loans from EU bodies), other borrowings, derivatives, The notional amount of a derivative contract is the amount cash collateral for derivatives transactions and trade paya- on which cash flows are exchanged. This amount can be ex- bles. The main purpose of those financial instruments is to pressed as a value or a quantity (for example tons, converted finance the operations of the Company. into euro by multiplying the notional amount by the agreed The main financial assets held by the Company include fi- price). nancial receivables, derivatives, cash collateral for derivati- The notional amounts of derivatives reported here do not ves transactions, cash and short-term deposits and trade represent amounts exchanged between the parties and receivables. therefore are not a measure of the Company’s credit risk For more details, please see note 31 “Financial instruments”. exposure. The source of exposure to interest rate risk and exchange risk did not change with respect to the previous year. Interest rate risk Interest rate risk is the risk that the fair value or future cash As the Parent Company, Enel SpA centralizes some treasury flows of a financial instrument will fluctuate because of chan- management functions and access to financial markets with ges in market interest rates. regard to financial derivatives contracts on interest rates and exchange rates. As part of this activity, Enel SpA acts as an Interest rate risk for the Company manifests itself as a change intermediary for Group companies with the market, taking in the flows associated with interest payments on floating- positions that, while they can be substantial, do not however rate financial liabilities, a change in financial terms and con- represent an exposure to markets risks for Enel SpA. ditions in negotiating new debt instruments or as an adverse 351 Separate financial statements of Enel SpAAnnual Report 2015change in the value of financial assets/liabilities measured at This goal is pursued through the strategic diversification of fair value, which are typically fixed-rate debt instruments. the portfolio of financial liabilities by contract type, maturity Interest rate risk is managed with the dual goals of reducing and interest rate, and modifying the risk profile of specific ex- the amount of debt exposed to interest rate fluctuations and posures using OTC derivatives, mainly interest rate swaps. containing the cost of funds, limiting the volatility of results. The notional amount of outstanding contracts is reported below. Millions of euro Notional amount Interest rate derivatives Interest rate swaps Total at Dec. 31, 2015 at Dec. 31, 2014 21,163 21,163 8,943 8,943 The term of such contracts does not exceed the maturity an increase in market interest rates. of the underlying financial liability, so that any change in the At December 31, 2015, 16.9% of gross long-term financial fair value and/or cash flows of such contracts is offset by a debt was floating rate (22.1% at December 31, 2014). Taking corresponding change in the fair value and/or cash flows of account of hedges of interest rates considered effective the underlying position. pursuant to the IAS 39, 79.4% of gross long-term financial Interest rate swaps normally provide for the periodic debt was hedged at December 31, 2015 (80.8% hedged at exchange of floating-rate interest flows for fixed-rate inte- December 31, 2014). Including derivatives treated as hed- rest flows, both of which are calculated on the basis of the ges for management purposes but ineligible for hedge ac- notional principal amount. counting, the ratio is essentially unchanged. The notional amount of open interest rate swaps at the end Interest rate risk sensitivity analysis of the year was €21,163 million (€8,943 million at December The Company analyses the sensitivity of its exposure by 31, 2014), of which €1,329 million (€2,629 million at Decem- estimating the effects of a change in interest rates on the ber 31, 2014) in respect of hedges of the Company’s share portfolio of financial instruments. of debt, and €9,917 million (€3,157 million at December 31, More specifically, sensitivity analysis measures the poten- 2014) in respect of hedges of the debt of Group companies tial impact of market scenarios on equity, for the cash flow with the market intermediated in the same notional amount hedge component, and on profit or loss, for the fair value with those companies. hedge component, for derivatives that are not eligible for hedge accounting and for the portion of gross long-term For more details on interest rate derivatives, please see debt not hedged using derivative financial instruments. note 33 “Derivatives and hedge accounting”. These scenarios are represented by parallel increases and decreases in the yield curve as at the reporting date. The amount of floating-rate debt that is not hedged against There were no changes in the methods and assumptions interest rate risk is the main risk factor that could impact the used in the sensitivity analysis compared with the previous income statement (raising borrowing costs) in the event of year. 352 Annual Report 2015With all other variables held constant, the Company’s profit before tax would be affected as follows: Millions of euro Change in financial expense on gross long-term floating- rate debt after hedging Change in fair value of derivatives classified as non- hedging instruments Change in fair value of derivatives designated as hedging instruments Cash flow hedges Fair value hedges Basis points 25 25 25 25 at Dec. 31, 2015 at Dec. 31, 2014 Pre-tax impact on profit or loss Pre-tax impact on equity Pre-tax impact on profit or loss Pre-tax impact on equity Increase Decrease Increase Decrease Increase Decrease Increase Decrease 9 7 - (7) (9) (7) - 7 - - 13 - - - (13) - 9 8 - (9) (9) (8) - 9 - - 17 - - - (17) - Exchange risk Exchange risk is the risk that the fair value or future cash ties agree to exchange principal amounts denominated in different currencies at a specified future date and exchan- flows of a financial instrument will fluctuate because of ge rate (the strike). Such contracts may call for the actual changes in exchange rates. exchange of the two amounts (deliverable forwards) or For Enel SpA, the main source of exchange risk is the pre- rate and the prevailing exchange rate at maturity (non-deli- sence of monetary financial instruments denominated in a verable forwards). In the latter case, the strike rate and/or currency other than the euro, mainly bonds denominated the spot rate may be determined as averages of the official in foreign currency. fixings of the European Central Bank. payment of the difference between the strike exchange The exposure to exchange risk did not change with respect to the previous year. Cross currency interest rate swaps are used to transform a For more details, please see note 31 “Financial instru- long-term fixed- or floating-rate liability in foreign currency ments”. into an equivalent floating- or fixed-rate liability in euros. In addition to having notionals denominated in different cur- In order to minimize exposure to changes in exchange ra- rencies, these instruments differ from interest rate swaps tes, the Company normally uses a variety of OTC derivati- in that they provide both for the periodic exchange of cash ves such as currency forwards and cross currency interest flows and the final exchange of principal. rate swaps. The term of such contracts does not exceed the maturity of the underlying exposure. The following table reports the notional amount of transac- tions outstanding at December 31, 2015 and December Currency forwards are contracts in which the counterpar- 31, 2014, broken down by type of hedged item. Millions of euro Notional amount at Dec. 31, 2015 at Dec. 31, 2014 Foreign exchange derivatives Currency forwards: - hedging exchange risk on commodities - hedging future cash flows - other currency forwards Cross currency interest rate swaps Total 11,389 7,240 4,138 11 23,729 35,118 11,218 8,378 2,840 - 22,017 33,235 353 Separate financial statements of Enel SpAAnnual Report 2015More specifically, these include: is denominated in currencies other than the euro. > currency forward contracts with a total notional amount Considering exchange rate hedges and the portion of debt of €7,240 million (€8,378 million at December 31, 2014), in foreign currency that is denominated in the currency of of which €3,620 million to hedge the exchange risk asso- account or the functional currency of the Company, the debt ciated with purchases of energy commodities by Group is fully hedged using cross currency interest rate swaps. companies, with matching transactions with the market; > currency forward contracts with a notional amount of Exchange risk sensitivity analysis €4,138 million (€2,840 million at December 31, 2014), to The Company analyses the sensitivity of its exposure by hedge the exchange risk associated with other expected estimating the effects of a change in exchange rates on the cash flows in currencies other than the euro, of which portfolio of financial instruments. €2,069 million in market transactions; More specifically, sensitivity analysis measures the potential > cross currency interest rate swaps with a notional amount impact of market scenarios on equity, for the cash flow hed- of €23,729 million (€22,017 million at December 31, 2014) ge component, and on profit or loss, for the fair value hedge to hedge the exchange risk on the debt of Enel SpA or component, for derivatives that are not eligible for hedge other Group companies denominated in currencies other accounting and for the portion of gross long-term debt not than the euro. hedged using derivative financial instruments. For more details, please see note 33 “Derivatives and hedge ciation of the euro against all of the foreign currencies com- These scenarios are represented by the appreciation/depre- accounting”. pared with the value observed as at the reporting date. There were no changes in the methods and assumptions An analysis of the Group’s debt shows that 22.2% of gross used in the sensitivity analysis compared with the previous medium and long-term debt (18.4% at December 31, 2014) year. With all other variables held constant, the profit before tax would be affected as follows: at Dec. 31, 2015 at Dec. 31, 2014 Pre-tax impact on profit or loss Pre-tax impact on equity Pre-tax impact on profit or loss Pre-tax impact on equity Exchange rate Increase Decrease Increase Decrease Increase Decrease Increase Decrease 10% 10% - - - - (507) - 620 - - - - - (485) 592 - - Millions of euro Change in fair value of derivatives designated as hedging instruments Cash flow hedges Fair value hedges 354 Annual Report 201532.3 Credit risk Credit risk is represented by the possibility that a change ring risks under the policies and procedures outlined in the in the creditworthiness of a counterparty in a financial tran- governance rules for managing the Group’s risks, which are saction could impact the creditor position, in terms of insol- also designed to ensure prompt identification of possible mi- vency (default risk) or changes in its market value (spread tigation actions to be taken. risk) such as to give rise to a loss. The Company is exposed Within this general framework, Enel entered into margin to credit risk from its financial activities, including transac- agreements with the leading financial institutions with which tions in derivatives, deposits with banks and financial insti- it operates that call for the exchange of cash collateral, which tutions, foreign exchange transactions and other financial significantly mitigates the exposure to counterparty risk. instruments. The sources of exposure to credit risk did not change with At December 31, 2015, the exposure to credit risk, repre- respect to the previous year. sented by the carrying amount of financial assets net of re- The Company’s management of credit risk is based on the lated provisions for impairment as well as derivatives with a selection of counterparties from among leading Italian and positive fair value, net of any cash collateral held, amounted international financial institutions with high credit standing to €10,909 million (€14,101 million at December 31, 2014). considered solvent both by the market and on the basis Of the total, €3,822 million regard receivables in respect of of internal assessments, diversifying the exposure among Group companies and €5,925 million regard cash and cash them. Credit exposures and associated credit risk are regu- equivalents. larly monitored by the departments responsible for monito- Millions of euro Non-current financial receivables Other non-current financial assets Trade receivables Current financial receivables Other current financial assets Financial derivatives Cash and cash equivalents at Dec. 31, 2015 at Dec. 31, 2014 Change of which Group of which Group 72 5 283 2,958 445 1,221 5,925 72 - 276 2,958 173 343 - 117 4 132 4,018 1,022 1,836 6,972 117 - 126 4,018 205 869 - (45) 1 151 (1,060) (577) (615) (1,047) (3,192) Total 10,909 3,822 14,101 5,335 32.4 Liquidity risk Liquidity risk is the risk that the Company will encounter In the long term, liquidity risk is mitigated by maintaining difficulty in meeting obligations associated with financial lia- a balanced debt maturity profile, diversification of funding bilities that are settled by delivering cash or another financial sources in terms of instruments, markets/currencies and asset. counterparties. The objectives of liquidity risk management policies are: > ensuring an appropriate level of liquidity for the Group, At December 31, 2015 Enel SpA had a total of about €5,925 minimizing the associated opportunity cost; million in cash or cash equivalents (€6,972 million at Decem- > maintaining a balanced debt structure in terms of the ma- ber 31, 2014), and committed lines of credit amounting to turity profile and funding sources. €5,720 million (of which none had been drawn) maturing in In the short term, liquidity risk is mitigated by maintaining an more than one year (€5,670 million at December 31, 2014). appropriate level of unconditionally available resources, in- cluding cash and short-term deposits, available committed credit lines and a portfolio of highly liquid asset. 355 Separate financial statements of Enel SpAAnnual Report 2015Maturity analysis The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments. Millions of euro Bonds: - fixed rate - floating rate Total Less than 3 months Between 3 months and 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years Maturing in 1,999 999 2,998 - 64 64 1,498 65 1,563 6,746 869 7,615 4,343 982 5,325 32.5 Offsetting financial assets and financial liabilities The following table reports the net financial assets and lia- guarantee transactions involving derivatives, Enel SpA has bilities. More specifically, it shows that there are no netting entered into margin agreements with leading financial insti- arrangements for derivatives in the financial statements tutions that call for the exchange of cash collateral, broken since the Company does not plan to set-off assets and lia- down as shown in the table. bilities. As envisaged by current market regulations and to Millions of euro (a) (b) (c)=(a)-(b) at Dec. 31, 2015 (d) (e)=(c)-(d) Related amounts not set off in the balance sheet (d)(i),(d)(ii) (d)(iii) Gross amounts of recognized financial assets/ (liabilities) set off in the balance sheet Net amounts of financial assets/ (liabilities) presented in the balance sheet Gross amounts of recognized financial assets/ (liabilities) Net portion of financial assets/ (liabilities) guaranteed with cash collateral Net amounts of financial assets/ (liabilities) Financial instruments 450 2,440 2,890 2,890 (629) (2,455) (3,084) (3,084) (194) - - - - - - - - - 450 2,440 2,890 2,890 (629) (2,455) (3,084) (3,084) (194) - - - - - - - - - (132) (2,113) (2,245) (2,245) 441 221 662 662 318 327 645 645 (188) (2,234) (2,422) (2,422) (1,583) (1,777) FINANCIAL ASSETS Derivative financial assets: - on interest rate risk - on exchange risk Total derivative financial assets TOTAL FINANCIAL ASSETS FINANCIAL LIABILITIES Derivative financial liabilities: - on interest rate risk - on exchange risk Total derivative financial liabilities TOTAL FINANCIAL LIABILITIES TOTAL NET FINANCIAL ASSETS/(LIABILITIES) 356 Annual Report 201533. Derivatives and hedge accounting The following tables report the notional amount and fair va- can be expressed as a value or a quantity (for example tons, lue of derivative financial assets and liabilities by type of hed- converted into euros by multiplying the notional amount by ge relationship and hedged risk, broken down into current the agreed price). Amounts denominated in currencies other and non-current derivative financial assets and liabilities. than the euro are converted at the end-year exchange rates The notional amount of a derivative contract is the amount provided by the European Central Bank. on the basis of which cash flows are exchanged. This amount Millions of euro Non-current Current Notional amount Fair value assets Notional amount Fair value assets at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Change Change Derivatives designated as hedging instruments Cash flow hedges: - on interest rate risk - on exchange risk Total cash flow hedges Fair value hedges: - on interest rate risk Total fair value hedges Derivatives at FVTPL: - on interest rate risk - on exchange risk Total derivatives at FVTPL TOTAL DERIVATIVE FINANCIAL ASSETS - 3,928 3,928 800 800 - 3,649 3,649 800 800 - 888 888 35 35 9,822 9,474 3,112 9,582 413 1,255 - 656 656 40 40 376 907 - 232 232 (5) (5) 37 348 - - - - - 400 - 400 - - 96 45 5,342 4,476 19,296 12,694 1,668 1,283 385 5,438 4,521 24,024 17,143 2,591 1,979 612 5,438 4,921 - - - - - 2 297 299 299 - - - - - 2 278 280 280 - - - - - - 19 19 19 Millions of euro Non-current Current Notional amount Fair value assets Notional amount Fair value assets at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 Change at Dec. 31, 2014 Change Derivatives designated as hedging instruments Cash flow hedges: - on interest rate risk - on exchange risk Total cash flow hedges Derivatives at FVTPL: - on interest rate risk - on exchange risk Total derivatives at FVTPL TOTAL DERIVATIVE FINANCIAL LIABILITIES 390 1,556 1,946 9,860 9,475 390 1,470 1,860 3,150 9,582 143 887 159 (16) 1,030 (143) 1,030 1,189 (159) - - - 900 - 900 419 1,268 384 911 35 357 195 146 5,343 4,476 19,335 12,732 1,687 1,295 392 5,538 4,622 21,281 14,592 2,717 2,484 233 5,538 5,522 - - - 67 300 367 367 1 - 1 75 283 358 359 (1) - (1) (8) 17 9 8 357 Separate financial statements of Enel SpAAnnual Report 201533.1 Hedge accounting Derivatives are initially recognized at fair value, on the trade a highly probable transaction that could affect profit or loss. date of the contract and are subsequently re-measured at The effective portion of changes in the fair value of derivati- their fair value. ves that are designated and qualify as cash flow hedges is The method of recognizing the resulting gain or loss depen- recognized in other comprehensive income. The gain or loss ds on whether the derivative is designated as a hedging in- relating to the ineffective portion is recognized immediately strument, and if so, on the nature of the item being hedged. in the income statement. Hedge accounting is applied to derivatives entered into in Amounts accumulated in equity are reclassified to profit or order to reduce risks such as interest rate risk, exchange loss in the period when the hedged item affects profit or risk, commodity risk, credit risk and equity risk when all the loss. criteria provided for under IAS 39 are met. When a hedging instrument expires or is sold, or when a At the inception of the transaction, the Company documents hedge no longer meets the criteria for hedge accounting but the relationship between hedging instruments and hedged the hedged item has not expired or been cancelled, any cu- items, as well as its risk management objectives and stra- mulative gain or loss existing in equity at that time remains tegy. The Company also analyzes, both at hedge inception in equity and is recognized when the forecast transaction is and on an ongoing systematic basis, the effectiveness of ultimately recognized in the income statement. hedges using prospective and retrospective tests in order When a forecast transaction is no longer expected to occur, to determine whether hedging instruments are highly effec- the cumulative gain or loss that was reported in equity is tive in offsetting changes in the fair values or cash flows of immediately transferred to profit or loss. hedged items. The Company currently uses these hedge relationships to Depending on the nature of the risks to which it is exposed, minimize the volatility of profit or loss. the Company designates derivatives as hedging instruments in one of the following hedge relationships: > cash flow hedge derivatives in respect of the risk of: (i) Fair value hedges Fair value hedges are used to protect the Company against changes in the cash flows associated with long-term floa- exposures to adverse changes in the fair value of assets, ting-rate debt; (ii) changes in the exchange rates associa- liabilities or firm commitments attributable to a particular ted with long-term debt denominated in a currency other risk that could affect profit or loss. than the currency of account or the functional currency in Changes in the fair value of derivatives that qualify and are which the company holding the financial liability operates; designated as hedging instruments are recognized in the (iii) changes in the price of fuels and non-energy commo- income statement, together with changes in the fair value dities denominated in a foreign currency; of the hedged item that are attributable to the hedged risk. > fair value hedge derivatives involving the hedging of expo- If the hedge is ineffective or no longer meets the criteria for sures to changes in the fair value of an asset, a liability or hedge accounting, the adjustment to the carrying amount a firm commitment attributable to a specific risk; of a hedged item for which the effective interest method > derivatives hedging a net investment in a foreign opera- is used is amortized to profit or loss over the period to ma- tion (NIFO), involving the hedging of exposures to exchan- turity. ge rate volatility associated with investments in foreign entities. The Company currently makes use of such hedge rela- tionships to seize opportunities associated with general de- For more details on the nature and the extent of risks arising velopments in the yield curve. from financial instruments to which the Company is expo- sed, please see note 32 “Risk management”. Cash flow hedges Cash flow hedges are used in order to hedge the Company’s exposure to changes in future cash flows that are attributa- ble to a particular risk associated with an asset, a liability or 358 Annual Report 2015Hedge of a Net Investment in a Foreign Operation (NIFO) Hedges of net investments in foreign operations, with a fun- which time the foreign exchange differences are transferred to profit or loss. ctional currency other than the euro, are hedges of the impact The Company does not currently hold any hedges of net in- of changes in exchange rates in respect of investments in fo- vestments in a foreign operation. reign entities. The hedge instrument is a liability denominated in the same currency as the investment. The foreign exchange For more information on the fair value measurement of deri- differences of the hedged item and the hedge are accumula- vatives, please see note 34 “Fair value measurement”. ted each year in equity until the disposal of the investment, at Hedge relationships by type of risk hedged 33.1.1 Interest rate risk The following table shows the notional amount and the fair transactions outstanding as at December 31, 2015 and De- value of the hedging instruments on the interest rate risk of cember 31, 2014, broken down by type of hedged item. Millions of euro Fair value Notional amount Fair value Notional amount Hedged instrument Hedged item at Dec. 31, 2015 at Dec. 31, 2014 Interest rate swaps Interest rate swaps Total Floating-rate borrowings Fixed-rate borrowings (143) 35 (108) 390 800 1,190 (160) 40 (120) 1,690 800 2,490 The interest rate swaps outstanding at the end of the year hedge derivatives refer to the hedging of certain floating-rate and designated as hedging instruments function as a cash bonds issued since 2001. flow hedge and fair value hedge for the hedged item. More The following table shows the notional amount and the fair specifically, fair value hedge derivatives relate to the issue of value of hedging derivatives on interest rate risk as at Decem- an unconvertible hybrid bond denominated in euros in 2013, ber 31, 2015 and December 31, 2014, broken down by type hedged in the amount of €800 million, while the cash flow of hedge. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Cash flow hedge derivatives: - interest rate swaps Fair value hedge derivatives: - interest rate swaps TOTAL INTEREST RATE DERIVATIVES - - 800 800 800 400 400 800 800 1,200 - - 35 35 35 - - 40 40 40 390 390 - - 1,290 1,290 - - (143) (143) - - (160) (160) - - 390 1,290 (143) (160) The notional amount of the interest rate swaps at December flow hedge positions for the same amount in 2015. 31, 2015 came to €1,190 million (€2,490 million at December The general decline in the yield curve over the course of the 31, 2014), with a corresponding negative fair value of €108 year prompted an improvement in the fair value of the fair million (negative €120 million at December 31, 2014). value hedge derivatives. The decline of €1,300 million in the notional amount is attri- butable to the maturing, and consequent closure, of cash 359 Separate financial statements of Enel SpAAnnual Report 2015Cash flow hedge derivatives The following table shows the cash flows expected in coming years from cash flow hedge derivatives. Millions of euro Fair value Distribution of expected cash flows Cash flow hedge derivatives on interest rates at Dec. 31, 2015 Positive fair value Negative fair value - (143) 2016 - (14) 2017 - (14) 2018 - (13) 2019 - (13) 2020 - (12) Beyond - (95) The following table shows the impact of cash flow hedge derivatives on interest rate risk on equity during the period, gross of tax effects. Millions of euro Opening balance at January 1 Changes in fair value recognized in equity (OCI) Changes in fair value recognized in profit or loss - recycling Changes in fair value recognized in profit or loss - ineffective portion Closing balance at December 31 2015 (93) - 6 - (87) 2014 (86) - (7) - (93) Fair value hedge derivatives The following table shows the cash flows expected in coming years from fair value hedge derivatives. Millions of euro Fair value Distribution of expected cash flows Fair value hedge derivatives at Dec. 31, 2015 2016 2017 2018 2019 2020 Beyond Positive fair value Negative fair value 35 - 12 - 13 - 11 - 31 - - - - - 33.1.2 Exchange risk The following table shows the notional amount and the fair sactions outstanding as at December 31, 2015 and Decem- value of the hedging instruments on exchange risk of tran- ber 31, 2014, broken down by type of hedged item. Millions of euro Hedging instruments Fair value Notional amount Fair value Notional amount Hedged item at Dec. 31, 2015 at Dec. 31, 2014 Cross currency interest rate swap (CCIRS) Fixed-rate borrowings Total 1 1 5,484 5,484 (374) (374) 5,119 5,119 The cross currency interest rate swaps outstanding at the The following table shows the notional amount and the fair end of the year and designated as hedging instruments value of derivatives on exchange risk as at December 31, 2015 function as a cash flow hedge for the hedged item. More and December 31, 2014, broken down by type of hedge. specifically, these derivatives hedge fixed-rate bonds deno- minated in foreign currencies. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 3,928 3,649 3,928 3,649 3,928 3,649 888 888 888 656 656 656 1,556 1,470 (887) (1,030) 1,556 1,470 (887) (1,030) 1,556 1,470 (887) (1,030) Cash flow hedge derivatives: - cross currency interest rate swaps Total foreign exchange derivatives 360 Annual Report 2015 The notional amount of the cross currency interest rate swaps The notional amount and the relative fair value essentially at December 31, 2015 came to €5,484 million (€5,119 million changed as a result of developments in the exchange rate of at December 31, 2014), with a corresponding positive fair va- the euro against the main other currencies. lue of €1 million (negative €374 million at December 31, 2014). Cash flow hedge derivatives The following table shows the cash flows expected in coming years from cash flow hedge derivatives on exchange risk. Millions of euro Fair value Distribution of expected cash flows Cash flow hedge derivatives on exchange rates at Dec. 31, 2015 2016 Positive fair value Negative fair value 888 (887) 123 (73) 2017 116 (65) 2018 110 (59) 2019 762 (474) 2020 116 (108) Beyond 148 (28) The following table shows the impact of cash flow hedge derivatives on exchange risk on equity during the period, gross of tax effects. Millions of euro Opening balance at January 1 Changes in fair value recognized in equity (OCI) Changes in fair value recognized in profit or loss - recycling Changes in fair value recognized in profit or loss - ineffective portion Closing balance at December 31 2015 (310) - 102 - (208) 2014 (242) - (68) - (310) 33.2 Derivatives at fair value through profit or loss The following table shows the notional amount and the fair value of derivatives at FVTPL as at December 31, 2015 and De- cember 31, 2014. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 at Dec. 31, 2015 at Dec. 31, 2014 Derivatives at FVTPL on interest rates: - interest rate swaps Derivatives at FVTPL on exchange rates: - forwards - cross currency interest rate swaps Total derivatives at FVTPL 9,918 9,918 3,157 3,157 14,817 14,058 5,694 5,609 415 415 1,552 308 378 378 1,186 364 10,055 10,055 3,296 3,296 (486) (486) (460) (460) 14,817 14,058 (1,568) (1,194) 5,694 5,609 (311) (369) 9,123 8,449 1,244 822 9,123 8,449 (1,257) (825) 24,735 17,215 1,967 1,564 24,872 17,354 (2,054) (1,654) At December 31, 2015 the notional amount of derivatives at hedges of the debt of the Group companies with the market fair value through profit or loss on interest rates and foreign and intermediated in the same notional amount with those exchange rates came to €49,607 million (€34,569 million at companies in the amount of €9,918 million. December 31, 2014), corresponding to a negative fair value The overall change in the notional amount and the fair value of €87 million (negative €90 million at December 31, 2014). of interest rate swaps (respectively, a positive €13,520 mil- Interest rate swaps at the end of the year refer primarily to lion and a positive €11 million) compared with the previous 361 Separate financial statements of Enel SpAAnnual Report 2015year is attributable to new transactions closed as part of The change in the notional amount and the fair value as the pre-hedge strategy for future bond issues in 2017-2018 compared with the previous year is associated with normal and 2019-2020, designed to set the cost of future funding in operations. advance and to the general decline in the interest rate yield Cross currency interest rate swaps, with a notional amount curve over the course of the year. of €9,123 million, relate to hedges of exchange risk on the Forward contracts, with a notional amount of €5,694 million, debt of the Group companies denominated in currencies relate mainly to OTC derivatives entered into to mitigate the other than the euro and matched with market transactions. exchange risk associated with the prices of energy commo- The change in the notional amount and the fair value of the dities within the provisioning process of Group companies cross currency interest rate swaps is mainly due to deve- and matched with market transactions. They also hedge the lopments in the exchange rate of the euro with other major expected cash flows in currencies other than the currency of currencies and the normal expiry of certain derivatives du- account connected with the acquisition of non-energy com- ring 2015. modities. 362 Annual Report 201534. Fair value measurement The Company measures fair value in accordance with IFRS market is determined using valuation methods appropriate 13 whenever required by international accounting stan- for each type of financial instrument and market data as of dards. the close of the period (such as interest rates, exchange Fair value is defined as the price that would be received to rates, volatility), discounting expected future cash flows on sell an asset or paid to transfer a liability. The best estimate the basis of the market yield curve and translating amounts is the market price, i.e. its current price, publicly available in currencies other than the euro using exchange rates pro- and effectively traded on an active, liquid market. vided by the European Central Bank. For contracts invol- The fair value of assets and liabilities is categorized into ving commodities, the measurement is conducted using a fair value hierarchy that provides three levels defined as prices, where available, for the same instruments on both follows on the basis of the inputs to valuation techniques regulated and unregulated markets. used to measure fair value: In accordance with the new international accounting stan- > Level 1: quoted prices (unadjusted) in active markets for dards, in 2013 the Group included a measurement of credit identical assets or liabilities to which the Company has risk, both of the counterparty (Credit Valuation Adjustment access at the measurement date; or CVA) and its own (Debit Valuation Adjustment or DVA), > Level 2: inputs other than quoted prices included within in order to adjust the fair value of financial instruments for Level 1 that are observable for the asset or liability, either the corresponding amount of counterparty risk. directly (that is, as prices) or indirectly (that is, derived More specifically, the Group measures CVA/DVA using a from prices); Potential Future Exposure valuation technique for the net > Level 3: inputs for the asset or liability that are not based exposure of the position and subsequently allocating the on observable market data (that is, unobservable inputs). adjustment to the individual financial instruments that In this note, the relevant disclosures are provided in order make up the overall portfolio. All of the inputs used in this to assess the following: technique are observable on the market. Changes in the > for assets and liabilities that are measured at fair value on assumptions underlying the estimated inputs could have a recurring or non-recurring basis in the balance sheet af- an effect on the fair value reported for such instruments. ter initial recognition, the valuation techniques and inputs The notional amount of a derivative contract is the amount used to develop those measurements; and on which cash flows are exchanged. This amount can be > for recurring fair value measurements using significant expressed as a value or a quantity (for example tons, con- unobservable inputs (Level 3), the effect of the measure- verted into euros by multiplying the notional amount by the ments on profit or loss or other comprehensive income agreed price). for the period. For this purpose: Amounts denominated in currencies other than the euro are converted into euros at the exchange rate provided by > recurring fair value measurements are those that IFRSs the European Central Bank. require or permit in the balance sheet at the end of each The notional amounts of derivatives reported here do not reporting period; necessarily represent amounts exchanged between the > non-recurring fair value measurements are those that parties and therefore are not a measure of the Company’s IFRSs require or permit in the balance sheet in particular credit risk exposure. circumstances. For listed debt instruments, the fair value is given by official prices. For unlisted instruments the fair value is determined The fair value of derivative contracts is determined using using appropriate valuation techniques for each category of the official prices for instruments traded on regulated mar- financial instrument and market data at the closing date of kets. The fair value of instruments not listed on a regulated the year, including the credit spreads of Enel SpA. 363 Separate financial statements of Enel SpAAnnual Report 201534.1 Assets measured at fair value in the balance sheet The following table shows, for each class of assets measu- reporting period and the level in the fair value hierarchy into red at fair value on a recurring or non-recurring basis in the which the fair value measurements are categorized. balance sheet, the fair value measurement at the end of the Millions of euro Non-current assets Current assets Fair value at Dec. 31, 2015 Notes Level 1 Level 2 Level 3 Fair value at Dec. 31, 2015 Level 1 Level 2 Level 3 Derivatives Cash flow hedge derivatives: - on exchange risk 33 Total Fair value hedge derivatives: - on interest rate risk 33 Total Fair value through profit or loss: - on interest rate risk - on exchange risk 33 33 Total TOTAL 888 888 35 35 413 1,255 1,668 2,591 - - - - - - - - 888 888 35 35 413 1,255 1,668 2,591 - - - - - - - - - - - - 2 297 299 299 - - - - - - - - - - - - 2 297 299 299 - - - - - - - - 34.2 Liabilities measured at fair value in the balance sheet The following table reports, for each class of liabilities me- end of the reporting period and the level in the fair value asured at fair value on a recurring or non-recurring basis hierarchy into which the fair value measurements are ca- in the balance sheet, the fair value measurement at the tegorized. Millions of euro Non-current liabilities Current liabilities Fair value at Dec. 31, 2015 Notes Level 1 Level 2 Level 3 Fair value at Dec. 31, 2015 Level 1 Level 2 Level 3 Derivatives Cash flow hedge derivatives: - on interest rate risk - on exchange risk Total Fair value through profit or loss: - on interest rate risk - on exchange risk Total TOTAL 33 33 33 33 143 887 1,030 419 1,268 1,687 2,717 - - - - - - - 143 887 1,030 419 1,268 1,687 2,717 - - - - - - - - - - 67 300 367 367 - - - - - - - - - - 67 300 367 367 - - - - - - - 364 Annual Report 201534.3 Liabilities not measured at fair value in the balance sheet The following table shows, for each class of liabilities not reporting period and the level in the fair value hierarchy into measured at fair value in the balance sheet but for which the which the fair value measurements are categorized. fair value shall be disclosed, the fair value at the end of the Millions of euro LIABILITIES Fair value at Dec. 31, 2015 Notes Level 1 Level 2 Level 3 Bonds: - fixed rate - floating rate Total 31.2.1 31.2.1 17,001 2,931 19,932 17,001 1,737 18,738 - 1,194 1,194 - - - 35. Related parties Related parties have been identified on the basis of the accordance with procedural and substantive propriety. provisions of international accounting standards and the applicable CONSOB measures. In November 2010, the Board of Directors of Enel SpA ap- proved a procedure governing the approval and execution The transactions Enel SpA entered into with its subsidiari- of transactions with related parties carried out by Enel SpA es mainly involved the provision of services, the sourcing directly or through subsidiaries. The procedure (available at and employment of financial resources, insurance covera- http://www.enel.com/en-GB/governance/rules/related_par- ge, human resource management and organization, legal ties/) sets out rules designed to ensure the transparency and corporate services, and the planning and coordination and procedural and substantive propriety of transactions of tax and administrative activities. with related parties. It was adopted in implementation of All the transactions are part of routine operations, are carri- and the implementing regulations issued by CONSOB. In ed out in the interest of the Company and are settled on an 2015, no transactions were carried out for which it was ne- arm’s length basis, i.e. on the same market terms as agree- cessary to make the disclosures required in the rules on ments entered into between two independent parties. transactions with related parties adopted with CONSOB the provisions of Article 2391-bis of the Italian Civil Code Resolution 17221 of March 12, 2010, as amended with Re- Finally, the Enel Group’s corporate governance rules, which solution 17389 of June 23, 2010. are discussed in greater detail in the Report on Corporate Governance and Ownership Structure available on the Com- The following tables summarize commercial, financial and pany’s website (www.enel.com), establish conditions for en- other relationships between the Company and related parties. suring that transactions with related parties are performed in 365 Separate financial statements of Enel SpAAnnual Report 2015Commercial and other relationships 2015 Millions of euro Receivables Payables Goods Services Goods Services at Dec. 31, 2015 at Dec. 31, 2015 2015 2015 Costs Revenue Subsidiaries: Central Geradora Termelétrica Fortaleza SA Edegel SA Empresa de Distribución Eléctrica de Lima Norte SAA Enel Brasil SA Endesa Distribución Eléctrica SL Endesa Generación SA Enel Latinoamérica SA Endesa SA Enel Distributie Banat SA Enel Distributie Dobrogea SA Enel Distributie Muntenia SA Enel Distribuzione SpA Enel Energia SpA Enel Iberoamérica SL Enel France Sas Enel Green Power SpA Enel Green Power North America Inc. Enel Ingegneria e Ricerca SpA Enel Russia PJSC Enel Produzione SpA Enel Romania Srl Enel Italia Srl Enel Servizio Elettrico SpA Enel Sole Srl Enel Trade SpA Enel.Factor SpA Enel Insurance NV Enel.si Srl Enelpower SpA Endesa Energía SA Enersis SA Gas y Electricidad Generación SAU Nuove Energie Srl Slovenské elektrárne AS Unión Eléctrica de Canarias Generación SAU Total Other related parties: GSE Fondazione Centro Studi Enel Total TOTAL 366 1 2 3 15 19 3 - - 1 1 3 361 102 1 2 17 1 2 18 132 4 84 57 2 5 - 1 1 - 4 3 1 - 16 1 863 1 - 1 - - - - 1 - - 1 - - - 167 26 8 1 115 1 6 4 153 - 64 13 3 85 2 - 2 3 - - - 1 - - 656 - - - 864 656 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 - 1 3 - - - - - 9 - - - - - - - 58 - 1 - - - - - - - - - - - 73 - - - 73 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 2 2 15 8 5 - - 1 1 2 45 7 1 - 16 - 1 7 23 1 80 4 1 4 - - - - 4 2 2 - 7 1 243 - 1 1 244 Annual Report 20152014 Millions of euro Receivables Payables Goods Services Goods Services at Dec. 31, 2014 at Dec. 31, 2014 2014 2014 Costs Revenue Subsidiaries: Endesa Distribución Eléctrica SL Endesa Generación SA Enel Latinoamérica SA Endesa SA Enel Distributie Banat SA Enel Distributie Dobrogea SA Enel Distributie Muntenia SA Enel Distribuzione SpA Enel Energia SpA Enel Iberoamérica SL Enel France Sas Enel Green Power Partecipazioni Speciali Srl Enel Green Power SpA Enel Green Power España SL Enel Green Power North America Inc. Enel Ingegneria e Ricerca SpA Enel Longanesi Developments Srl Enel Russia PJSC Enel Produzione SpA Enel Romania Srl Enel Italia Srl Enel Servizio Elettrico SpA Enel Sole Srl Enel Trade SpA Enel.Factor SpA Enel Insurance NV Enel.si Srl Enelpower SpA Endesa Energía SA Gas y Electricidad Generación SAU Nuove Energie Srl Slovenské elektrárne AS Sviluppo Nucleare Italia Srl Unión Eléctrica de Canarias Generación SAU Total Other related parties: GSE Total TOTAL 16 (2) - - - - 1 146 109 1 2 - 41 - 1 8 - 16 88 4 22 6 3 18 - 1 7 - 6 - - 17 - - 511 1 1 512 - - 1 4 - - - 289 4 - 1 2 10 - 1 3 1 4 169 - 47 74 - 105 13 - 2 3 - - 1 - 3 - 737 1 1 738 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 5 - - - - - - - - - - - (1) - 1 - - 49 - - - - - - - - - - - 3 - 58 - - 58 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 16 3 (3) 1 1 1 1 73 59 1 - - 21 (2) - 2 - 4 33 - 1 8 4 3 - 1 1 - 6 1 1 6 - 2 245 - - 245 367 Separate financial statements of Enel SpAAnnual Report 2015Financial relationships 2015 Millions of euro Receivables Payables Guarantees Costs Revenue Dividends at Dec. 31, 2015 2015 165 9 1 1,459 - 107 - - 331 1 1 28 1 119 101 1,017 17 - 47 123 - 4 - - 13 - 890 395 - 3,719 1,087 - 2 - - 2,432 21,846 1,533 - - 3 - 7 3 87 - - 648 84 - - - 364 2 15 - 36 - - 2 - - - 51 1,804 33 376 2 1 2,415 73 1,798 110 8 1,560 - 1 36 1 8 86 - 1 - - 1 67 1 - - - 145 - - - - 497 2 - - - - - - 48 10 1 48 2 13 2 2 1,245 159 500 - - - - - 132 109 2 1 - - 36 6 8 1 - 347 2 - - - - - - - - - - - 9 - - - - - - - - - - - 3,544 4,968 35,015 2,249 661 2,022 - - - - - - - - - - - - - - - 1 1 2 3,544 4,968 35,015 2,249 661 2,024 Subsidiaries: Enel Distribuzione SpA Enel Energia SpA Enel Iberoamérica SL Enel Finance International NV Enel Green Power Chile Ltda Enel Green Power International BV Enel Green Power México S de RL de Cv Enel Green Power North America Inc. Enel Green Power SpA Enel Ingegneria e Ricerca SpA Enel Investment Holding BV Enel Longanesi Developments Srl Enel M@P Srl Enel Produzione SpA Enel Italia Srl Enel Servizio Elettrico SpA Enel Sole Srl Enel Trade Romania Srl Enel Trade SpA Enel.Factor SpA Enel.Newhydro Srl Enel.si Srl Enelpower SpA Marcinelle Energie SA Nuove Energie Srl Enel Oil & Gas SpA Total Other related parties: Emittenti Titoli SpA CESI SpA Total TOTAL 368 Annual Report 2015 - 189 8 2 173 - 32 1 1 - 71 5 3 - - 35 6 8 3 - 115 2 - - - - - - - - 1,373 16 - - - - - - - 109 - - - - 223 7 85 - - - 3 - - 1 - - - - 2014 Millions of euro Receivables Payables Guarantees Costs Revenue Dividends at Dec. 31, 2014 2014 Subsidiaries: Concert Srl Enel Distribuzione SpA Enel Energia SpA Enel Iberoamérica SL - 218 11 2 2 1,258 - 2 - 4,005 1,009 - - 1 - - Enel Finance International NV 1,714 3,105 25,522 750 Enel France Sas Enel Green Power International BV Enel Green Power México S de RL de Cv Enel Green Power North America Inc. Enel Green Power Romania Srl Enel Green Power SpA Enel Ingegneria e Ricerca SpA Enel Investment Holding BV Enel Longanesi Developments Srl Enel M@P Srl Enel Produzione SpA Enel Italia Srl Enel Servizio Elettrico SpA Enel Sole Srl Enel Trade Romania Srl Enel Trade SpA Enel.Factor SpA Enel.Newhydro Srl Enel.si Srl Enelpower SpA Marcinelle Energie SA Nuove Energie Srl PH Chucas SA Sviluppo Nucleare Italia Srl Total Other related parties: CESI SpA Total TOTAL - 98 23 14 5 67 98 1 27 1 137 102 1,242 41 - 1,231 160 - 5 - - 5 7 - 5,209 - - - - - - - 9 - 88 - - 112 200 - - - 26 - - 45 - 1,543 67 365 1 5 2,691 91 1,660 111 6 - 1 - 2 - 3 - - - - 129 - - - - 239 1,424 286 - 6 36 1 9 86 - 4 - - - - - - - - - 16 - 34 - - - 11 5,076 - - 38,713 1,172 654 1,817 - - - - - - 1 1 5,209 5,076 38,713 1,172 654 1,818 The impact of transactions with related parties on the balance sheet, income statement and cash flows is reported in the following tables. 369 Separate financial statements of Enel SpAAnnual Report 2015Impact on balance sheet Millions of euro Total Related parties % of total Total Related parties % of total at Dec. 31, 2015 at Dec. 31, 2014 Assets Derivatives - non-current Other non-current financial assets Other non-current assets Trade receivables Derivatives - current Other current financial assets Other current assets Liabilities Derivatives - non-current Other non-current liabilities Short-term borrowings Trade payables Derivatives - current Other current financial liabilities Other current liabilities 2,591 107 409 283 299 3,403 460 2,717 243 4,914 164 367 643 1,046 317 71 164 278 26 3,130 422 1,365 243 3,243 59 276 84 354 12.2% 66.4% 40.1% 98.2% 8.7% 92.0% 91.7% 50.2% 100.0% 66.0% 36.0% 75.2% 13.1% 33.8% 1,979 146 467 132 280 5,040 244 2,484 287 4,746 139 359 694 975 819 117 177 127 50 4,223 208 469 287 4,319 55 234 54 396 41.4% 80.1% 37.9% 96.2% 17.9% 83.8% 85.2% 18.9% 100.0% 91.0% 39.6% 65.2% 7.8% 40.6% Impact on income statement Millions of euro Total Related parties % of total Total Related parties % of total 2015 2014 245 399 2,024 3,358 177 3,024 1,243 244 73 99.6% 18.3% 2,024 100.0% 500 161 2,248 1 14.9% 91.0% 74.3% 0.1% 246 324 1,818 2,190 222 1,954 1,377 245 58 99.6% 17.9% 1,818 100.0% 460 194 1,169 3 21.0% 87.4% 59.8% 0.2% Revenue Services and other operating expenses Income from equity investments Financial income on derivatives Other financial income Financial expense on derivatives Other financial expense Impact on cash flows Millions of euro Total Related parties % of total Total Related parties % of total Cash flows from operating activities 1,062 1,092 102.8% Cash flows from investing/disinvesting activities Cash flows from financing activities (560) (1,549) (559) 29 99.8% -1.9% 2015 2014 667 (10) 926 (11) 2,934 2,682 72.0% 90.9% 91.4% 370 Annual Report 201536. Contractual commitments and guarantees Millions of euro Sureties and guarantees given: - third parties - subsidiaries Total at Dec. 31, 2015 at Dec. 31, 2014 376 35,015 35,391 405 38,713 39,118 Change (29) (3,698) (3,727) Sureties granted to third parties regard guarantees issued by > €525 million issued to INPS on behalf of various Group the Parent Company as part of the disposal to third parties of companies whose employees elected to participate in the assets owned by Enel SpA or in the interest of its subsidiari- structural staff reduction plan (Article 4 of Law 92/2012); es and they essentially regard the sale of real estate assets > €495 million issued to Terna on behalf of Enel Distribuzio- (€375 million). The guarantee is meant to ensure the perfor- ne, Enel Trade, Enel Produzione and Enel Energia in re- mance of contractual obligations, specifically payments due spect of agreements for electricity transmission services; and the commitment to renew at least 50% of the long-term > €387 million issued to Snam Rete Gas on behalf of Enel lease agreements for six years. Trade for gas transport capacity; > €365 million as counter-guarantees in favor of the banks Sureties issued on behalf of subsidiaries include: that guaranteed the Energy Markets Operator (GME) on > €21,748 million issued on behalf of Enel Finance Interna- behalf of Enel Trade and Enel Produzione; tional securing bonds denominated in dollars, pounds, eu- > €364 million issued to financial counterparties on behalf ros and yen as part of the €35 billion Global Medium-Term of Enel Investment Holding securing bonds as part of the Notes Program; €35 billion Global Medium-Term Notes Program; > €3,050 million issued to the European Investment Bank > €97 million issued on behalf of Enel Finance International (EIB) for loans granted to Enel Distribuzione, Enel Produ- to secure the Euro Commercial Paper program; zione and Enel Green Power; > €80 million issued to RWE Supply & Trading GmbH on be- > €2,046 million issued to the tax authorities in respect half of Enel Trade for electricity purchases; of participation in the Group VAT procedure on behalf of > €50 million issued to E.ON on behalf of Enel Trade for tra- Enel.Newhydro, Enel Trade, Enel Produzione, Enelpower, ding on the electricity market; Enel Servizio Elettrico, Nuove Energie, Enel Ingegneria e > €32 million issued to Wingas GmbH & CO.KG on behalf of Ricerca, Enel M@p, Enel.si, Enel Green Power, Enel Sole Enel Trade for the supply of gas; and Enel Longanesi Developments; > €3,218 million issued to various beneficiaries as part of > €1,407 million in favor of Cassa Depositi e Prestiti issued financial support activities by the Parent Company on be- on behalf of Enel Distribuzione, which received the Enel half of subsidiaries. Grid Efficiency II loan; > €1,150 million issued by Enel SpA to the Acquirente Unico In its capacity as the Parent Company, Enel SpA has also (Single Buyer) on behalf of Enel Servizio Elettrico for obli- granted letters of patronage to a number of Group compa- gations under the electricity purchase contract; nies, essentially for assignments of receivables. 37. Contingent liabilities and assets Please see note 49 to the consolidated financial statements for information on contingent liabilities and asset. 371 Separate financial statements of Enel SpAAnnual Report 201538. Events after the reporting date Please see note 50 to the consolidated financial statements for information on events after the reporting date. 39. Fees of audit firm pursuant to Article 149-duodecies of the CONSOB “Issuers Regulation” Fees paid in 2015 to the audit firm and entities belonging table, pursuant to the provisions of Article 149-duodecies of to its network for services are summarized in the following the CONSOB “Issuers Regulation”. Entity providing the service Fees (millions of euro) of which: - Reconta Ernst & Young SpA - Entities of Ernst & Young network of which: - Reconta Ernst & Young SpA - Entities of Ernst & Young network of which: - Reconta Ernst & Young SpA - Entities of Ernst & Young network of which: - Reconta Ernst & Young SpA - Entities of Ernst & Young network of which: - Reconta Ernst & Young SpA - Entities of Ernst & Young network of which: - Reconta Ernst & Young SpA - Entities of Ernst & Young network of which: - Reconta Ernst & Young SpA - Entities of Ernst & Young network 1.6 - 0.6 - 0.5 - 2.7 2.3 12.6 0.6 3.9 - 0.5 - 0.5 20.4 23.1 Type of service Enel SpA Auditing Certification services Other services Total Enel SpA subsidiaries Auditing Certification services Tax advisory Other services Total TOTAL 372 Annual Report 2015373 Separate financial statements of Enel SpAAnnual Report 2015Declaration of the Chief Executive Officer and the officer responsible for the preparation of the Company financial reports 374 Annual Report 2015Declaration of the Chief Executive Officer and the officer responsible for the preparation of the financial reports of Enel SpA at December 31, 2015, 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 1. The undersigned Francesco Starace and Alberto De Paoli, 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 provi- sions 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 Company and b. the effective adoption of the administrative and accounting procedures for the preparation of the separate financial statements of Enel SpA in the period between January 1, 2015 and December 31, 2015. 2. In this regard, we report that: a. the appropriateness of the administrative and accounting procedures used in the preparation of the separate finan- cial statements of Enel SpA has been verified in an assessment of the internal control system for financial repor- ting. 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 separate financial statements of Enel SpA at December 31, 2015: a. have been prepared in compliance with the international accounting standards recognized in the European Union pursuant to Regulation 2002/1606/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. 4. Finally, we certify that the report on operations, included in the Annual Report 2015 and accompanied by the financial statements of Enel SpA at December 31, 2015, contains a reliable analysis of operations and performance, as well as the situation of the issuer, together with a description of the main risks and uncertainties to which it is exposed. Rome, March 22, 2016 Francesco Starace Alberto De Paoli Chief Executive Officer of Enel SpA Officer responsible for the preparation of the financial reports of Enel SpA 375 Declaration of the Chief Executive Officer and the officer responsibleAnnual Report 2015Reports 376 Annual Report 2015377 ReportsAnnual Report 2015Report of the Board of Auditors to the Shareholders’ Meeting of Enel SpA 378 Annual Report 2015Report of the Board of Auditors to the Shareholders’ Meeting of Enel SpA (pursuant to Article 153 of Legislative Decree 58/1998) Shareholders, During the year ended December 31, 2015 we performed the oversight activities envisaged by law at Enel SpA (hereinafter also “Enel” or the “Company”). In particular, pursuant to the provisions of Article 149, paragraph 1, of Legislative Decree 58 of February 24, 1998 (hereinafter the “Consolidated Law on Financial Intermediation”) and Article 19, paragraph 1 of Legisla- tive Decree 39 of January 27, 2010 (hereinafter “Decree 39/2010”) we monitored: > compliance with the law and the corporate bylaws as well as compliance with the principles of sound administration in the performance of the Company's business; > the Company’s financial reporting process and the adequacy of the administrative and accounting system, as well as the reliability of the latter in representing operational events; > the statutory audit of the annual statutory and consolidated accounts and the independence of the audit firm; > the adequacy and effectiveness of the internal control and risk management system; > the adequacy of the organizational structure of the Company, within the scope of our responsibilities; > the implementation of the corporate governance rules as provided for by the Corporate Governance Code for Listed Com- panies (hereinafter, the “Corporate Governance Code”), which the Company has adopted; > the appropriateness of the instructions given by the Company to its subsidiaries to enable it to meet statutory market disclosure requirements. In performing our checks and assessments of the above issues, we did not find any particular issues to report. In compliance with the instructions issued by CONSOB with Communication DEM/1025564 of April 6, 2001, as amended, we report the following: > we monitored compliance with the law and the bylaws and we have no issues to report; > on a quarterly basis, we received adequate information from the Chief Executive Officer, as well as through our participa- tion in the meetings of the Board of Directors of Enel, on activities performed, general developments in operations and the outlook, and on transactions with the most significant impact on performance or the financial position carried out by the Company and its subsidiaries. We report that the actions approved and implemented were in compliance with the law and the bylaws and were not manifestly imprudent, risky, in potential conflict of interest or in contrast with the resolutions of the Shareholders’ Meeting or otherwise prejudicial to the integrity of the Company’s assets. For a discussion of the features of the most significant transactions, please see the report on operations accompanying the separate financial statements of the Company for 2015 and the consolidated financial statements of the Enel Group for 2015 (in the section “Significant events in 2015”); > we did not find any atypical or unusual transactions conducted with third parties, Group companies or other related par- ties; > in the section “Related parties” of the notes to the separate 2015 financial statements of the Company, the directors describe the main related-party transactions – identified on the basis of international accounting standards and the in- structions of CONSOB – carried out by the Company, to which readers may refer for details on the transactions and their financial impact. They also detail the procedures adopted to ensure that related-party transactions are carried out in accor- dance with the principles of transparency and procedural and substantive fairness. The transactions were carried out in compliance with the approval and execution processes set out in the related procedure – adopted in compliance with the provisions of Article 2391-bis of the Italian Civil Code and the implementing regulations issued by CONSOB – described in the Report on Corporate Governance and Ownership Structure for 2015. All transactions with related parties reported in the notes to the separate 2015 financial statements of the Company were executed as part of ordinary operations in the interest of the Company and settled on market terms and conditions; > the Company declares that it has prepared its statutory financial statements for 2015 on the basis of international ac- counting standards (IAS/IFRS) – and the interpretations issued by the IFRIC and the SIC – endorsed by the European Union pursuant to Regulation 1606/2002/EC and in force at the close of 2015, as well as the provisions of Legislative De- 379 ReportsAnnual Report 2015cree 38 of February 28, 2005 and its related implementing measures, as it did the previous year. The Company’s separate financial statements for 2015 have been prepared on a going-concern basis using the cost method, with the exception of items that are measured at fair value under the IFRS-EU, as indicated in the accounting policies for the individual items of the consolidated financial statements. The notes to the Company’s separate financial statements also refer readers to the consolidated financial statements for information on the accounting standards and measurement criteria adopted, with the exception of equity investments in subsidiaries and associates, which are carried in the Company’s separate financial statements at purchase costs adjusted for any impairment losses. The notes to the Company’s separate finan- cial statements also refer readers to the consolidated financial statements for information on recently issued accounting standards. The separate financial statements for 2015 of the Company were audited by the independent auditors Reconta Ernst & Young SpA, which issued an unqualified opinion, including with regard to the consistency of the report on opera- tions with the financial statements, pursuant to Article 14 of Decree 39/2010; > the Company declares that it has also prepared the consolidated financial statements of the Enel Group for 2015 on the ba- sis of international accounting standards (IAS/IFRS) – and the interpretations issued by the IFRIC and the SIC – endorsed by the European Union pursuant to Regulation 1606/2002/EC and in force at the close of 2015, as well as the provisions of Legislative Decree 38 of February 28, 2005 and its related implementing measures, as it did the previous year. The 2015 consolidated financial statements of the Enel Group are also prepared on a going-concern basis using the cost method, with the exception of items that are measured at fair value under the IFRS-EU (as indicated in the discussion of measu- rement criteria for the individual items) and non-current assets (or disposal groups) classified as held for sale, which are measured at the lower of carrying amount and fair value less costs to sell. The notes to the consolidated financial state- ments provide a detailed discussion of the accounting standards and measurement criteria adopted. As regards recently issued accounting standards, the notes to the consolidated financial statements discuss (i) new standards applied in 2015, which according to the notes did not have a material impact in the year under review, with the exception of the “IFRIC 11 - Levies”, which, while not giving rise to any restatement of comparative figures on an annual basis, did involve a number of changes in the interim income statement; and (ii) standards that will apply in the future. The consolidated financial sta- tements for 2015 of the Enel Group were audited by the independent auditors Reconta Ernst & Young SpA, which issued an unqualified opinion, including with regard to the consistency of the report on operations with the consolidated financial statements, pursuant to Article 14 of Decree 39/2010. Under the terms of its engagement, Reconta Ernst & Young SpA also issued unqualified opinions on the financial state- ments for 2015 of the most significant Italian companies of the Enel Group. Moreover, during periodic meetings with the representatives of the audit firm, Reconta Ernst & Young SpA, the latter did not raise any issues concerning the reporting packages of the main foreign companies of the Enel Group, selected by them on the basis of the work plan established for the auditing of the consolidated financial statements of the Enel Group, that would have a sufficiently material impact to be reported in the opinion on those financial statements; > taking due account of the recommendations of the European Securities and Markets Authority issued on January 21, 2013, and most recently confirmed with the Public Statement of October 27, 2015, to ensure greater transparency concerning the methods used by listed companies in testing goodwill for impairment, in line with the recommendations contained in the joint Bank of Italy - CONSOB - ISVAP document 4 of March 3, 2010, and in the light of indications of CONSOB in its Commu- nication 7780 of January 28, 2016, the compliance of the impairment testing procedure with the provisions of IAS 36 was expressly approved by the Board of Directors of the Company, having obtained a favorable opinion in this regard from the Control and Risk Committee in February 2016, i.e. prior to the date of approval of the financial statements for 2015; > we examined the Board of Directors’ proposal for the allocation of net income for 2015 and the distribution of available reserves and have no comments in this regard; > we note that the Board of Directors of the Company certified, following appropriate checks by the Control and Risk Com- mittee, that as at the date on which the 2015 financial statements were approved, the Enel Group continued to meet the conditions established by CONSOB (set out in Article 36 of the Market Rules, approved with Resolution 16191 of October 29, 2007 as amended) concerning the accounting transparency and adequacy of the organizational structures and internal control systems that subsidiaries established and regulated under the law of non-EU countries must comply with so that Enel shares can continue to be listed on regulated markets in Italy; 380 Annual Report 2015 > we monitored, within the scope of our responsibilities, the adequacy of the organizational structure of the Company (and the Enel Group as a whole), obtaining information from department heads and in meetings with the boards of auditors or equivalent bodies of a number of the main Enel Group companies in Italy and abroad, for the purpose of the reciprocal exchange of material information. As from the second half of 2014, the organizational structure of the Enel Group is based on a matrix of Divisions and geographical areas. It is organized into: (i) Divisions, which are responsible for managing and developing assets, optimizing their performance and the return on capital employed in the various geographical areas in which the Group operates. The Divisions comprise: Global Infrastructure and Networks, Global Generation, Renewable Energy, Global Trading and Upstream Gas (note that the latter two Divisions were merged in March 2016); (ii) Areas and Countries, which are responsible for managing relationships with local institutional bodies and regulatory authorities, as well as selling electricity and gas, in each of the countries in which the Group is present, while also providing staff and other service support to the divisions. Areas and Countries comprise: Italy, Iberian Peninsula, Latin America, Eastern Europe; (iii) Global service functions, which are responsible for managing information and communication technology activities and procurement at the Group level; and (iv) Holding company functions, which are responsible for managing governance processes at the Group level. They include: Administration, Finance and Control, Human Resources and Or- ganization, Communication, Legal and Corporate Affairs, Audit, European Affairs, and Innovation and Sustainability. The Board of Auditors feels that the organizational system described above is adequate to support the strategic development of the Company and the Enel Group and is consistent with control requirements; > during meetings with the boards of auditors or equivalent bodies of a number of the Group’s main companies in Italy and abroad, no material issues emerged that would require reporting here; > we monitored the independence of the audit firm Reconta Ernst & Young SpA, having received from them specific writ- ten confirmation that they met that requirement (pursuant to the provisions of Article 17, paragraph 9, letter a) of Decree 39/2010) and having discussed the substance of that declaration with the audit partner. In this regard, we also monitored – as provided for under Article 19, paragraph 1(d), of Decree 39/2010 – the nature and the scale of non-audit services provided to the Company and other Enel Group companies by Reconta Ernst & Young SpA and the entities belonging to its network, the fees for which are reported in the notes to the financial statements of the Company. Following our examinations, the Board of Auditors feels that there are no critical issues concerning the independence of the audit firm Reconta Ernst & Young SpA. We held periodic meetings with the representatives of the audit firm, pursuant to Article 150, paragraph 3, of the Consolidated Law on Financial Intermediation, and no material issues emerged that would require mention in this report. As regards the provisions of Article 19, paragraph 3, of Decree 39/2010, Reconta Ernst & Young SpA provided the Board of Auditors with the report for 2015 “on key issues emerging during the statutory audit”, which did not find any significant shortcomings in the internal control system concerning financial reporting. The audit firm also reported that, as it perfor- med its engagement, it provided suggestions concerning a number of issues that, after being agreed with the competent units of the Company, enabled improvements to be implemented. The audit firm also reported that it did not prepare any management letter for 2015; > we monitored the financial reporting process, the appropriateness of the administrative and accounting system and its reliability in representing operational events, as well as compliance with the principles of sound administration in the per- formance of the Company’s business and we have no comments in that regard. We conducted our checks by obtaining information from the head of the Administration, Finance and Control department (taking due account of the head’s role as the officer responsible for the preparation of the Company’s financial reports), examining Company documentation and analyzing the findings of the examination performed by Reconta Ernst & Young SpA. The Chief Executive Officer and the officer responsible for the preparation of the financial reports of Enel issued a statement (regarding the Company’s 2015 financial statements) certifying (i) the appropriateness with respect to the characteristics of the Company and the effective adoption of the administrative and accounting procedures used in the preparation of the financial statements; (ii) the compliance of the content of the financial reports with international accounting standards endorsed by the European Union pursuant to Regulation 1606/2002/EC; (iii) the correspondence of the financial statements with the information in the books and other accounting records and their ability to provide a true and fair representation of the performance and financial position of the Company; and (iv) that the report on operations accompanying the financial statements contains 381 ReportsAnnual Report 2015a reliable analysis of operations and performance, as well as the situation of the issuer, together with a description of the main risks and uncertainties to which it is exposed. The statement also affirmed that the appropriateness of the admini- strative and accounting procedures used in the preparation of the financial statements of the Company had been verified in an assessment of the internal control system for financial reporting (supported by the findings of the independent monitoring performed by the Company’s Audit department) and that the assessment of the internal control system did not identify any material issues. An analogous statement was prepared for the consolidated financial statements for 2015 of the Enel Group; > we monitored the adequacy and effectiveness of the internal control system, primarily through periodic meetings with the head of the Audit department of the Company and holding most of the meetings jointly with the Control and Risk Committee as well as with the participation of the Chairman of the Board of Auditors in the other meetings of the Control and Risk Committee and the subsequent examination of the associated documentation during those meetings. In the light of our examination and in the absence of significant issues, the internal control and risk management system can be considered adequate and effective. In March 2016, the Board of Directors of the Company expressed an analogous assessment of the situation and also noted, in February 2015 and November 2015, that the main risks associated with the strategic targets set out, respectively, in the 2015-2019 business plan and the 2016-2020 business plan were compatible with the management of the Company in a manner consistent with those targets; > in July 2015, the Board of Auditors received two reports of censurable facts pursuant to Article 2408 of the Italian Civil Code from a shareholder, who alleged serious shortcomings and omissions in both the description in the 2014 Annual Report of a dispute in which the Company is involved and in the supplementary disclosures provided on the dispute during the Shareholders’ Meeting in response to questions submitted by the representative of the shareholder (pursuant to Arti- cle 127-ter of the Consolidated Law on Financial Intermediation). Following appropriate enquiries, and taking due account of the analysis of the dispute in question conducted during previous meetings of the Board of Directors and the Board of Auditors of Enel, the latter did not find any serious management irregularities or any simple irregularities in the events involved in the complaint and reported those conclusions to the shareholder. In September 2015, the Board of Auditors received two additional complaints from the same shareholder charging the Board of Auditors with failing to perform its oversight duties in examining the above complaints and essentially restating using the same arguments the complaints involved, adding a number of circumstances drawn from the interim financial reports at June 30, 2015 of Enel and a num- ber of its subsidiaries. Following additional enquiries, the Board of Auditors did not find any information that would alter its original finding of no irregularities in the events addressed by the complaints. Once again, the Board of Auditors informed the shareholder of its conclusions. Since September 2015, the Board of Auditors has not received any further reports concerning the affair. In addition, in December 2015, the Board of Auditors received a notice requesting the termination of a series of contracts for the supply of electricity as they were considered inappropriately executed by an Italian company of the Enel Group with a number of squatters. The Board of Auditors asked the competent Company units to conduct an appropriate investigation, which found no irregularities to report; > we monitored the effective implementation of the Corporate Governance Code, which the Company has adopted, ve- rifying the compliance of Enel’s governance arrangements with the recommendations of the Code. Detailed information on the Company’s corporate governance system can be found in the Report on Corporate Governance and Ownership Structure for 2015. In June 2015 and February 2016, the Board of Auditors verified that the Board of Directors, in evalua- ting the independence of non-executive directors, correctly applied the assessment criteria specified in the Corporate Governance Code and the principle of the priority of substance over form set out in that Code, adopting a transparent procedure, the details of which are discussed in the Report on Corporate Governance and Ownership Structure for 2015. As regards the “self-assessment” of the independence of its members, the Board of Auditors verified compliance, most recently in February 2016, with the requirements set out in both the Consolidated Law on Financial Intermediation and the Corporate Governance Code; > since the listing of its shares, the Company has adopted specific rules (most recently amended in December 2012) for the internal management and processing of confidential information, which also set out the procedures for the disclosure of documentation and information concerning the Company and the Group, with specific regard to inside information. Those rules (which can be consulted at www.enel.com) contain appropriate provisions directed at subsidiaries to enable Enel to 382 Annual Report 2015comply with statutory market disclosure requirements, pursuant to Article 114, paragraph 2, of the Consolidated Law on Financial Intermediation; > in 2002 the Company also adopted (and has subsequently updated) a Code of Ethics (also available at www.enel.com) that expresses the commitments and ethical responsibilities involved in the conduct of business, regulating and harmonizing corporate conduct in accordance with standards of maximum transparency and fairness with respect to all stakeholders; > with regard to the provisions of Legislative Decree 231 of June 8, 2001 which introduced into Italian law a system of administrative (in fact criminal) liability for companies for certain types of offences committed by its directors, managers or employees on behalf of or to the benefit of the company since July 2002 Enel has adopted a compliance program consisting of a “general part” and various “special parts” concerning the difference offences specified by Legislative Decree 231/2001 that the program is intended to prevent. For a description of the manner in which the model has been implemented by the various Group companies, please see the Report on Corporate Governance and Ownership Structure for 2015. The structure that monitors the operation and compliance with the program and is responsible for updating it (hereinafter, “the Supervisory Body”) is a collegial body. In 2015 it was composed of two external members with expertise on corporate organization matters, one of whom acted as chairman of the body, and the head of the Audit department, the head of the Legal and Corporate Affairs department and the Secretary of the Board of Directors of the Company, since they have specific professional expertise regarding the application of the compliance program and are not directly involved in operating activities. The Board of Auditors received adequate information on the main activities carried out in 2015 by the Supervisory Body. Our examination of those activities found no facts or situations that would require mention in this report; > in 2015, the Board of Auditors issued the following opinions: - a favorable opinion at the meeting of January 26, 2015 concerning the 2015 Audit Plan in accordance with the provisions of Article 7.C.1, letter c) of the Corporate Governance Code, preliminary to the resolutions pertaining to the Board of Directors in that regard; - a favorable opinion at the meeting of February 11, 2015, pursuant to Article 2389, paragraph 3, of the Italian Civil Code, concerning the supplementary instruments concerning the resolution on the remuneration and job conditions of the Chairman of the Board of Directors and the Chief Executive Officer/General Manager during the 2014-2016 term; - a favorable opinion at the meeting of May 7, 2015 on the findings of Reconta Ernst & Young in its report on the major is- sues that arose in the statutory audit in 2014, in accordance with the provisions of Article 7.C.1, letter e) of the Corporate Governance Code, preliminary to the assessments pertaining to the Board of Directors in that regard; > a report on the fixed and variable compensation accrued by those who served as Chairman of the Board of Directors, the Chief Executive Officer/General Manager and other directors in 2015 for their respective positions and any compensation instruments awarded to them will be contained (as provided for in the draft version, which the Board of Auditors has seen) in the Remuneration Report referred to in Article 123-ter of the Consolidated Law on Financial Intermediation. It will be submitted for approval by the Board of Directors, acting on a proposal of the Nomination and Compensation Committee, and published in compliance with the time limits established by law. The design of these compensation instruments is in line with best practices, complying with the principle of establishing a link with appropriate financial and non-financial performance targets and pursuing the creation of shareholder value over the medium and long term. The proposals to the Board of Directors concerning such forms of compensation and the determination of the associated parameters were prepared by the Nomination and Compensation Committee, which is made up of independent directors, drawing on the findings of benchmarking analyses at the national and international level performed by an independent consulting firm. In addition, in determining the compensation package of the new directors with special duties in the 2014-2016 term, the resolution of the Shareholders’ Meeting of May 22, 2014 was implemented. That resolution, in application of Article 84-ter of Decree Law 69 of June 21, 2013 (ratified with amendments with Law 98 of August 9, 2013), established that for the election of the Board of Directors by that Shareholders’ Meeting the remuneration of directors with special duties could not be set by the Board of Directors in an amount exceeding 75% of the total remuneration of any form, including under an employment relationships with the Company, established during the previous term. Finally, the Report on Remunera- tion referred to in Article 123-ter of the Consolidated Law on Financial Intermediation will contain, in compliance with the applicable CONSOB regulations, specific disclosures on the remuneration earned in 2015 by key management personnel. 383 ReportsAnnual Report 2015The Board of Auditors’ oversight activity in 2015 was carried out in 17 meetings and with participation in the 15 meetings of the Board of Directors, and, through the Chairman, in the 15 meetings of the Control and Risk Committee (of which 13 joint meetings with the Board of Auditors), in the 7 meetings of the Nomination and Compensation Committee, in the 1 meeting of the Related Parties Committee and in the 6 meetings of the Corporate Governance Committee. The delegate of the State Audit Court participated in the meetings of the Board of Auditors and those of the Board of Directors. During the course of this activity and on the basis of information obtained from Reconta Ernst & Young SpA, no omissions, censurable facts, irregularities or other significant developments were found that would require reporting to the regulatory authorities or mention in this report. Based on the oversight activity performed and the information exchanged with the independent auditors Reconta Ernst & Young SpA, we recommend that you approve the Company's financial statements for the year ended December 31, 2015 in conformity with the proposals of the Board of Directors. Rome, April 13, 2016 The Board of Auditors Chairman Sergio Duca Auditor Lidia D’Alessio Auditor Gennaro Mariconda 384 Annual Report 2015385 ReportsAnnual Report 2015Report of the independent audit firm on the 2015 financial statements of Enel SpA 386 Annual Report 2015387 ReportsAnnual Report 2015388 Annual Report 2015389 ReportsAnnual Report 2015Report of the independent audit firm on the 2015 consolidated financial statements of the Enel Group 390 Annual Report 2015Reports 391 Annual Report 2015392 Annual Report 2015393 ReportsAnnual Report 2015Summary of the resolutions of the Ordinary and Extraordinary Shareholders’ Meeting The Ordinary and Extraordinary Shareholders’ Meeting of Enel SpA held in Rome in single call on May 26, 2016 at the Enel Conference Center at 125, Viale Regina Margherita, adopted the following resolutions during the ordinary session: 1. approved the financial statements of Enel SpA for the year ended December 31, 2015, having acknowledged the results of the consolidated financial statements of the Enel Group for the year ended December 31, 2015, which closed with net income attri- butable to shareholders of the Parent Company of €2,196 million; 2. resolved: (i) to allocate Enel SpA’s net income for the year 2015, amounting to €1,010,654,499.31, as follows: a) to earmark for distribution to the shareholders, as dividend, €0.08 for each of the 10,166,679,946 ordinary shares in circulation on June 20, 2016, the scheduled ex-dividend date, for an overall amount of €813,334,395.68; b) to earmark for the statutory reserve the part of the net income necessary to bring the amount of the aforesaid reserve up to one-fifth of the share capital, as specified by Article 2430, paragraph 1, of the Civil Code, for an overall amount of €152,664,430.20; c) to earmark for “retained earnings” the remaining part of the net income, equal to €44,655,673.43; (ii) to earmark for the distribution to the shareholders also a part of the available reserve named “retained earnings” allocated in the financial statements of Enel SpA (amounting as of December 31, 2015 to €5,303,025,796.26 overall), for an amount of €0.08 for each of the 10,166,679,946 ordinary shares in circulation on June 20, 2016, the scheduled ex-dividend date, for an overall amount of €813,334,395.68; paying, before withholding tax, if any, an overall dividend of €0.16 per ordinary share – of which €0.08 as distribution of the 2015 net income and €0.08 as partial distribution of the available reserve named “retained earnings” – as from June 22, 2016, with the ex-dividend date of coupon no. 24 falling on June 20, 2016 and the “record date” (i.e. the date of the title to the payment of the dividend) coinciding with June 21, 2016; 3. appointed the new Board of Statutory Auditors, which will remain in office until the approval of the 2018 financial statements, in the persons of: • Sergio Duca - Chairman; • Roberto Mazzei – Regular Auditor; • Romina Guglielmetti - Regular Auditor; • Alfonso Tono - Alternate Auditor; • Michela Barbiero - Alternate Auditor; • Franco Tutino - Alternate Auditor; confirming their yearly gross compensation at €85,000 for the Chairman and €75,000 for each of the other regular Statu- tory Auditors, in addition to the reimbursement of properly documented travel and living expenses incurred in the perfor- mance of their duties; 4. approved the long term incentive plan for 2016 reserved to the management of Enel SpA and/or of its subsidiaries pur- suant to Article 2359 of the Italian Civil Code, whose features are described in the relevant information document prepa- 394 Annual Report 2015 red pursuant to Article 84-bis, paragraph 1, of the Issuers’ Regulation adopted by Consob with resolution 11971/1999, and to grant the Board of Directors, with the faculty to sub-delegate, all powers necessary for the actual implementation of the aforesaid plan; 5. resolved in favor of the first section of the remuneration report drawn up pursuant to Article 123-ter of Legislative Decree 58 dated February 24, 1998, and Article 84-quater of the Issuers’ Regulation adopted by Consob with resolution 11971/1999, contai- ning the description of the policy for the remuneration of Directors, General Manager and Executives with strategic responsibi- lities adopted by the Company for the financial year 2016, as well as the procedures used for the adoption and implementation of such policy. In the extraordinary session, the Shareholders’ Meeting approved an amendment of Article 14.3 of the corporate bylaws, concerning the procedure for the appointment of the Board of Directors by slating vote, in order to allow the entire Board to be elected by slating vote even in the event that the slate that has obtained the most votes at the Shareholders’ Meeting con- tains a lower number of candidates than 7/10 of the directors to be elected, assigned to that slate by the corporate bylaws. 395 ReportsAnnual Report 2015396 Annual Report 2015Attachments Annual Report 2015Subsidiaries, associates and other significant equity investments of the Enel Group at December 31, 2015 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, 2015, 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. 398 Annual Report 2015Company name Headquarters Country Parent company Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel SpA Rome Italy 9,403,357,795.00 EUR Holding company Holding 100.00% Subsidiaries Cataldo Hydro Power New York USA - USD Electricity generation Line-by-line Pyrites Hydro 50.00% 34.83% Associates LP (New York) from renewable resources LLC Hydro 50.00% Development Group Acquisition LLC Società di sviluppo, Milan Italy 37,419,179.00 EUR Energy and - Enel Produzione 17.65% 17.65% realizzazione e gestione del gasdotto Algeria- Italia via Sardegna SpA (in breve "Galsi SpA") infrastructure engineering SpA 3-101-665717 SA San José Costa Rica 10,000.00 CRC Electricity generation Line-by-line PH Chucas SA 100.00% 42.67% from renewable resources 3Sun Srl Catania Italy 35,205,984.00 EUR Development, design, Line-by-line Enel Green 100.00% 68.29% construction and operation of solar panel manufacturing plants Power SpA Adams Solar PV Project Johannesburg South Africa 10,000,000.00 ZAR Electricity generation Line-by-line Enel Green Power 60.00% 40.97% Two (RF) (Pty) Ltd from renewable resources RSA (Pty) Ltd Adria Link Srl Gorizia Italy 500,000.00 EUR Design, construction Equity Enel Produzione 33.33% 33.33% and operation of merchant lines SpA Agassiz Beach LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Agatos Green Power Rome Italy 10,000.00 EUR Electricity generation Line-by-line Enel Green 80.00% 54.63% Trino from renewable resources Power Solar Energy Srl Agrupación Acefhat Barcelona Spain 793,340.00 EUR Design and services - Endesa 16.67% 11.69% AIE Distribución Eléctrica SL Aguilón 20 SA Zaragoza Spain 2,682,000.00 EUR Electricity generation Line-by-line Enel Green 51.00% 35.20% from renewable resources Power España SL Albany Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora Distributed 100.00% 68.29% from renewable resources Solar LLC Almeyda Solar SpA Santiago Chile 1,736,965,000.00 CLP Electricity generation Line-by-line Enel Green 100.00% 68.23% from renewable resources Power Chile Ltda Almussafes Servicios Valencia Spain 3,010.00 EUR Management and Line-by-line Enel Green 100.00% 69.01% Energéticos SL maintenance of power Power España SL plants Alpe Adria Energia Udine Italy 450,000.00 EUR Design, construction Equity Enel Produzione 40.50% 40.50% SpA and operation of merchant lines SpA Altomonte FV Srl Rome Italy 5,100,000.00 EUR Electricity generation Equity Ultor Srl 100.00% 34.14% from renewable resources Alvorada Energia SA Rio de Janeiro Brazil 17,117,415.92 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% and sale Power Brasil Participações Ltda 399 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Ampla Energia e Rio de Janeiro Brazil 129,823.00 BRL Electricity generation, Line-by-line Enel Brasil SA 46.89% 55.79% Serviços SA transmission and distribution Chilectra 21.02% Inversud SA Chilectra SA 10.34% Enersis SA 21.38% Annandale Solar Delaware USA - USD Electricity generation Line-by-line Aurora Distributed 100.00% 68.29% from renewable resources Solar LLC Apiacás Energia SA Rio de Janeiro Brazil 21,216,846.33 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Power Brasil Participações Ltda Aquenergy Systems Greenville USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% LLC (South Carolina) from renewable resources Hydro Holdings LLC Aquilae Solar Las Palmas de Spain 3,008.00 EUR Photovoltaic plants Equity Endesa Ingeniería 50.00% 35.05% SL Gran Canaria SLU Aragonesa de Teruel Spain 60,100.00 EUR Electricity generation Line-by-line Endesa Red SA 100.00% 70.10% Actividades Energéticas SA Asociación Nuclear Tarragona Spain 19,232,400.00 EUR Management and Joint operation Endesa 85.41% 59.87% Ascó-Vandellós II AIE maintenance of power Generación SA plants Astronomy & Energy Santiago Chile 5,000,000.00 CLP Electricity generation Line-by-line Parque Eólico 100.00% 68.23% SpA from renewable resources Renaico SpA Athonet Smartgrid Srl Bolzano Italy 14,285.71 EUR Research, development Equity Enel Italia Srl 30.00% 30.00% and design Atwater Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora Distributed 100.00% 68.29% from renewable resources Solar LLC Aurora Distributed Wilmington USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% Solar LLC (Delaware) from renewable resources Aurora Land Holdings Delaware USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% LLC from renewable resources Autumn Hills LLC Delaware USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% from renewable resources Wind LLC Aysén Energía SA Santiago Chile 4,900,100.00 CLP Electricity Equity Centrales 99.00% 18.54% Hidroeléctricas de Aysén SA Empresa Nacional 0.51% de Electricidad SA Aysén Transmisión SA Santiago Chile 22,368,000.00 CLP Electricity generation Equity Empresa Nacional 0.51% 18.54% and sale de Electricidad SA Barnet Hydro Company Burlington USA - USD Electricity generation Line-by-line Enel Green 10.00% 68.29% LLC (Vermont) from renewable resources Power North America Inc. Beaver Falls Water Philadelphia USA - USD Electricity generation Line-by-line Beaver Valley 67.50% 46.09% Power Company (Pennsylvania) from renewable resources Holdings LLC Sweetwater 90.00% Hydroelectric LLC Centrales Hidroeléctricas de 99.00% Aysén SA 400 Annual Report 2015Company name Headquarters Country Beaver Valley Holdings Philadelphia USA LLC (Pennsylvania) Share capital - Consolidaton % Group % Currency Activity method Held by holding holding USD Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power North America Inc. Beaver Valley Power Philadelphia USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% Company LLC (Pennsylvania) from renewable resources Hydro Holdings LLC Black River Hydro New York USA - USD Electricity generation Line-by-line Cataldo Hydro 75.00% 43.19% Association (New York) from renewable resources Power Associates LP Enel Green 25.00% Power North America Inc. BLP Energy Private New Delhi India 30,000,000.00 INR Electricity generation Line-by-line Enel Green Power 68.00% 46.44% Limited from renewable resources Development BV BLP Vayu (Project 1) Haryana India 7,500,000.00 INR Electricity generation Line-by-line BLP Energy 100.00% 46.44% Private Limited from renewable resources Private Limited BLP Vayu (Project 2) Haryana India 45,000,000.00 INR Electricity generation Line-by-line BLP Energy 100.00% 46.44% Private Limited from renewable resources Private Limited BLP Wind Project New Delhi India 5,000,000.00 INR Electricity generation Line-by-line BLP Energy 100.00% 46.44% (Amberi) Private Limited from renewable resources Private Limited Boiro Energía SA Boiro Spain 601,010.00 EUR Electricity generation Equity Enel Green 40.00% 27.61% Boott Field LLC Wilmington USA (Delaware) Boott Hydropower Boston USA LLC (Massachusetts) Bp Hydro Associates Boise USA (Idaho) - - - from renewable resources Power España SL USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% from renewable resources Hydro Holdings LLC USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% from renewable resources Hydro Holdings LLC USD Electricity generation Line-by-line Enel Green 32.00% 68.29% from renewable resources Power North America Inc. Bp Hydro Finance Salt Lake City USA - USD Electricity generation Line-by-line Partnership (Utah) from renewable resources Chi Idaho LLC 68.00% Bp Hydro Associates 75.92% 68.29% Enel Green 24.08% Power North America Inc. Braila Power SA Chiscani Romania 1,900,000.00 RON Electricity generation Equity Enel Investment 29.93% 29.93% Holding BV Buffalo Dunes Wind Topeka USA - USD Electricity generation Line-by-line EGPNA 75.00% 51.22% Project LLC (Kansas) from renewable resources Development Holdings LLC Business Venture Lombardy East South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% Investments 1468 (Pty) Ltd from renewable resources Power RSA (Pty) Ltd Bypass Limited LLC Boise USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% (Idaho) from renewable resources Hydro Holdings LLC Bypass Power Los Angeles USA - USD Electricity generation Line-by-line Chi West LLC 100.00% 68.29% Company LLC (California) from renewable resources Canastota Wind Power Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC (Delaware) from renewable resources Power North America Inc. Caney River Wind Topeka USA - USD Electricity generation Line-by-line Rocky Caney 100.00% 68.29% Project LLC (Kansas) from renewable resources Wind LLC 401 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity Carbopego - Abrantes Portugal 50,000.00 EUR Fuel supply Abastecimientos e Combustiveis SA Consolidaton method Equity Held by Endesa Generación SA % Group % holding holding 49.99% 35.05% Endesa 0.01% Generación Portugal SA Carodex (Pty) Ltd Houghton South Africa 116.00 ZAR Electricity generation Line-by-line Enel Green 98.49% 67.26% from renewable resources Power RSA (Pty) Ltd Castle Rock Ridge Calgary Canada - CAD Electricity generation Line-by-line Enel Alberta 0.10% 68.29% Limited Partnership (Alberta) from renewable resources Wind Inc. Enel Green 99.90% Power Canada Inc. Cefeidas Desarrollo Puerto del Spain 3,008.00 EUR Photovoltaic plants Equity Endesa Ingeniería 50.00% 35.05% Solar SL Rosario SLU Centrais Elétricas Goiania Brazil 289,340,000.00 BRL Electricity generation Line-by-line Enel Brasil SA 99.75% 51.03% Cachoeira Dourada SA and sale Central Dock Sud SA Buenos Aires Argentina 35,595,178,229.00 ARS Electricity generation, Line-by-line Inversora Dock 69.99% 24.24% transmission and distribution Sud SA Central Eólica Canela Santiago Chile 12,284,740,000.00 CLP Electricity generation Line-by-line Compañía 75.00% 27.96% SA from renewable resources Eléctrica Tarapacá SA Central Geradora Caucaia Brazil 151,940,000.00 BRL Thermal generation Line-by-line Enel Brasil SA 100.00% 51.15% Termelétrica Fortaleza SA plants Central Hidráulica Seville Spain 364,210.00 EUR Operation of hydro- Equity Enel Green 33.30% 22.98% Güejar-Sierra SL electric plants Power España SL Central Térmica de Madrid Spain 595,000.00 EUR Operation of thermal Equity Endesa 33.33% 23.36% Anllares AIE plants Generación SA Central Vuelta de Buenos Aires Argentina 500,000.00 ARS Electrical facilities Equity Endesa Costanera 1.30% 9.80% Obligado SA construction SA Central Dock 6.40% Sud SA Hidroeléctrica El 33.20% Chocón SA Centrales Santiago Chile 158,975,665,182.00 CLP Design Equity Empresa Nacional 51.00% 18.54% Hidroeléctricas de Aysén SA de Electricidad SA Compañía 0.00% Eléctrica Tarapacá SA Centrales Nucleares Madrid Spain - EUR Management of Equity Endesa 23.57% 16.76% Almaraz-Trillo AIE nuclear plants Generación SA Centrum Pre Vedu a Kalná nad Slovakia 6,639.00 EUR Research and Held for sale Slovenské 100.00% 66.00% Nuclenor SA 0.69% Vyskum Sro Hronom development on natural sciences and engineering elektrárne AS CESI - Centro Elettrotecnico Sperimentale Italiano Giacinto Motta SpA Milan Italy 8,550,000.00 EUR Research and testing Equity Enel SpA 42.70% 42.70% services, analysis and consulting, engineering, design and certification Chepei Desarollo Las Palmas de Spain 3,008.00 EUR Photovoltaic plants Equity Endesa Ingeniería 50.00% 35.05% Solar L Gran Canaria SLU Cherokee Falls Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Hydroelectric Project LLC from renewable resources Power North America Inc. Chi Black River LLC Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) from renewable resources Power North America Inc. 402 Annual Report 2015Company name Headquarters Country Chi Idaho LLC Wilmington USA (Delaware) Share capital - Currency Activity method Held by holding holding USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Consolidaton % Group % from renewable resources Power North America Inc. Chi Minnesota Wind Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC (Delaware) from renewable resources Power North America Inc. Chi Operations Inc. Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) from renewable resources Power North America Inc. Chi Power Inc. Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) from renewable resources Power North America Inc. Chi Power Marketing Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Inc. (Delaware) from renewable resources Power North America Inc. Chi West LLC Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) from renewable resources Power North America Inc. Chilectra Inversud SA Santiago Chilectra SA Santiago Chile Chile 569,020,000.00 36,792,868,194.00 USD CLP Holding company Line-by-line Chilectra SA 100.00% 60.07% Holding company, Line-by-line Enersis SA 99.09% 60.07% Electricity distribution Compañía 0.00% Eléctrica Tarapacá SA Endesa SA 0.00% Chinango SAC Lima Peru 294,249,298.00 PEN Electricity generation, Line-by-line Edegel SA 80.00% 28.42% Chisago Solar LLC Delaware USA Chisholm View Wind Oklahoma City USA Project LLC (Oklahoma) - - sale and transmission USD Electricity generation Line-by-line Aurora Distributed 100.00% 68.29% from renewable resources Solar LLC USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% from renewable resources Wind Holdings LLC Chladiace Veze Bohunice Slovakia 16,598.00 EUR Engineering and Held for sale Slovenské 35.00% 23.10% Bohunice Spol Sro construction elektrárne AS Codensa SA ESP Bogotá DC Colombia 13,209,330,000.00 COP Electricity distribution Line-by-line Chilectra SA 9.35% 29.34% and sale Enersis SA 39.13% Cogeneración El Salto Zaragoza Spain 36,060.73 EUR Cogeneration of - Enel Green 20.00% 13.80% SL (in liquidation) electricity and heat Power España SL Cogeneración Lipsa SL Barcelona Spain 720,000.00 EUR Cogeneration of Equity Enel Green 20.00% 13.80% electricity and heat Power España SL Comercializadora de Buenos Aires Argentina 14,010,014.00 ARS Electricity trading Line-by-line Enersis SA 55.00% 49.70% Energía SA Endesa 45.00% Argentina SA Compagnia Porto di Rome Italy 21,372,000.00 EUR Construction of port Equity Enel Produzione 25.00% 25.00% Civitavecchia SpA infrastructure SpA Companhia Energética Fortaleza Brazil 442,950,000.00 BRL Electricity generation, Line-by-line Enersis SA 15.18% 39.32% do Ceará SA Compañía de Interconexión Energética SA transmission and distribution Enel Brasil SA 58.87% Rio de Janeiro Brazil 285,050,000.00 BRL Electricity generation, Line-by-line Enel Brasil SA 100.00% 51.15% transmission and distribution Compañía de Buenos Aires Argentina 14,175,999.00 ARS Electricity generation, Line-by-line Compañía de 100.00% 51.15% Transmisión del Mercosur SA transmission and distribution Interconexión Energética SA Compañía Eléctrica Santiago Chile 331,815,034,140.00 CLP Electricity generation, Line-by-line Empresa Nacional 96.21% 37.28% Tarapacá SA transmission and distribution de Electricidad SA Enersis SA 3.78% Compañía Energética Lima Peru 2,886,000.00 PEN Hydroelectric projects Line-by-line Generalima SA 100.00% 60.62% Veracruz SAC Enel 0.00% Latinoamérica SA 403 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity Compañía Eólica Soria Spain 13,222,000.00 EUR Wind plants Tierras Altas SA Consolidaton % Group % method Equity Held by holding holding Enel Green 35.63% 24.59% Power España SL Compostilla Re SA Luxembourg Luxembourg 12,000,000.00 EUR Reinsurance Held for sale Enel Insurance 100.00% 85.05% NV Concert Srl Rome Italy 10,000.00 EUR Product, plant and Line-by-line Enel Ingegneria e 49.00% 100.00% equipment certification Ricerca SpA Enel Produzione 51.00% SpA Coneross Power Greenville USA 110,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Corporation Inc. (South Carolina) from renewable resources Power North America Inc. Consolidated Hydro Wilmington USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% New Hampshire LLC (Delaware) from renewable resources Hydro Holdings LLC Consolidated Hydro Wilmington USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% New York LLC (Delaware) from renewable resources Hydro Holdings LLC Consolidated Hydro Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Southeast LLC (Delaware) Consolidated Pumped Wilmington USA Storage Inc. (Delaware) from renewable resources Power North America Inc. 550,000.00 USD Electricity generation Line-by-line Enel Green 81.82% 55.87% from renewable resources Power North America Inc. Consorcio Eólico Cadiz Spain 200,000.00 EUR Wind plants Equity Enel Green 50.00% 34.51% Marino Cabo de Trafalgar SL Power España SL Copenhagen Hydro New York USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% LLC (New York) from renewable resources Hydro Holdings LLC Corporación Eólica de Zaragoza Spain 1,021,600.00 EUR Electricity generation Equity Enel Green 25.00% 17.25% Zaragoza SL from renewable resources Power España SL Crucero Oeste Cinco Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Parque Eólico 100.00% 68.23% SpA from renewable resources Renaico SpA Crucero Oeste Cuatro Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Parque Eólico 100.00% 68.23% SpA from renewable resources Renaico SpA Crucero Oeste Dos Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Parque Eólico 100.00% 68.23% SpA from renewable resources Renaico SpA Crucero Oeste Tres Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Parque Eólico 100.00% 68.23% SpA from renewable resources Renaico SpA Crucero Oeste Uno Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Parque Eólico 100.00% 68.23% SpA from renewable resources Renaico SpA Danax Energy (Pty) Ltd Houghton South Africa 100.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power RSA (Pty) Ltd De Rock’l Srl Bucharest Romania 5,629,000.00 RON Electricity generation Line-by-line Enel Green Power 0.00% 68.29% from renewable resources International BV Enel Green Power 100.00% Romania Srl Depuración Destilación Boiro Spain 600,000.00 EUR Electricity generation Equity Enel Green 40.00% 27.61% Reciclaje SL from renewable resources Power España SL Desarollo Photosolar Las Palmas de Spain 3,008.00 EUR Photovoltaic plants Equity Endesa Ingeniería 50.00% 35.05% SL Gran Canaria SLU 404 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Desarrollo de Fuerzas Mexico City Mexico 13,564,350.00 MXN Electricity generation Line-by-line Enel Green 99.99% 68.29% Renovables S de RL de Cv from renewable resources Power México S de RL de Cv Energía Nueva 0.01% Energía Limpia México S de RL de Cv Diego de Almagro Santiago Chile 351,604,338.00 CLP Electricity generation Line-by-line Empresa Eléctrica 100.00% 68.23% Matriz SpA from renewable resources Panguipulli SA Dietrich Drop LLC Delaware USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% from renewable resources Hydro Holdings LLC Diseño de Sistemas Valencia Spain 578,000.00 EUR Photovoltaic plants - Endesa Servicios 14.39% 10.09% en silicio SA (in liquidation) SL Distribuidora de Barcelona Spain 108,240.00 EUR Electricity distribution Line-by-line Hidroeléctrica de 45.00% 70.10% Energía Eléctrica del Bages SA and sale Catalunya SL Endesa Red SA 55.00% Distribuidora Eléctrica Bogotá DC Colombia 1,000,000.00 COP Electricity distribution Equity Inversora 0.00% 14.38% de Cundinamarca SA ESP and sale Codensa Sas Codensa SA ESP 49.00% Distribuidora Eléctrica Tenerife Spain 12,621,210.00 EUR Electricity purchase, Line-by-line Endesa Red SA 100.00% 70.10% del Puerto de La Cruz SA transmission and distribution Distrilec Inversora Buenos Aires Argentina 497,610,000.00 ARS Holding company Line-by-line Empresa Nacional 0.89% 30.87% SA de Electricidad SA Chilectra SA 23.42% Enersis SA 27.19% Dodge Center Delaware USA - USD Electricity generation Line-by-line Aurora Distributed 100.00% 68.29% Distributed Solar LLC from renewable resources Solar LLC Dominica Energía Colonia Mexico 279,282,225.00 MXN Electricity generation Line-by-line Enel Green 0.04% 68.29% Limpia S de RL de Cv Guadalupe Inn from renewable resources Power Guatemala SA Enel Green 99.96% Power México S de RL de Cv Drift Sand Wind Project Delaware USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% LLC from renewable resources Eastwood Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora Distributed 100.00% 68.29% from renewable resources Solar LLC Edegel SA Lima Peru 2,302,143,514.88 PEN Electricity generation, Line-by-line Generandes Perú 54.20% 35.53% distribution and sale SA Empresa Nacional 29.40% de Electricidad SA EGP BioEnergy Srl Rome Italy 1,000,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power Puglia Srl EGP Geronimo Holding Wilmington USA 1,000.00 USD Holding company Line-by-line Enel Green 100.00% 68.29% Company Inc. (Delaware) Power North America Inc. EGP Salt Wells Solar Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC from renewable resources Power North America Inc. EGP Solar 1 LLC Wilmington USA - USD Electricity generation Line-by-line EGPNA REP Solar 100.00% 34.83% (Delaware) from renewable resources Holdings LLC 405 AttachmentsAnnual Report 2015Company name Headquarters Country EGP Stillwater Solar Wilmington USA LLC (Delaware) Share capital - Currency Activity method Held by holding holding USD Electricity generation Line-by-line Enel Stillwater 100.00% 34.83% Consolidaton % Group % from renewable resources LLC EGP Stillwater Solar Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% PV II LLC from renewable resources Power North America Inc. EGP Timber Hills Los Angeles USA - USD Electricity generation Line-by-line Padoma Wind 100.00% 68.29% Project LLC (California) from renewable resources Power LLC EGP NA Development Wilmington USA - USD Electricity generation Line-by-line Enel Green Power 100.00% 68.29% Holdings LLC (Delaware) from renewable resources North America Development LLC EGP NA Hydro Delaware USA - USD Holding company Line-by-line Enel Green 100.00% 68.29% Holdings LLC EGP NA Renewable Delaware USA Energy Partners LLC EGP NA REP Holdings Delaware USA - - LLC Power North America Inc. USD Holding company Line-by-line EGPNA REP 51.00% 34.83% Holdings LLC USD Holding company Line-by-line Enel Green 100.00% 68.29% Power North America Inc. EGP NA REP Hydro Delaware USA - USD Holding company Line-by-line EGPNA 100.00% 34.83% Holdings LLC Renewable Energy Partners LLC EGP NA REP Solar Delaware USA - USD Holding company Line-by-line EGPNA 100.00% 34.83% Holdings LLC Renewable Energy Partners LLC EGP NA REP Wind Delaware USA - USD Electricity generation Line-by-line EGPNA 100.00% 34.83% Holdings LLC from renewable resources Renewable Energy Partners LLC EGP NA Wind Holdings Wilmington USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% 1 LLC (Delaware) from renewable resources Wind Holdings LLC El Dorado Hydro LLC Los Angeles USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% (California) from renewable resources Hydro Holdings LLC Elcogas SA Puertollano Spain 809,690.40 EUR Electricity generation Equity Enel SpA 4.32% 33.05% Endesa 40.99% Generación SA Elcomex Solar Energy Costanza Romania 4,590,000.00 RON Electricity generation Line-by-line Enel Green Power 0.00% 68.29% Srl from renewable resources International BV Enel Green Power 100.00% Romania Srl Elecgas SA Santarem Portugal 50,000.00 EUR Combined-cycle Equity Endesa 50.00% 35.05% (Pego) electricity generation Generación Portugal SA Electra Capital (RF) Johannesburg South Africa 10,000,000.00 ZAR Electricity generation Line-by-line Enel Green 60.00% 40.97% (Pty) Ltd from renewable resources Power RSA (Pty) Ltd Eléctrica Cabo Blanco Lima Peru 46,508,170.00 PEN Holding company Line-by-line Enersis SA 80.00% 60.62% SA Generalima SA 20.00% Eléctrica de Jafre SA Girona Spain 165,880.00 EUR Electricity distribution Equity Hidroeléctrica de 47.46% 33.27% and sale Catalunya SL Eléctrica de Lijar SL Cadiz Spain 1,081,820.00 EUR Electricity transmission Equity Endesa Red SA 50.00% 35.05% and distribution Electricidad de Puerto Cadiz Spain 6,611,130.00 EUR Distribution and supply Equity Endesa Red SA 50.00% 35.05% Real SA of electricity Electrogas SA Santiago Chile 61,832,327.00 USD Holding company Equity Empresa Nacional 42.50% 15.45% de Electricidad SA 406 Annual Report 2015Company name Headquarters Country Elk Creek Hydro LLC Delaware USA Share capital - Currency Activity method Held by holding holding USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Consolidaton % Group % from renewable resources Power North America Inc. Emgesa Panama SA Panama Panama 10,000.00 USD Electricity trading Line-by-line Emgesa SA ESP 100.00% 22.87% Emgesa SA ESP Bogotá DC Colombia 655,222,310,000.00 COP Electricity generation Line-by-line Enersis SA 21.61% 22.87% and sale Empresa Nacional 26.87% de Electricidad SA Emittenti Titoli SpA Milan Empresa Carbonífera Madrid Italy Spain 5,200,000.00 18,030,000.00 EUR EUR - Mining - Enel SpA 10.00% 10.00% Line-by-line Endesa 100.00% 70.10% del Sur SA Generación SA Empresa de Lima Peru 638,560,000.00 PEN Electricity distribution Line-by-line Inversiones 51.68% 45.79% Distribución Eléctrica de Lima Norte SAA and sale Distrilima SA Enersis SA 24.00% Empresa de Energía Bogotá DC Colombia 39,699,630,000.00 COP Electricity distribution Equity Distribuidora 82.34% 11.84% Cundinamarca SA ESP and sale Eléctrica de Cundinamarca SA ESP Empresa Distribuidora Buenos Aires Argentina 898,590,000.00 ARS Electricity distribution Line-by-line Distrilec Inversora 56.36% 43.41% Sur SA and sale SA Chilectra SA 20.85% Enersis SA 22.25% Empresa Eléctrica de Santiago Chile 82,222,000.00 CLP Electricity generation, Line-by-line Luz Andes Ltda 0.00% 60.07% Colina Ltda transmission and distribution Chilectra SA 100.00% Empresa Eléctrica de Lima Peru 73,982,594.00 PEN Electricity generation Line-by-line Eléctrica Cabo 60.00% 58.50% Piura SA Blanco SA Generalima SA 36.50% Empresa Eléctrica Santiago Chile 48,038,937.00 CLP Electricity generation Line-by-line Enel Green 99.99% 68.23% Panguipulli SA from renewable resources Power Chile Ltda Enel Green 0.01% Power Latin America Ltda Empresa Eléctrica Santiago Chile 200,319,020.73 CLP Electricity generation, Line-by-line Empresa Nacional 92.65% 33.69% Pehuenche SA transmission and distribution de Electricidad SA Empresa Nacional de Santiago Chile 1,331,714,090,000.00 CLP Electricity generation, Line-by-line Enersis SA 59.98% 36.36% Electricidad SA transmission and distribution Empresa Nacional de Santiago Chile 12,647,752,517.00 CLP Electricity generation Line-by-line Enel Green 51.00% 34.80% Geotermia SA from renewable resources Power Chile Ltda Empresa Propietaria Panama Panama 58,500,000.00 USD Electricity transmission - Enel 11.11% 70.14% de La Red SA and distribution Latinoamérica SA En-Brasil Comercio e Rio de Janeiro Brazil 1,000,000.00 BRL Electricity Line-by-line Enel Brasil SA 99.99% 51.15% Serviços SA Central Geradora 0.01% Termelétrica Fortaleza SA Endesa Argentina SA Buenos Aires Argentina 514,530,000.00 ARS Holding company Line-by-line Empresa Nacional 99.66% 36.36% de Electricidad SA Compañía 0.34% Eléctrica Tarapacá SA Endesa Capital SA Madrid Spain 60,200.00 EUR Finance company Line-by-line Endesa SA 100.00% 70.10% Endesa Oporto Portugal 250,000.00 EUR Electricity generation Line-by-line Endesa Energía 100.00% 70.10% Comercialização de Energia SA and sale SA 407 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Endesa Costanera SA Buenos Aires Argentina 701,988,378.00 ARS Electricity generation Line-by-line Endesa Argentina 49.68% 27.52% and sale SA Empresa Nacional 24.85% de Electricidad SA Southern Cone 1.15% Power Argentina SA Endesa Distribución Barcelona Spain 1,204,540,060.00 EUR Electricity distribution Line-by-line Endesa Red SA 100.00% 70.10% Eléctrica SL Endesa Energía SA Madrid Spain 12,981,860.00 EUR Marketing of energy Line-by-line Endesa SA 100.00% 70.10% products Endesa Energía XXI SL Madrid Spain 2,000,000.00 EUR Marketing and energy- Line-by-line Endesa Energía 100.00% 70.10% related services SA Endesa Financiación Madrid Spain 4,621,003,006.00 EUR Finance company Line-by-line Endesa SA 100.00% 70.10% Filiales SA Endesa Generación Seville Spain 63,107.00 EUR Electricity generation Line-by-line Endesa SA 100.00% 70.10% II SA Endesa Generación Seville Spain 60,000.00 EUR Subholding company in Line-by-line Endesa 100.00% 70.10% Nuclear the nuclear sector Generación SA Endesa Generación Paço de Arcos Portugal 50,000.00 EUR Electricity generation Line-by-line Endesa 99.20% 70.09% Portugal SA (Oeiras) Generación SA Endesa Energía 0.20% SA Enel Green 0.40% Power España SL Energías de 0.20% Aragón II SL Endesa Generación SA Seville Spain 1,940,379,737.02 EUR Electricity generation Line-by-line Endesa SA 100.00% 70.10% and sale Endesa Ingeniería SLU Seville Spain 1,000,000.00 EUR Consulting and Line-by-line Endesa Red SA 100.00% 70.10% engineering services Endesa Operaciones y Barcelona Spain 10,138,580.00 EUR Services Line-by-line Endesa Energía 100.00% 70.10% Servicios Comerciales SL Endesa Power Trading London Ltd Endesa Red SA Barcelona Endesa SA Madrid United Kingdom Spain Spain SA 2.00 GBP Trading Line-by-line Endesa SA 100.00% 70.10% 719,901,728.28 EUR Electricity distribution Line-by-line Endesa SA 100.00% 70.10% 1,270,502,540.40 EUR Holding company Line-by-line Enel Iberoamérica Srl 70.10% 70.10% Endesa Servicios SL Madrid Spain 89,999,790.00 EUR Services Line-by-line Endesa SA 100.00% 70.10% Enel Alberta Wind Inc. Calgary Canada 16,251,021.00 CAD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Alberta) from renewable resources Power Canada Inc. Enel Atlantic Canada Newfoundland Canada - CAD Electricity generation Line-by-line Enel Green 99.90% 68.29% Limited Partnership from renewable resources Power Canada Inc. Newind Group 0.10% Inc. 408 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel Brasil SA Rio de Janeiro Brazil 1,320,049,091.42 BRL Holding company Line-by-line Edegel SA 4.00% 51.15% Chilectra 5.94% Inversud SA Chilectra SA 5.33% Empresa 34.64% Nacional de Electricidad SA Enersis SA 50.09% Enel Cove Fort II LLC Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) from renewable resources Power North America Inc. Enel Cove Fort LLC Wilmington USA - USD Electricity generation Line-by-line Enel Geothermal 100.00% 34.83% (Delaware) from renewable resources LLC Enel Distributie Banat Timisoara Romania 382,158,580.00 RON Electricity distribution Line-by-line Enel Investment 51.00% 51.00% SA Holding BV Enel Distributie Costanza Romania 280,285,560.00 RON Electricity distribution Line-by-line Enel Investment 51.00% 51.00% Dobrogea SA Holding BV Enel Distributie Bucharest Romania 271,635,250.00 RON Electricity distribution Line-by-line Enel Investment 64.43% 64.43% Muntenia SA Enel Distribuzione SpA Rome Enel Energia SpA Rome Italy Italy 2,600,000,000.00 302,039.00 EUR EUR Electricity distribution Line-by-line Electricity and gas salesLine-by-line Holding BV Enel SpA Enel SpA 100.00% 100.00% 100.00% 100.00% Enel Energie Muntenia Bucharest Romania 37,004,350.00 RON Electricity sale Line-by-line Enel Investment 64.43% 64.43% SA Holding BV Enel Energie SA Bucharest Romania 140,000,000.00 RON Electricity sale Line-by-line Enel Investment 51.00% 51.00% Holding BV Enel Energy South Gauteng South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% Africa from renewable resources Power International BV Enel Finance Amsterdam The 1,478,810,370.00 EUR Holding company Line-by-line Enel SpA 100.00% 100.00% International NV Netherlands Enel Fortuna SA Panama Panama 100,000,000.00 USD Electricity generation Line-by-line Enel Green 50.06% 34.18% from renewable resources Power Panama SA Enel France Sas Paris France 34,937,000.00 EUR Holding company Line-by-line Enel Investment 100.00% 100.00% Holding BV Enel Gas Rus LLC Moscow Russian 350,000.00 RUB Energy services Line-by-line Enel Investment 100.00% 100.00% Federation Holding BV Enel Geothermal LLC Wilmington USA - USD Electricity generation Line-by-line EGPNA 100.00% 34.83% (Delaware) from renewable resources Renewable Energy Partners LLC Enel GP Newfoundland Newfoundland Canada 1,000.00 CAD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% and Labrador Inc. from renewable resources Wind Holdings LLC Enel Green Power Boa Niterói (Rio de Brazil 1,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 68.29% Vista Eólica SA Janeiro) from renewable resources Power Brasil Participações Ltda Enel Green 1.00% Power Desenvolvimento Ltda Enel Green Power Rio de Janeiro Brazil - BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Bom Jesus da Lapa Solar SA from renewable resources Power Brasil Participações Ltda 409 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel Green Power Rio de Janeiro Brazil 2,131,724,676.70 BRL Holding company Line-by-line Enel Green 99.99% 68.29% Brasil Participações Ltda Power International BV Enel Green 0.01% Power Latin America Ltda Enel Green Power Sofia Bulgaria 35,231,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% Bulgaria EAD operation and maintenance Power International BV Enel Green Power Rio de Janeiro Brazil 76,000,000.00 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Cabeça de Boi SA from renewable resources Power Brasil Participações Ltda Enel Green Power CAI Rome Italy 100,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% Agroenergy Srl from renewable resources Power SpA Enel Green Power Rome Italy 10,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% Calabria Srl from renewable resources Power SpA Enel Green Power Montreal Canada 85,681,857.00 CAD Electricity generation Line-by-line Enel Green 100.00% 68.29% Canada Inc. (Quebec) from renewable resources Power North America Inc. Enel Green Power Santiago Chile 15,649,360,000.00 CLP Electricity generation Line-by-line Enel Green 99.99% 68.23% Chile Ltda from renewable resources Power Latin America Ltda Enel Green Power Bogotá DC Colombia 300,000,000.00 COP Electricity generation Line-by-line Enel Green 100.00% 68.29% Colombia SA from renewable resources Power International BV Enel Green Power San José Costa Rica 27,500,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Costa Rica SA from renewable resources Power International BV Enel Green Power Rio de Janeiro Brazil 144,640,892.85 BRL Electricity generation Line-by-line Enel Green 99.00% 68.29% Hydromac Energy BV 0.01% Cristal Eólica SA and sale from renewable resources Power Brasil Participações Ltda Enel Green 1.00% Power Desenvolvimento Ltda Enel Green Power Rio de Janeiro Brazil 1,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Critalândia I Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 1,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Critalândia II Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 70,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 68.29% Damascena Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green 1.00% Power Desenvolvimento Ltda Enel Green Power Rio de Janeiro Brazil 70,379,344.85 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Delfina A Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 23,054,973.26 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Delfina B Eólica SA 410 from renewable resources Power Brasil Participações Ltda Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel Green Power Rio de Janeiro Brazil 7,298,322.77 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Delfina C Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 24,624,368.53 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Delfina D Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 24,623,467.93 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Delfina E Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 13,900,297.00 BRL Electricity generation Line-by-line Enel Green 0.01% 68.29% Desenvolvimento Ltda from renewable resources Power Latin America Ltda Enel Green 99.99% Power Brasil Participações Ltda Enel Green Power Amsterdam The 20,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% Development BV Netherlands from renewable resources Power International BV Enel Green Power Rio de Janeiro Brazil 135,000,000.00 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Dois Riachos Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Quito Ecuador 26,000.00 USD Electricity generation Line-by-line Enel Green 1.00% 68.29% Ecuador SA from renewable resources Power Latin America Ltda Enel Green Power Cairo Egypt 250,000.00 EGP Management, Line-by-line Enel Green 100.00% 68.29% Egypt SAE operation and maintenance of energy production plant of all types and their distribution networks Power International BV Enel Green Power El San Salvador El Salvador 3,071,090.00 SVC Electricity generation Line-by-line Enel Green 0.00% 67.61% Enel Green 99.00% Power International BV Salvador SA de Cv from renewable resources Power Latin America Ltda Enel Green 99.00% Power International BV Enel Green Power Rio de Janeiro Brazil 177,500,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 68.29% Emiliana Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green 1.00% Power Desenvolvimento Ltda Enel Green Power Madrid Spain 11,152.74 EUR Electricity generation Line-by-line Endesa 40.00% 69.01% España SL from renewable resources Generación SA Enel Green 60.00% Power International BV 411 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel Green Power Rio de Janeiro Brazil 135,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 68.29% Esperança Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green 1.00% Power Desenvolvimento Ltda Enel Green Power Rio de Janeiro Brazil 62,000,000.00 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Fazenda SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rome Italy 10,000,000.00 EUR Electricity generation Line-by-line Enel Green 70.00% 47.80% Finale Emilia Srl from renewable resources Power SpA Enel Green Power Tenerife Spain 3,012.00 EUR Electricity generation Line-by-line Enel Green 65.00% 44.86% Granadilla SL from renewable resources Power España SL Enel Green Power Guatemala Guatemala 5,000.00 GTQ Holding company Line-by-line Enel Green 2.00% 68.29% Guatemala SA Power Latin America Ltda Enel Green 98.00% Power International BV Enel Green Power Maroussi Greece 7,737,850.00 EUR Holding company. Line-by-line Enel Green 100.00% 68.29% Hellas SA Energy services Power International BV Enel Green Power Rio de Janeiro Brazil - BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Horizonte MP Solar SA from renewable resources Power Brasil Participações Ltda Enel Green Power Amsterdam The 244,532,298.00 EUR Holding company Line-by-line Enel Green 100.00% 68.29% International BV Netherlands Power SpA Enel Green Power Rio de Janeiro Brazil 1,639,346.69 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Ituverava Norte Solar SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 1,639,346.69 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Ituverava Solar SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 1,639,346.69 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Ituverava Sul Solar SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 165,000,000.00 BRL Electricity generation Line-by-line Enel Green 1.00% 68.29% Joana Eólica SA from renewable resources Power Desenvolvimento Ltda Enel Green 99.00% Power Brasil Participações Ltda Enel Green Power Nairobi Kenya 100,000.00 KES Electricity generation, Line-by-line Enel Green 99.00% 68.29% Kenya Limited transmission, distribution sale and purchase Enel Green Power Santiago Chile 30,728,470.00 CLP Holding company Line-by-line Latin America Ltda Power International BV Enel Green 1.00% Power RSA (Pty) Ltd Hydromac Energy BV 99.90% 68.23% Enel Green 0.01% Power International BV 412 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel Green Power Rio de Janeiro Brazil 70,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 68.29% Maniçoba Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green 1.00% Power Desenvolvimento Ltda Enel Green Power Mexico City Mexico 2,399,774,165.00 MXN Holding company Line-by-line Enel Green 0.01% 68.29% México S de RL de Cv Power Latin America Ltda Enel Green 99.99% Power International BV Enel Green Power Rio de Janeiro Brazil 175,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 68.12% Modelo I Eólica SA from renewable resources Power Brasil Participações Ltda Enel Brasil SA 1.00% Enel Green Power Rio de Janeiro Brazil 150,000,000.00 BRL Electricity generation Line-by-line Enel Brasil SA 1.00% 68.12% Modelo II Eólica SA from renewable resources Enel Green 99.00% Power Brasil Participações Ltda Enel Green Power Niterói Brazil 1,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 67.61% Morro do Chapéu I (Rio de Janeiro) Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Niterói Brazil 1,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 67.61% Morro do Chapéu II (Rio de Janeiro) Eólica SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 8,513,128.89 BRL Electricity generation Line-by-line Enel Green 99.90% 68.22% Mourão SA from renewable resources Power Brasil Participações Ltda Enel Green Power Windhoek Namibia 100.00 NAD Electricity generation Line-by-line Enel Green 100.00% 68.29% Namibia (Pty) Ltd from renewable resources Power International BV Enel Green Power Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% North America (Delaware) Development LLC from renewable resources Power International BV Enel Green Power Wilmington USA 50.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% North America Inc. (Delaware) from renewable resources Power International BV Enel Green Power Rio de Janeiro Brazil - BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Nova Lapa Solar SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil - BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Nova Olinda B Solar SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil - BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Nova Olinda C Solar SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil - BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Nova Olinda Norte Solar SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil - BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Nova Olinda Sul Solar SA from renewable resources Power Brasil Participações Ltda 413 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel Green Power Panama Panama 3,000.00 USD Holding company Line-by-line Enel Green 100.00% 68.29% Panama SA Power International BV Enel Green Power Rio de Janeiro Brazil 1,000.00 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Paranapanema SA from renewable resources Power Brasil Participações Ltda Enel Green Power Rome Italy 10,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% Partecipazioni Speciali Srl from renewable resources Power SpA Enel Green Power Pau Rio de Janeiro Brazil 178,670,000.00 BRL Electricity generation Line-by-line Enel Green 1.00% 68.28% Ferro Eólica SA from renewable resources Power Desenvolvimento Ltda Enel Green 99.00% Power Brasil Participações Ltda Enel Green Power Rio de Janeiro Brazil 230,000,000.00 BRL Electricity generation Enel Green Power Enel Green 1.00% 68.28% Pedra do Gerônimo Eólica SA from renewable Desenvolvimento Power resources Ltda Desenvolvimento Ltda Enel Green 99.00% Power Brasil Participações Ltda Enel Green Power Lima Peru 1,000.00 PEN Electricity generation Line-by-line Empresa Eléctrica 0.01% 68.23% Peru SA from renewable resources Panguipulli SA Enel Green 99.90% Power International BV Enel Green Power Rio de Janeiro Brazil 144,640,892.85 BRL Electricity generation Line-by-line Enel Green 1.00% 68.29% Primavera Eólica SA and sale from renewable resources Power Desenvolvimento Ltda Enel Green 99.00% Power Brasil Participações Ltda Enel Green Power Rome Italy 1,000,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% Puglia Srl from renewable resources Power SpA Enel Green Power RA Cairo Egypt 15,000,000.00 EGP Management, Line-by-line Enel Green 100.00% 68.29% SAE operation and maintenance of energy production plant of all types and their distribution networks Power Egypt SAE Enel Green Power Rusu de Sus Romania 2,430,631,000.00 RON Electricity generation Line-by-line Enel Green 100.00% 68.29% Romania Srl (Nus¸eni) from renewable resources Power International BV Enel Green Power RSA Johannesburg South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% (Pty) Ltd from renewable resources Power Development BV Enel Green Power RSA Johannesburg South Africa 120.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% 2 (Pty) Ltd from renewable resources Power RSA (Pty) Ltd 414 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel Green Power Niterói (Rio de Brazil 14,412,120.00 BRL Electricity generation Line-by-line Enel Green 1.00% 68.29% Salto Apiacás SA Janeiro) from renewable resources Power Desenvolvimento Ltda Enel Green 99.00% Power Brasil Participações Ltda Enel Green Power San Rome Italy 10,000.00 EUR Electricity generation Equity Altomonte FV Srl 80.00% 27.32% Gillio Srl from renewable resources Enel Green Power São Niterói (Rio de Brazil 1,000,000.00 BRL Electricity generation Line-by-line Enel Green 99.00% 67.61% Abraão Eólica SA Janeiro) from renewable resources Power Brasil Participações Ltda Enel Green Power São Rio de Janeiro Brazil 144,640,892.85 BRL Electricity generation Line-by-line Enel Green 99.00% 68.29% Judas Eólica SA and sale from renewable sources Power Brasil Participações Ltda Enel Green 1.00% Power Desenvolvimento Ltda Enel Green Power Cairo Egypt 15,000,000.00 EGP Management, Line-by-line Enel Green 100.00% 68.29% SHU SAE operation and maintenance of energy production plant of all types and their distribution networks Power Egypt SAE Enel Green Power Rome Italy 10,000.00 EUR Design, development, Line-by-line Enel Green 100.00% 68.29% Solar Energy Srl construction and operation of photovoltaic plants (holding company) Power SpA Enel Green Power SpA Rome Italy 1,000,000,000.00 EUR Electricity generation Line-by-line Enel SpA 68.29% 68.29% from renewable resources Enel Green Power Turin Italy 250,000.00 EUR Electricity generation Equity Altomonte 60.00% 20.49% Strambino Solar Srl from renewable resources FV Srl Enel Green Power Rio de Janeiro Brazil 125,765,000.00 BRL Electricity generation Line-by-line Enel Green 1.00% 68.28% Tacaicó Eólica SA from renewable resources Power Desenvolvimento Ltda Enel Green 99.00% Power Brasil Participações Ltda Enel Green Power Cairo Egypt 15,000,000.00 EGP Management, Line-by-line Enel Green 100.00% 68.29% Tefnut SAE operation and maintenance of energy production plant of all types and their distribution networks Power Egypt SAE Enel Green Power Istanbul Turkey 61,654,658.00 TRY Electricity generation Line-by-line Enel Green 100.00% 68.29% Turkey Enerji Yatirimlari Anonim S‚irketi from renewable resources Power International BV Enel Green Power Oficina 1508 Uruguay 400,000.00 UYU Electricity generation Line-by-line Enel Green 100.00% 68.29% Uruguay SA from renewable resources Power International BV Enel Green Power Rome Italy 1,200,000.00 EUR Electricity generation Line-by-line Enel Green 51.00% 34.83% Villoresi Srl from renewable resources Power SpA Enel Iberoamérica Srl Madrid Spain 500,000,000.00 EUR Holding company Line-by-line Enel SpA 100.00% 100.00% 415 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity Consolidaton method Enel Ingegneria e Rome Italy 30,000,000.00 EUR Analysis, design, Line-by-line Held by Enel SpA % Group % holding holding 100.00% 100.00% Ricerca SpA construction and maintenance of engineering works Enel Insurance NV Amsterdam The 60,000.00 EUR Holding company Line-by-line Endesa SA 50.00% 85.05% Netherlands Enel Investment 50.00% Holding BV Enel Investment Amsterdam The 1,593,050,000.00 EUR Holding company Line-by-line Enel SpA 100.00% 100.00% Holding BV Netherlands Enel Italia Srl Rome Italy 50,000,000.00 EUR Personnel Line-by-line Enel SpA 100.00% 100.00% administration activities, information technology and business services Enel Kansas LLC Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) from renewable resources Power North America Inc. Enel Latinoamérica SA Madrid Spain 796,683,058.00 EUR Holding company Line-by-line Enel Iberoamérica 100.00% 100.00% Srl Enel Longanesi Rome Italy 10,000,000.00 EUR Prospecting and Line-by-line Enel Trade SpA 100.00% 100.00% Developments Srl development of hydrocarbon fields Enel M@P Srl Rome Italy 100,000.00 EUR Metering, remote Line-by-line Enel Distribuzione 100.00% 100.00% control and connectivity services via power line communication SpA Enel Minnesota Minneapolis USA - USD Electricity generation Line-by-line EGP Geronimo 100.00% 68.29% Holdings LLC (Minnesota) from renewable resources Holding Company Inc. Enel Nevkan Inc. Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) from renewable resources Power North America Inc. Enel Oil & Gas España Madrid Spain 33,000.00 EUR Prospecting and Line-by-line Enel Oil & Gas 100.00% 100.00% SL development of hydrocarbon fields SpA Enel Oil & Gas SpA Rome Italy 200,000,000.00 EUR Upstream gas- Line-by-line Enel Trade SpA 100.00% 100.00% extraction of natural gas Enel Open Fiber SpA Milan Italy 5,000,000.00 EUR Installation of electronic Line-by-line Enel SpA 100.00% 100.00% plant (including maintenance and repair) Enel Productie Srl Bucharest Romania 20,210,200.00 RON Electricity generation Line-by-line Enel Investment 100.00% 100.00% Holding BV 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 Judetul Ilfov Romania 200,000.00 RON Business services Line-by-line Enel Investment 100.00% 100.00% Holding BV Enel Russia PJSC Ekaterinburg Russian 35,371,898,370.00 RUB Electricity generation Line-by-line Enel Investment 56.43% 56.43% Federation Holding BV Enel Salt Wells LLC Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) from renewable resources Power North America Inc. Enel Servicii Comune Bucharest Romania 33,000,000.00 RON Energy services Line-by-line Enel Distributie 50.00% 51.00% SA Banat SA Enel Distributie 50.00% Dobrogea SA Enel Servizio Elettrico Rome SpA Enel Sole Srl Rome Italy Italy 10,000,000.00 EUR Electricity sale 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% 416 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Enel Soluções Niterói Brazil 5,000,000.00 BRL Electricity generation Line-by-line Enel Green 0.01% 68.29% Energéticas Ltda (Rio de Janeiro) from renewable resources Power Desenvolvimento Ltda Enel Green 99.99% Power Brasil Participações Ltda Enel Stillwater LLC Wilmington USA (Delaware) Enel Surprise Valley Wilmington USA LLC (Delaware) Enel Texkan Inc. Wilmington USA (Delaware) - - - Enel Trade d.o.o. Zagabria Croatia 2,240,000.00 Enel Trade Romania Srl Bucharest Romania 21,250,000.00 Enel Trade Serbia d.o.o.Belgrade Enel Trade SpA Rome Serbia Italy 300,000.00 90,885,000.00 Enel.Factor SpA Enel.Newhydro Srl Enel.si Srl Rome Rome Rome Italy Italy Italy 12,500,000.00 1,000,000.00 USD Electricity generation Line-by-line Enel Geothermal 100.00% 34.83% from renewable resources LLC USD Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power North America Inc. USD Electricity generation Line-by-line Chi Power Inc. 100.00% 68.29% from renewable resources Electricity trading Line-by-line Enel Trade SpA 100.00% 100.00% Electricity sourcing and Line-by-line Enel Trade SpA 100.00% 100.00% trading Electricity trading Line-by-line Enel Trade SpA 100.00% 100.00% Fuel trading and Line-by-line Enel SpA 100.00% 100.00% logistics - Electricity sales Factoring Line-by-line Engineering and water Line-by-line systems Enel SpA Enel SpA 100.00% 100.00% 100.00% 100.00% HRK RON EUR EUR EUR EUR 5,000,000.00 EUR Plant engineering and Line-by-line Enel Energia SpA 100.00% 100.00% energy services Enelco SA Athens Greece 60,108.80 EUR Plant construction, Line-by-line Enel Investment 75.00% 75.00% operation and maintenance Holding BV Enelpower Contractor Riyadh Saudi Arabia 5,000,000.00 SAR Plant construction, Line-by-line Enelpower SpA 51.00% 51.00% And Development Saudi Arabia Ltd operation and maintenance Enelpower do Brasil Rio de Janeiro Brazil 1,242,000.00 BRL Electrical engineering Line-by-line Enel Green 99.99% 68.29% Ltda Power Brasil Participações Ltda Enel Green 0.01% Power Latin America Ltda Enelpower SpA Milan Italy 2,000,000.00 EUR Engineering and Line-by-line Enel SpA 100.00% 100.00% construction Energética de Rosselló Barcelona Spain 3,606,060.00 EUR Cogeneration of Equity Enel Green 27.00% 18.63% AIE electricity and heat Power España SL Energía de La Loma Jaén Spain 4,450,000.00 EUR Biomass Line-by-line Enel Green 60.00% 41.41% SA Power España SL Energia Eolica Srl Rome Italy 4,840,000.00 EUR Electricity generation Line-by-line Enel Green Power 100.00% 68.29% from renewable resources SpA Energía Global de Mexico City Mexico 50,000.00 MXN Electricity generation Line-by-line Enel Green 99.00% 67.61% México (Enermex) SA de Cv from renewable resources Power International BV Energía Global San José Costa Rica 10,000.00 CRC Electricity generation Line-by-line Enel Green 100.00% 68.29% Operaciones SA from renewable resources Power Costa Rica SA Energía Limpia de Palo Mexico City Mexico 613,953,610.00 MXN Electricity generation Line-by-line Enel Green 99.99% 68.29% Alto S de RL de Cv from renewable resources Power México S de RL de Cv Energía Marina SpA Santiago Chile 2,404,240,000.00 CLP Electricity generation Equity Enel Green 25.00% 17.06% from renewable resources Power Chile Ltda Hidroelectricidad 0.01% del Pacífico S de RL de Cv 417 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Energía Nueva de Iguu Mexico City Mexico 41,582,307.00 MXN Electricity generation Line-by-line Enel Green 99.90% 68.23% S de RL de Cv from renewable resources Power México S de RL de Cv Energía Nueva 0.01% Energía Limpia México S de RL de Cv Energía Nueva Energía Mexico City Mexico 5,339,650.00 MXN Electricity generation Line-by-line Enel Green 0.04% 68.29% Limpia México S de RL de Cv from renewable resources Power Guatemala SA Enel Green 99.96% Power International BV Energías Alternativas Las Palmas de Spain 5,589,393.00 EUR Electricity generation Line-by-line Enel Green 53.77% 37.11% del Sur SL Gran Canaria from renewable resources Power España SL Energías de Aragón Zaragoza Spain 3,200,000.00 EUR Electricity transmission, Line-by-line Endesa Red SA 100.00% 70.10% I SL distribution and sale Energías de Aragón Zaragoza Spain 18,500,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 69.01% II SL Power España SL Energías de Graus SL Barcelona Spain 1,298,160.00 EUR Hydroelectric plants Line-by-line Enel Green 66.67% 46.01% Power España SL Energías de La Mancha Villarta de San Spain 279,500.00 EUR Biomass Line-by-line Enel Green 68.42% 47.22% SA Juan (Ciudad Real) Power España SL Energías Especiales La Coruña Spain 270,450.00 EUR Electricity generation Line-by-line Enel Green 77.00% 53.14% de Careón SA from renewable resources Power España SL Energías Especiales Madrid Spain 963,300.00 EUR Electricity generation Line-by-line Enel Green 80.00% 55.21% de Pena Armada SA from renewable resources Power España SL Energías Especiales Madrid Spain 1,722,600.00 EUR Electricity generation Line-by-line Enel Green 100.00% 69.01% del Alto Ulla SA from renewable resources Power España SL Energías Especiales Torre del Bierzo Spain 1,635,000.00 EUR Electricity generation Equity Enel Green 50.00% 34.51% del Bierzo SA from renewable resources Power España SL Energías Renovables Mexico City Mexico 656,615,400.00 MXN Electricity generation Line-by-line Enel Green 99.99% 68.29% La Mata SAPI de Cv from renewable resources Power México S de RL de Cv Energía Nueva 0.01% de Iguu S de RL de Cv Energie Electrique de Tangeri Morocco 750,400,000.00 MAD Combined-cycle Equity Endesa 32.00% 22.43% Tahaddart SA generation plants Generación SA Energosluzby AS Trnava Slovakia 33,194.00 EUR Business services - Slovenské 100.00% 66.00% (in liquidation) elektrárne AS Energotel AS Bratislava Slovakia 2,191,200.00 EUR Operation of optical Held for sale Slovenské 20.00% 13.20% fiber network elektrárne AS ENergy Hydro Piave Srl Soverzene Italy 800,000.00 EUR Electricity purchases Line-by-line Enel Produzione 51.00% 51.00% and sales SpA Enerlasa SA (in Madrid Spain 1,021,700.58 EUR Electricity generation - Enel Green 45.00% 31.06% liquidation) from renewable resources Power España SL Enerlive Srl Rome Italy 6,520,000.00 EUR Electricity generation Line-by-line Maicor Wind Srl 100.00% 40.97% from renewable resources Enersis SA Santiago Chile 5,669,280.72 CLP Electricity generation Line-by-line Enel 40.32% 60.62% and distribution Latinoamérica SA Enel Iberoamérica 20.30% Srl 418 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Eólica del Noroeste SL La Coruña Spain 36,100.00 EUR Wind plant Line-by-line Enel Green 51.00% 35.20% development Power España SL Eólica del Principado Oviedo Spain 90,000.00 EUR Electricity generation Equity Enel Green 40.00% 27.61% SAU from renewable resources Power España SL Eólica Fazenda Rio Grande do Brazil 1,839,000.00 BRL Wind plants Line-by-line Enel Brasil SA 99.95% 51.13% Nova - Generação e Norte Comercialização de Energia SA Eólica Valle del Ebro Zaragoza Spain 5,559,340.00 EUR Electricity generation Line-by-line Enel Green 50.50% 34.85% SA from renewable resources Power España SL Eólica Zopiloapan SAPI Mexico City Mexico 1,877,201,540.00 MXN Electricity generation Line-by-line Enel Green 56.98% 65.88% de Cv from renewable resources Power México S de RL de Cv Enel Green 39.50% Power Partecipazioni Speciali Srl Eólicas de Agaete SL Las Palmas de Spain 240,400.00 EUR Electricity generation Line-by-line Enel Green 80.00% 55.21% Gran Canaria from renewable resources Power España SL Eólicas de Fuencaliente Las Palmas de Spain 216,360.00 EUR Electricity generation Line-by-line Enel Green 55.00% 37.96% SA Gran Canaria from renewable resources Power España SL Eólicas de Fuerteventura Spain - EUR Electricity generation Equity Enel Green 40.00% 27.61% Fuerteventura AIE (Las Palmas) from renewable resources Power España SL Eólicas de La Patagonia Buenos Aires Argentina 480,930.00 ARS Electricity generation Equity Enel Green 50.00% 34.51% SA from renewable resources Power España SL Eólicas de Lanzarote Las Palmas de Spain 1,758,000.00 EUR Electricity generation Equity Enel Green 40.00% 27.61% SL Gran Canaria and distribution Power España SL Eólicas de Tenerife AIE Santa Cruz de Spain 420,708.40 EUR Electricity generation Equity Enel Green 50.00% 34.51% Tenerife from renewable resources Power España SL Eólicas de Tirajana AIE Las Palmas de Spain - EUR Electricity generation Line-by-line Enel Green 60.00% 41.41% Gran Canaria from renewable resources Power España SL Erdwärme Oberland Munich Germany 116,667.00 EUR Electricity generation Line-by-line Enel Green 78.57% 53.65% GmbH from renewable resources Power International BV Essex Company LLC Boston USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% (Massachusetts) from renewable resources Hydro Holdings LLC Estrellada SA Montevideo Uruguay 448,000.00 UYU Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power Uruguay SA Explotaciones Eólicas Zaragoza Spain 3,505,000.00 EUR Electricity generation Line-by-line Enel Green 70.00% 48.31% de Escucha SA from renewable resources Power España SL Explotaciones Eólicas Teruel Spain 3,230,000.00 EUR Electricity generation Line-by-line Enel Green 73.60% 50.79% El Puerto SA from renewable resources Power España SL Explotaciones Eólicas Zaragoza Spain 5,488,500.00 EUR Electricity generation Line-by-line Enel Green 65.00% 44.86% Saso Plano SA from renewable resources Power España SL Explotaciones Eólicas Zaragoza Spain 8,046,800.00 EUR Electricity generation Line-by-line Enel Green 90.00% 62.11% Sierra Costera SA from renewable resources Power España SL Explotaciones Eólicas Zaragoza Spain 4,200,000.00 EUR Electricity generation Line-by-line Enel Green 90.00% 62.11% Sierra La Virgen SA from renewable resources Power España SL 419 AttachmentsAnnual Report 2015Company name Headquarters Country Fiesta City Solar LLC Delaware USA Share capital - Currency Activity Consolidaton method USD Electricity generation Line-by-line from renewable resources % Group % holding holding 100.00% 68.29% Held by Aurora Distributed Solar LLC Florence Hills LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Fotovoltaica Insular SL Las Palmas de Spain 3,008.00 EUR Photovoltaic plants Equity Endesa Ingeniería 50.00% 35.05% Gran Canaria SLU Fowler Hydro LLC Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power North America Inc. Fuentes Renovables Guatemala Guatemala 5,000.00 GTQ Electricity generation Line-by-line Renovables de 40.00% 68.29% de Guatemala SA from renewable resources Guatemala SA Enel Green 60.00% Power Guatemala SA Fulcrum LLC Boise (Idaho) USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% from renewable resources Hydro Holdings LLC Garob Wind Farm Gauteng South Africa 100 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% (Pty) Ltd from renewable resources Power RSA (Pty) Ltd Gas Atacama Chile SA Santiago Chile 185,025,186.00 USD Electricity generation Line-by-line Gas Atacama SA 99.90% 36.80% Gas Atacama SA Santiago Chile 291,484,088.00 USD Holding company Line-by-line Inversiones 100.00% 36.82% Gasatacama Holding Ltda Gas y Electricidad Palma de Spain 213,775,700.00 EUR Electricity generation Line-by-line Endesa 100.00% 70.10% Generación SAU Mallorca Generación SA Gasoducto Atacama Santiago Chile 208,173,124.00 USD Natural gas transport Line-by-line Gas Atacama SA 57.23% 36.80% Argentina SA Compañía 0.05% Eléctrica Tarapacá SA Compañía 0.03% Eléctrica Tarapacá SA Gas Atacama 42.71% Chile SA Gasoducto Atacama Buenos Aires Argentina - ARS Natural gas transport Line-by-line Gasoducto 100.00% 36.80% Argentina SA Sucursal Argentina Atacama Argentina SA Gasoducto Taltal SA Santiago Chile 18,638.52 CLP Natural gas transport Line-by-line Gasoducto 0.12% 36.80% Atacama Argentina SA Gas Atacama 99.88% Chile SA Gauley Hydro LLC Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Delaware) Willison (Vermont) Gauley River Management Corporation from renewable resources Power North America Inc. USA 1.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power North America Inc. Gauley River Power Willison USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% Partners LLC (Vermont) from renewable resources Hydro Holdings LLC Guatemala Guatemala 16,261,697.33 GTQ Electricity generation Line-by-line Enel Green 1.00% 68.29% from renewable resources Power Guatemala SA Enel Green 99.00% Power International BV Generadora de Occidente Ltda 420 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Generadora Eólica Alto Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Pacora SA from renewable resources Power Panama SA Generadora Estrella Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Solar SA from renewable resources Power Panama SA Generadora Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Fotovoltaica Chiriquí SA from renewable resources Power Panama SA Generadora Guatemala Guatemala 3,820,000.00 GTQ Electricity generation Line-by-line Enel Green 0.01% 68.29% Montecristo SA from renewable resources Power Guatemala SA Generadora Solar Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Tolé SA from renewable resources Power Panama SA Generalima SA Lima Generandes Perú SA Lima Peru Peru 146,534,335.00 853,429,020.00 PEN PEN Holding company Line-by-line Enersis SA 100.00% 60.62% Holding company Line-by-line Empresa 61.00% 45.82% Enel Green 99.99% Power International BV Nacional de Electricidad SA Enersis SA 39.00% Geotérmica del Norte Santiago Chile 120,068,349,979.00 CLP Electricity generation Line-by-line Enel Green 68.31% 46.61% SA from renewable resources Power Chile Ltda Gibson Bay Wind Farm Johannesburg South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 60.00% 40.97% (RF) (Pty) Ltd from renewable resources Power RSA (Pty) Ltd Gnl Chile SA Santiago Chile 3,026,160.00 USD Design and LNG supply Equity Empresa Nacional 33.33% 12.12% de Electricidad SA Gnl Norte SA Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Gas Atacama 50.00% 36.80% Chile SA Gasoducto Taltal 50.00% SA Gnl Quintero SA Santiago Chile 114,057,353.00 USD Design and LNG supply Equity Empresa Nacional 20.00% 7.27% de Electricidad SA Goodwell Wind Project Wilmington USA - USD Electricity generation Line-by-line Origin Goodwell 100.00% 34.83% LLC (Delaware) from renewable resources Holdings LLC Goodyear Lake Hydro Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC from renewable resources Power North America Inc. Gorona del Viento El Valverde de El Spain 30,936,736.00 EUR Development and Equity Unión Eléctrica 23.21% 16.27% Hierro SA Hierro maintenance of El Hierro generation plant de Canarias Generación SAU Green Fuel Corporación Madrid Spain 1,717,049.55 EUR Electricity generation - Enel Green 24.24% 16.73% SA (in liquidation) from renewable resources Power España SL Guadarranque Solar 4 Seville Spain 3,006.00 EUR Electricity generation Line-by-line Endesa 100.00% 70.10% SL Unipersonal from renewable resources Generación II SA GV Energie Rigenerabili Bucharest Romania 1,145,400.00 RON Electricity generation Line-by-line Enel Green 0.00% 68.29% ITAL-RO Srl from renewable resources Power International BV Hadley Ridge LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Enel Green 100.00% Power Romania Srl 421 AttachmentsAnnual Report 2015Company name Headquarters Country Hastings Solar LLC Delaware USA Share capital - Currency Activity Consolidaton method USD Electricity generation Line-by-line from renewable resources % Group % holding holding 100.00% 68.29% Held by Aurora Distributed Solar LLC Helio Atacama Nueve Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Enel Green 100.00% 68.23% SpA from renewable resources Power Chile Ltda Hidroeléctrica de Barcelona Spain 126,210.00 EUR Electricity transmission Line-by-line Endesa Red SA 100.00% 70.10% Catalunya SL and distribution Hidroeléctrica de Lugo Spain 1,608,200.00 EUR Electricity generation Equity Enel Green 30.00% 20.70% Ourol SL from renewable resources Power España SL Hidroeléctrica Don San José Costa Rica 10,000.00 CRC Electricity generation Line-by-line Enel Green 65.00% 44.39% Rafael SA from renewable resources Power Costa Rica SA Hidroeléctrica El Buenos Aires Argentina 298,584,050.00 ARS Electricity generation Line-by-line Hidroinvest SA 59.00% 23.77% Chocón SA and sale Empresa Nacional 2.48% de Electricidad SA Endesa Argentina 6.19% SA Hidroelectricidad del Mexico City Mexico 30,890,736.00 MXN Electricity generation Line-by-line Enel Green 99.99% 68.28% Pacífico S de RL de Cv from renewable resources Power México S de RL de Cv Hidroflamicell SL Barcelona Spain 78,120.00 EUR Electricity distribution Line-by-line Hidroeléctrica de 75.00% 52.58% and sale Catalunya SL Hidroinvest SA Buenos Aires Argentina 55,312,093.00 ARS Holding company Line-by-line Endesa Argentina 54.15% 34.94% SA Empresa Nacional 41.94% de Electricidad SA Hidromondego - Lisbon Portugal 3,000.00 EUR Hydroelectric power Line-by-line Endesa 10.00% 70.10% Hidroeléctrica do Mondego Lda Generación Portugal SA Endesa 90.00% Generación SA High Shoals LLC Delaware USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% from renewable resources Hydro Holdings LLC Highfalls Hydro Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Company Inc. (Delaware) from renewable resources Power North America Inc. Hispano Generación de Jerez de los Spain 3,500.00 EUR Electricity generation Line-by-line Enel Green 51.00% 35.20% Energía Solar SL Caballeros (Badajoz) from renewable resources Power España SL Hope Creek LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Hydro Development Albany (New USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% Group Acquisition LLC York) from renewable resources Hydro Holdings LLC Hydro Dolomiti Enel Srl Trento Italy 3,000,000.00 EUR Electricity generation, Held for sale Enel Produzione 49.00% 49.00% Hydro Energies Corporation Willison (Vermont) USA 5,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% purchases and sales SpA from renewable resources Power North America Inc. Hydrogen Park- Venice Italy 245,000.00 EUR Development of Line-by-line Enel Produzione 60.00% 60.00% Marghera per l’idrogeno Scrl studies and projects for the use of hydrogen SpA Hydromac Energy BV Amsterdam The 18,000.00 EUR Holding company Line-by-line Enel Green 100.00% 68.29% Netherlands Power International BV I-EM Srl Turin Italy 28,571.43 EUR Design and Equity Enel Italia Srl 30.00% 30.00% development 422 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Ingendesa do Brasil Rio de Janeiro Brazil 500,000.00 BRL Design, engineering Line-by-line Empresa Nacional 1.00% 37.27% Ltda and consulting de Electricidad SA Inkolan Información y Bilbao Spain 84,140.00 EUR Information on Equity Coordinación de obras AIE infrastructure of Inkolan associates Compañía 99.00% Eléctrica Tarapacá SA Endesa Distribución Eléctrica SL 14.29% 10.02% International Endesa Amsterdam The 15,428,520.00 EUR Holding company Line-by-line Endesa SA 100.00% 70.10% BV Netherlands International Rome Italy 24,000.00 EUR Long-distance learning - Enel Italia Srl 13.04% 13.04% Multimedia University Srl (in bankruptcy) Inversiones Distrilima Lima Peru 714,233,174.00 PEN Holding company Line-by-line Enersis SA 69.85% 60.45% SA Inversiones Santiago Chile 333,520,000.00 USD Natural gas transport Line-by-line Empresa Nacional 50.00% 36.82% Chilectra SA 30.15% Gasatacama Holding Ltda de Electricidad SA Compañía 50.00% Eléctrica Tarapacá SA Inversora Codensa Sas Bogotá DC Colombia 5,000,000.00 COP Electricity transmission Line-by-line Codensa SA ESP 100.00% 29.34% and distribution Inversora Dock Sud SA Buenos Aires Argentina 241,490,000.00 Isamu Ikeda Energia Rio de Janeiro Brazil 61,474,475.77 ARS BRL Holding company Line-by-line Enersis SA 57.14% 34.64% Electricity generation Line-by-line Enel Green 100.00% 68.29% SA and sale Power Brasil Participações Ltda Italgest Energy (Pty) Johannesburg South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% Ltd from renewable resources Power RSA (Pty) Ltd Jack River LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Jessica Mills LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Julia Hills LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Kalenta SA Maroussi Greece 4,359,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power Solar Energy Srl Kavacik Eolìko Enerjì Istanbul Turkey 9,000,000.00 TRY Electricity generation Line-by-line Enel Green 100.00% 68.29% Elektrìc Üretìm ve Tìcaret Anonìm S¸ìrketì from renewable resources Power Turkey Enerji Yatirimlari Anonim S¸ìrketì Kelley’s Falls LLC Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power North America Inc. Kings River Hydro Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Company Inc. (Delaware) from renewable resources Power North America Inc. Kinneytown Hydro Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Company Inc. (Delaware) from renewable resources Power North America Inc. Kirklarelì Eolìko Enerjì Istanbul Turkey 5,250,000.00 TRY Electricity generation Line-by-line Enel Green 100.00% 68.29% Elektrìk Üretìm ve Tìcaret Anonìm S¸ìrketì from renewable resources Power Turkey Enerji Yatirimlari Anonim S¸ìrketì Kongul Energì Sanayi Istanbul Turkey 125,000,000.00 TRY Electricity generation Line-by-line Enel Green 100.00% 68.29% ve Tìcaret Anonìm S¸ìrketì from renewable resources Power Turkey Enerji Yatirimlari Anonim S¸ìrketì Kromschroeder SA Barcelona Spain 627,126.00 EUR Services Equity Endesa Red SA 29.26% 20.51% 423 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity La Pereda Co2 AIE Oviedo Spain 224,286.00 EUR Services Consolidaton method Equity Held by Endesa Generación SA % Group % holding holding 33.33% 23.36% LaChute Hydro Wilmington USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% Company LLC (Delaware) from renewable resources Hydro Holdings LLC Lake Emily Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% from renewable resources Distributed Solar LLC Lake Pulaski Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% from renewable resources Distributed Solar LLC Lawrence Creek Solar Minnesota USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% LLC from renewable resources Distributed Solar LLC Lester Prairie Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% from renewable resources Distributed Solar LLC Lindahl Wind Project Delaware USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% LLC from renewable resources Little Elk Wind Delaware USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% Holdings LLC from renewable resources Little Elk Wind Project Oklahoma City USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% LLC (Oklahoma) from renewable resources Littleville Power Boston USA 1.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Company Inc. (Massachusetts) from renewable resources Power North America Inc. Llano Sánchez Solar Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Power One SA from renewable resources Power Panama SA Llano Sánchez Solar Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Power Cuatro SA from renewable resources Power Panama SA Llano Sánchez Solar Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Power Tres SA from renewable resources Power Panama SA Lower Saranac Hydro Delaware USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% Partners LLC from renewable resources Hydro Holdings LLC Lower Saranac Hydro Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC from renewable resources Power North America Inc. Lower Valley LLC Delaware USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% from renewable resources Hydro Holdings LLC Lowline Rapids LLC Delaware USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% from renewable resources Hydro Holdings LLC Luz Andes Ltda Santiago Chile 1,224,348.00 CLP Electricity and fuel Line-by-line Chilectra SA 99.90% 70.08% transport, distribution and sale Enersis SA 0.10% Maicor Wind Srl Rome Italy 20,850,000.00 EUR Electricity generation Line-by-line Enel Green 60.00% 40.97% from renewable resources Power SpA Marcinelle Energie SA Charleroi Belgium 110,061,500.00 EUR Electricity generation, Line-by-line Enel Investment 100.00% 100.00% transport, sale and trading Holding BV Marte Srl Rome Italy 5,100,000.00 EUR Electricity generation Line-by-line Enel Green 98.00% 68.29% from renewable resources Power SpA Enel Green 2.00% Power Solar Energy Srl 424 Annual Report 2015Company name Headquarters Country Mascoma Hydro Concord (New USA Corporation Hampshire) Share capital 1.00 Currency Activity method Held by holding holding USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Consolidaton % Group % from renewable resources Power North America Inc. Mason Mountain Wind Wilmington USA - USD Electricity generation Line-by-line Padoma Wind 100.00% 68.29% Project LLC (Delaware) from renewable resources Power LLC Matrigenix (Pty) Ltd Houghton South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power RSA (Pty) Ltd Medidas Ambientales Medina de Spain 60,100.00 EUR Environmental studies Equity Nuclenor SA 50.00% 17.53% SL Pomar (Burgos) Metro Wind LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Mexicana de Mexico City Mexico 181,728,701.00 MXN Electricity generation Line-by-line Enel Green 99.99% 68.28% Hidroelectricidad Mexhidro S de RL de Cv from renewable resources Power México S de RL de Cv Mill Shoals Hydro Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Company ILLC (Delaware) from renewable resources Power North America Inc. Minas de Estercuel SA Madrid Minas Gargallo SL Madrid Spain Spain 93,160.00 150,000.00 EUR EUR Mineral deposits Line-by-line Minas Gargallo SL99.65% 69.79% Mineral deposits Line-by-line Endesa 99.91% 70.04% Generación SA Minicentrales del Canal Zaragoza Spain 1,202,000.00 EUR Hydroelectric plants - Enel Green 15.00% 10.35% de Las Bárdenas AIE Power España SL Minicentrales del Canal Zaragoza Spain 1,820,000.00 EUR Hydroelectric plants Equity Enel Green 36.50% 25.19% Imperial-Gallur SL Power España SL Mira Energy (Pty) Ltd Houghton South Africa 100.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power RSA (Pty) Ltd Missisquoi Associates Los Angeles USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% LLC (California) from renewable resources Hydro Holdings LLC Montrose Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% from renewable resources Distributed Solar LLC Nevkan Renewables Wilmington USA - USD Electricity generation Line-by-line Enel Nevkan Inc. 100.00% 68.29% LLC (Delaware) from renewable resources Newbury Hydro Delaware USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% Company LLC from renewable resources Hydro Holdings LLC Newind Group Inc. St. John Canada 578,192.00 CAD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Newfoundland) from renewable resources Power Canada Inc. Nojoli Wind Farm (RF) Johannesburg South Africa 10,000,000.00 ZAR Electricity generation Line-by-line Enel Green 60.00% 40.97% (Pty) Ltd North Canal Waterworks Boston USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% (Massachusetts) from renewable resources Power North America Inc. from renewable resources Power RSA (Pty) Ltd Northwest Hydro LLC Wilmington USA - USD Electricity generation Line-by-line Chi West LLC 100.00% 68.29% (Delaware) from renewable resources Notch Butte Hydro Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Company Inc. (Delaware) from renewable resources Power North America Inc. Nuclenor SA Burgos Spain 102,000,000.00 EUR Nuclear plant Equity Endesa 50.00% 35.05% Generación SA Nueva Marina Real Madrid Spain 3,200.00 EUR Real estate Line-by-line Endesa Servicios 60.00% 42.06% Estate SL SL Nuove Energie Srl Porto Italy 54,410,000.00 EUR Construction and Line-by-line Enel Trade SpA 100.00% 100.00% Empedocle management of LNG regasification infrastructure 425 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Ochrana A Bezpecnost Mochovce Slovakia 33,193.92 EUR Security services Held for sale Slovenské 100.00% 66.00% Se AS elektrárne AS Odell Sponsorco LLC Delaware USA - USD Electricity generation Line-by-line Enel Kansas LLC 50.00% 34.14% from renewable resources OGK-5 Finance LLC Moscow Russian 10,000,000.00 RUB Finance company Line-by-line Enel Russia PJSC 100.00% 56.43% Federation Origin Goodwell Wilmington USA - USD Electricity generation Line-by-line EGPNA Wind 100.00% 34.83% Holdings LLC (Delaware) from renewable resources Holdings 1 LLC Origin Wind Energy Wilmington USA - USD Electricity generation Line-by-line Origin Goodwell 100.00% 34.83% LLC (Delaware) from renewable resources Holdings LLC Osage Wind Holdings Delaware USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% LLC from renewable resources Osage Wind LLC Delaware USA - USD Electricity generation Line-by-line Osage Wind 50.00% 34.14% from renewable resources Holdings LLC Ottauquechee Hydro Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Company Inc. (Delaware) from renewable resources Power North America Inc. Ovacik Eolìko Enerjì Istanbul Turkey 11,250,000.00 TRY Electricity generation Line-by-line Enel Green 100.00% 68.29% Elektrìk Üretìm ve Tìcaret Anonìm S¸ìrketì from renewable resources Power Turkey Enerji Yatirimlari Anonim S¸ìrketì Oxagesa AIE Teruel Spain 6,010.00 EUR Cogeneration of Equity Enel Green 33.33% 23.00% electricity and heat Power España SL Oyster Bay Wind Farm Cape Town South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% (Pty) Ltd from renewable resources Power RSA (Pty) Ltd P.E. Cote SA San José Costa Rica 10,000.00 CRC Electricity generation Line-by-line Enel Green 65.00% 44.39% from renewable resources Power Costa Rica SA P.V. Huacas SA San José Costa Rica 10,000.00 CRC Electricity generation Line-by-line Enel Green 65.00% 44.39% from renewable resources Power Costa Rica SA Padoma Wind Power Los Angeles USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC (California) from renewable resources Power North America Inc. Palo Alto Farms Wind Dallas (Texas) USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% Project LLC from renewable resources Pampa Solar Norte Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Helio Atacama 100.00% 68.23% Cuatro SpA from renewable resources Nueve SpA Pampa Solar Norte Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Helio Atacama 100.00% 68.23% Dos SpA from renewable resources Nueve SpA Pampa Solar Norte Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Helio Atacama 100.00% 68.23% Uno SpA from renewable resources Nueve SpA Paravento SL Lugo Spain 3,006.00 EUR Electricity generation Line-by-line Enel Green 90.00% 62.11% from renewable resources Power España SL Parc Eolic Els Aligars Barcelona Spain 1,313,100.00 EUR Electricity generation Equity Enel Green 30.00% 20.70% SL from renewable resources Power España SL Parc Eolic La Tossa-La Barcelona Spain 1,183,100.00 EUR Electricity generation Equity Enel Green 30.00% 20.70% Mola D’en Pascual SL from renewable resources Power España SL Parque Eólico A Santiago de Spain 5,857,586.40 EUR Electricity generation Line-by-line Enel Green 100.00% 69.01% Capelada AIE Compostela from renewable resources Power España SL 426 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Parque Eólico Carretera Las Palmas de Spain 1,603,000.00 EUR Electricity generation Line-by-line Enel Green 80.00% 55.21% de Arinaga SA Gran Canaria from renewable resources Power España SL Parque Eólico de Zaragoza Spain 601,000.00 EUR Electricity generation Line-by-line Enel Green 80.00% 55.21% Aragón AIE from renewable resources Power España SL Parque Eólico de La Coruña Spain 3,606,000.00 EUR Electricity generation Line-by-line Enel Green 75.00% 51.76% Barbanza SA from renewable resources Power España SL Parque Eólico de Madrid Spain 120,400.00 EUR Electricity generation Line-by-line Enel Green 50.16% 34.62% Belmonte SA from renewable resources Power España SL Parque Eólico de San La Coruña Spain 552,920.00 EUR Electricity generation Line-by-line Enel Green 82.00% 56.59% Andrés SA from renewable resources Power España SL Parque Eólico de Santa Las Palmas de Spain 901,500.00 EUR Electricity generation Line-by-line Enel Green 65.67% 45.32% Lucía SA Gran Canaria from renewable resources Power España SL Parque Eólico Finca de Las Palmas de Spain 3,810,340.00 EUR Construction and Line-by-line Enel Green 90.00% 62.11% Mogán SA Gran Canaria operation of wind plants Power España SL Parque Eólico Montes Madrid Spain 6,540,000.00 EUR Construction and Line-by-line Enel Green 75.50% 52.11% de Las Navas SA operation of wind plants Power España SL Parque Eólico Punta de Tenerife Spain 528,880.00 EUR Electricity generation Line-by-line Enel Green 52.00% 35.89% Teno SA from renewable resources Power España SL Parque Eólico Renaico Santiago Chile 1,000,000.00 CLP Electricity generation Line-by-line Enel Green 100.00% 68.23% SpA from renewable resources Power Chile Ltda Parque Eólico Sierra Soria Spain 7,193,970.00 EUR Electricity generation Line-by-line Enel Green 58.00% 40.03% del Madero SA from renewable resources Power España SL Parque Eólico Taltal SA Santiago Chile 20,878,010,000.00 CLP Electricity generation Line-by-line Enel Green 0.01% 68.23% from renewable resources Power Latin America Ltda Enel Green 99.99% Power Chile Ltda Parque Eólico Valle de Santiago Chile 566,096,564.00 CLP Electricity generation Line-by-line Enel Green 0.01% 68.23% los Vientos SA from renewable resources Power Latin America Ltda Parque Solar Carrera Santiago Chile 10,000,000.00 CLP Electricity generation Line-by-line Enel Green 99.00% 67.54% Pinto SA from renewable resources Power Chile Ltda Parque Talinay Oriente Santiago Chile 66,092,165,171.00 CLP Electricity generation Line-by-line Enel Green 34.57% 65.17% Enel Green 99.99% Power Chile Ltda SA from renewable resources Power SpA Enel Green 60.92% Power Chile Ltda Paynesville Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% from renewable resources Distributed Solar LLC Pegop - Energia Abrantes Portugal 50,000.00 EUR Electricity generation Equity Endesa 0.02% 35.05% Eléctrica SA Generación Portugal SA Endesa 49.98% Generación SA Pelzer Hydro Company Wilmington USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% LLC (Delaware) from renewable resources Hydro Holdings LLC Pereda Power SL La Pereda Spain 5,000.00 EUR Development of Line-by-line Endesa 70.00% 49.07% (Mieres) generation activities Generación II SA 427 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % PH Chucas SA San José Costa Rica 100,000.00 CRC Electricity generation Line-by-line Enel Green 22.17% 42.67% from renewable resources Power SpA Enel Green 40.31% Power Costa Rica SA PH Don Pedro SA San José Costa Rica 100,001.00 CRC Electricity generation Line-by-line Enel Green 33.44% 22.84% from renewable resources Power Costa Rica SA PH Guacimo SA San José Costa Rica 50,000.00 CRC Electricity generation Line-by-line Enel Green 65.00% 44.39% from renewable resources Power Costa Rica SA PH Río Vólcan SA San José Costa Rica 100,001.00 CRC Electricity generation Line-by-line Enel Green 34.32% 23.44% Pine Island Distributed Delaware USA - USD Electricity generation Line-by-line Solar LLC from renewable resources from renewable resources Power Costa Rica SA Aurora Distributed Solar LLC 100.00% 68.29% Planta Eólica Europea Seville Spain 1,198,530.00 EUR Electricity generation Line-by-line Enel Green 56.12% 38.73% SA from renewable resources Power España SL PowerCrop Bologna Italy 100,000.00 EUR Electricity generation Equity PowerCrop Srl 100.00% 34.14% Macchiareddu Srl from renewable resources PowerCrop Russi Srl Bologna Italy 100,000.00 EUR Electricity generation Equity PowerCrop Srl 100.00% 34.14% from renewable resources PowerCrop Srl Bologna Italy 4,000,000.00 EUR Electricity generation Equity Enel Green 50.00% 34.14% from renewable resources Power SpA Prairie Rose Minneapolis USA - USD Electricity generation Line-by-line Prairie Rose Wind 100.00% 34.83% Transmission LLC (Minnesota) from renewable resources LLC Prairie Rose Wind LLC New York USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% (New York) from renewable resources Wind Holdings LLC Primavera Energia SA Rio de Janeiro Brazil 36,965,444.64 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% and sale Power Brasil Participações Ltda Productor Regional Valladolid Spain 88,398.00 EUR Construction and Line-by-line Enel Green 82.89% 57.21% de Energía Renovable III SA operation of wind plants Power España SL Productor Regional de Valladolid Spain 710,500.00 EUR Construction and Line-by-line Enel Green 85.00% 58.66% Energía Renovable SA operation of wind plants Power España SL Productora de Energías Barcelona Spain 30,050.00 EUR Hydroelectric plants Equity Enel Green 30.00% 20.70% SA Power España SL Prof-Energo LLC Sredneuralsk Russian 10,000.00 RUB Energy services Line-by-line Sanatorium- 100.00% 56.43% Federation Preventorium Energetik LLC Progas SA Santiago Chile 1,526,000.00 CLP Gas distribution Line-by-line Gas Atacama SA 0.10% 36.80% Promociones Ponferrada Spain 12,020.00 EUR Electricity generation Line-by-line Enel Green 100.00% 69.01% Energéticas del Bierzo SL Proveedora de Electricidad de Occidente S de RL de Cv Mexico City Mexico 89,708,735.00 MXN Electricity generation Line-by-line Enel Green 99.99% 68.28% from renewable resources Power México S de RL de Cv from renewable resources Power España SL Proyecto Almería Madrid Spain 601,000.00 EUR Desalinization and Equity Endesa SA 45.00% 31.55% Mediterraneo SA water supply Gas Atacama 99.90% Chile SA 428 Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Proyecto Eólico El San José Costa Rica 10,000.00 CRC Electricity generation Line-by-line Enel Green 65.00% 44.39% Pedregal SA from renewable resources Power Costa Rica SA Proyectos Alicante Spain 180,000.00 EUR Electricity generation Equity Enel Green 33.33% 23.00% Universitarios de Energías Renovables SL from renewable resources Power España SL PT Bayan Resources Jakarta Indonesia 333,333,350,000.00 IDR Energy - Enel Investment 10.00% 10.00% Tbk Holding BV Pulida Energy (RF) Houghton South Africa 10,000,000.00 ZAR Electricity generation Line-by-line Enel Green 52.70% 35.99% (Pty) Ltd from renewable resources Power RSA (Pty) Ltd Pyrites Hydro LLC New York USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% (New York) from renewable resources Hydro Holdings LLC Quatiara Energia SA Rio de Janeiro Brazil 16,566,510.61 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% Power Brasil Participações Ltda Rattlesnake Creek Lincoln USA - USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% Wind Project LLC (Nebraska) from renewable resources Reaktortest Sro Trnava Slovakia 66,389.00 EUR Nuclear power researchHeld for sale Slovenské 49.00% 32.34% elektrárne AS Red Centroamericana Panama Panama 2,700,000.00 USD Telecommunications - Enel 11.11% 11.11% de Telecomunicaciones SA Latinoamérica SA Renovables de Guatemala Guatemala 1,924,465,600.00 GTQ Electricity generation Line-by-line Enel Green 0.01% 68.29% Guatemala SA from renewable resources Power Guatemala SA Enel Green 42.83% Power International BV Enel Green 57.16% Power SpA Res Holdings BV Amsterdam The 18,000.00 EUR Holding company Equity Enel Investment 49.50% 49.50% Netherlands Holding BV Rock Creek Hydro LLC Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Rock Creek Wind Clayton USA Project LLC (California) Rocky Caney Wind New York USA LLC (New York) - - from renewable resources Power North America Inc. USD Holding company Line-by-line Enel Kansas LLC 100.00% 68.29% USD Electricity generation Line-by-line Enel Kansas LLC 100.00% 68.29% from renewable resources Rocky Ridge Wind Oklahoma City USA - USD Electricity generation Line-by-line Rocky Caney 100.00% 68.29% Project LLC (Oklahoma) from renewable resources Wind LLC Rusenergosbyt LLC Moscow Russian 2,760,000.00 RUB Electricity trading Equity Res Holdings BV 100.00% 49.50% Federation Rusenergosbyt Siberia Krasnoyarskiy Russian 4,600,000.00 RUB Electricity sale Equity Rusenergosbyt 50.00% 24.75% LLC Kray Federation LLC Rusenergosbyt Yaroslavl Russian 100,000.00 RUB Electricity sale Equity Rusenergosbyt 50.00% 24.75% Yaroslavl Federation LLC Ruthton Ridge LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Sacme SA Buenos Aires Argentina 12,000.00 ARS Monitoring of electricity Equity Empresa 50.00% 21.70% system Distribuidora Sur SA Salmon Falls Hydro Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC from renewable resources Power North America Inc. 429 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Salto de San Rafael SL Seville Spain 461,410.00 EUR Hydroelectric plants Equity Enel Green 50.00% 34.51% Power España SL San Juan Mesa Wind Wilmington USA - USD Electricity generation Line-by-line Padoma Wind 100.00% 68.29% Project II LLC (Delaware) from renewable resources Power LLC Sanatorium- Nevinnomyssk Russian 10,571,300.00 RUB Energy services Line-by-line Enel Russia PJSC 99.99% 56.43% Preventorium Energetik Federation LLC OGK-5 Finance 0.01% LLC Santo Rostro Seville Spain 207,000.00 EUR Cogeneration of - Enel Green 45.00% 31.06% Cogeneración SA (in liquidation) electricity and heat Power España SL Scandia Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% from renewable resources Distributed Solar LLC Se Hazelton A.LLC Los Angeles USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% (California) from renewable resources Hydro Holdings LLC Se Predaj Sro Bratislava Slovakia 4,505,000.00 EUR Electricity supply Held for sale Slovenské 100.00% 66.00% elektrárne AS SE Služby inžinierskych Kalná nad Slovakia 200,000.00 EUR Services Held for sale Slovenské 100.00% 66.00% stavieb Sro Hronom elektrárne AS Serra do Moncoso La Coruña Spain 3,125.00 EUR Electricity generation Line-by-line Enel Green 100.00% 69.01% Cambas SL from renewable resources Power España SL Servicio de Operación Mexico City Mexico 3,000.00 MXN Electricity generation Line-by-line Enel Green 0.01% 0.01% y Mantenimiento para Energías Renovables S de RL de Cv from renewable resources Power Guatemala SA Servicios Informáticos Santiago Chile 61,948,673,981.00 CLP ICT Line-by-line Enersis SA 99.90% 60.62% e Inmobiliarios Ltda Chilectra SA 0.10% SIET - Società Piacenza Italy 697,820.00 EUR Analysis, design and Equity Enel.Newhydro 41.55% 41.55% Informazioni Esperienze Termoidrauliche SpA research in thermal technology Srl Sistema Eléctrico de Granada Spain 44,900.00 EUR Electricity generation Equity Enel Green 16.70% 11.53% Conexión Montes Orientales SL Power España SL Sistema Eléctrico de Madrid Spain 175,200.00 EUR Electricity generation Equity Enel Green 28.13% 19.41% Conexión Valcaire SL Power España SL Sistemas Energéticos La Coruña Spain 2,007,750.00 EUR Electricity generation Line-by-line Enel Green 96.00% 66.25% Mañón Ortigueira SA Slate Creek Associates LP Los Angeles USA - USD Electricity generation Line-by-line Slate Creek Hydro 95.00% 33.09% (California) from renewable resources Company LLC from renewable resources Power España SL Slate Creek Company Wilmington USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% LLC (Delaware) from renewable resources Hydro Holdings LLC Slovenské elektrárne Cˆeská republika Sro Prague Czech Republic 3,000.00 CZK Electricity supply Held for sale Slovenské 100.00% 66.00% elektrárne AS Slovenské elektrárne Bratislava Slovakia 1,269,295,724.66 EUR Electricity generation Held for sale Enel Produzione 66.00% 66.00% AS SpA Smart P@Per SpA Potenza Italy 2,184,000.00 EUR Services - Enel Servizio 10.00% 10.00% Elettrico SpA SMART-I Srl Rome Italy 14,571.43 EUR Research, development Equity Enel Italia Srl 24.00% 24.00% and design Smoky Hills Wind Farm Topeka USA - USD Electricity generation Line-by-line Texkan Wind LLC 100.00% 68.29% LLC (Kansas) from renewable resources Smoky Hills Wind Topeka USA - USD Electricity generation Line-by-line Nevkan 100.00% 68.29% Project II LLC (Kansas) from renewable resources Renewables LLC 430 Annual Report 2015Company name Headquarters Country Snyder Wind Farm LLC Dallas USA (Texas) Share capital - Consolidaton % Group % Currency Activity method Held by holding holding USD Electricity generation Line-by-line Texkan Wind LLC 100.00% 68.29% from renewable resources Socibe Energia SA Rio de Janeiro Brazil 19,969,032.25 BRL Electricity generation Line-by-line Enel Green 100.00% 68.29% and sale Power Brasil Participações Ltda Sociedad Agrícola de Santiago Chile 5,738,046,495.00 CLP Financial investment Line-by-line Servicios 57.50% 34.86% Cameros Ltda Informáticos e Inmobiliarios Ltda Sociedad Eólica de Seville Spain 4,507,590.78 EUR Electricity generation Line-by-line Enel Green 64.74% 44.68% Andalucía SA Power España SL Sociedad Eólica El Seville Spain 1,643,000.00 EUR Electricity generation Equity Enel Green 50.00% 34.51% Puntal SL from renewable resources Power España SL Sociedad Eólica Los Cadiz Spain 2,404,048.42 EUR Electricity generation Line-by-line Enel Green 60.00% 41.41% Lances SA from renewable resources Power España SL Sociedad Portuaria Bogotá DC Colombia 5,800,000.00 COP Construction and Line-by-line Emgesa SA ESP 94.95% 23.15% Central Cartagena SA management of port infrastructure Inversora 4.90% Codensa Sas Sol de Media Noche Las Palmas de Spain 3,008.00 EUR Photovoltaic plants Equity Endesa Ingeniería 50.00% 35.05% Fotovoltaica SL Gran Canaria SLU Sol Real Istmo SA Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power Panama SA Sol Real Uno SA Panama Panama 10,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power Panama SA Soliloquoy Ridge LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Somersworth Hydro Wilmington USA 100.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Company Inc. (Delaware) from renewable resources Power North America Inc. Sotavento Galicia SA Santiago de Spain 601,000.00 EUR Electricity generation Equity Enel Green 36.00% 24.84% Compostela from renewable resources Power España SL Southern Cone Power Buenos Aires Argentina 19,874,798.00 ARS Holding company Line-by-line Empresa Nacional 98.03% 36.38% Argentina SA de Electricidad SA Compañía 1.97% Eléctrica Tarapacá SA Southwest Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% Transmission LLC (Minnesota) from renewable resources Wind LLC Spartan Hills LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Stipa Nayaá SA de Cv Colonia Mexico 1,811,016,348.00 MXN Electricity generation Line-by-line Enel Green 40.16% 65.13% Cuauhtémoc from renewable resources Power Partecipazioni Speciali Srl Enel Green 55.21% Power México S de RL de Cv Sublunary Trading (RF) Johannesburg South Africa 8,757,214.00 ZAR Electricity generation Line-by-line Enel Green 57.00% 38.92% (Pty) Ltd from renewable resources Power Solar Energy Srl Suministradora Cadiz Spain 12,020,240.00 EUR Electricity distribution Equity Endesa Red SA 33.50% 23.48% Eléctrica de Cádiz SA and supply 431 AttachmentsAnnual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Suministro de Luz y Torroella de Spain 2,800,000.00 EUR Electricity distribution Line-by-line Hidroeléctrica de 60.00% 42.06% Fuerza SL Montgrí (Girona) and supply Catalunya SL Summit Energy Wilmington USA 2,050,000.00 USD Electricity generation Line-by-line Enel Green 75.00% 51.22% Storage Inc. (Delaware) from renewable resources Power North America Inc. Sun River LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Sweetwater Concord (New USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Hydroelectric LLC Hampshire) from renewable resources Power North America Inc. Taranto Solar Srl Rome Italy 100,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power SpA Tecnatom SA Madrid Spain 4,025,700.00 EUR Electricity generation Equity Endesa 45.00% 31.55% and services Generación SA Tecnoguat SA Guatemala Guatemala 30,948,000.00 GTQ Electricity generation Line-by-line Enel Green 75.00% 51.22% from renewable resources Power International BV Tejo Energia Produção Paço de Arcos Portugal 5,025,000.00 EUR Electricity generation, Equity Endesa 38.89% 27.26% e Distribuição de (Oeiras) Energia Eléctrica SA transmission and distribution Generación SA Teploprogress OJSC Sredneuralsk Russian 128,000,000.00 RUB Electricity sale Line-by-line OGK-5 Finance 60.00% 33.86% Federation LLC Termoeléctrica José Buenos Aires Argentina 500,000.00 ARS Construction and Equity Central Dock 5.32% 7.29% de San Martín SA management of a combined-cycle plant Sud SA Endesa Costanera 5.51% SA Hidroeléctrica El 18.85% Chocón SA Termoeléctrica Manuel Buenos Aires Argentina 500,000.00 ARS Construction and Equity Hidroeléctrica El 18.85% 7.29% Belgrano SA management of a combined-cycle plant Chocón SA Central Dock 5.32% Sud SA Endesa Costanera 5.51% SA Termotec Energía AIE Valencia Spain 481,000.00 EUR Cogeneration of - Enel Green 45.00% 31.06% (in liquidation) electricity and heat Power España SL TERRAE Iniziative Rome Italy 19,060,811.37 EUR Agro-industrial Equity Enel Green 20.00% 13.66% per lo sviluppo agroindustriale SpA activities Power SpA Texkan Wind LLC Wilmington USA - USD Electricity generation Line-by-line Enel Texkan Inc. 100.00% 68.29% (Delaware) from renewable resources Tko Power LLC Los Angeles USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% (California) from renewable resources Hydro Holdings LLC Tobivox (RF) (Pty) Ltd Houghton South Africa 10,000,000.00 ZAR Electricity generation Line-by-line Enel Green 60.00% 40.97% from renewable resources Power RSA (Pty) Ltd Toledo Pv AEIE Madrid Spain 26,890.00 EUR Photovoltaic plants Equity Enel Green 33.33% 23.00% Power España SL Tradewind Energy Inc. Wilmington USA 200,000.00 USD Electricity generation Equity Enel Kansas LLC 19.90% 13.59% (Delaware) from renewable resources Transmisora de Energía Guatemala Guatemala 233,561,800.00 GTQ Electricity generation Line-by-line Enel Green 0.00% 68.29% Renovable SA 432 from renewable resources Power Guatemala SA Enel Green 100.00% Power International BV Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Transmisora Eléctrica Santiago Chile 440,644,600.00 CLP Electricity transmission Equity Compañía 50.00% 18.64% de Quillota Ltda and distribution Eléctrica Tarapacá SA Transportadora de Buenos Aires Argentina 100,000.00 ARS Electricity generation, Line-by-line Compañía de 100.00% 51.15% Energía SA Transportes y Distribuciones Eléctricas SA Olot (Girona) Spain 72,120.00 EUR Electricity Line-by-line Endesa 73.33% 51.41% transmission Distribución Eléctrica SL transmission and distribution Interconexión Energética SA Triton Power Company New York USA - USD Electricity generation Line-by-line Highfalls Hydro 98.00% 68.29% (New York) from renewable resources Company Inc. Enel Green 2.00% Power North America Inc. Tsar Nicholas LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Twin Falls Hydro Seattle USA - USD Electricity generation Line-by-line Twin Falls Hydro 99.51% 34.66% Associates (Washington) from renewable resources Company LLC Twin Falls Hydro Wilmington USA - USD Electricity generation Line-by-line EGPNA REP 100.00% 34.83% Company LLC (Delaware) from renewable resources Hydro Holdings LLC Twin Lake Hills LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC Twin Saranac Holdings Wilmington USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC (Delaware) from renewable resources Power North America Inc. Ufefys SL (in liquidation) Aranjuez Spain 304,150.00 EUR Electricity generation - Enel Green 40.00% 27.61% from renewable resources Power España SL Ukuqala Solar (Pty) Ltd Johannesburg South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power RSA (Pty) Ltd Ultor Srl Rome Italy 5,100,000.00 Unión Eléctrica de Las Palmas de Spain 190,171,520.00 EUR EUR Electricity generation Equity Marte Srl 50.00% 34.14% Electricity generation Line-by-line Endesa 100.00% 70.10% Canarias Generación Gran Canaria SAU Generación SA Upington Solar Johannesburg South Africa 1,000.00 ZAR Electricity generation Line-by-line Enel Green 100.00% 68.29% (Pty) Ltd from renewable resources Power RSA (Pty) Ltd Ustav Jaderného Rez Czech Republic 524,139,000.00 CZK Nuclear power research Equity Slovenské 27.77% 18.33% Výzkumu Rez AS and development elektrárne AS Vektör Enerji Üretim Istanbul Turkey 740,000.00 TRY Plant construction and Line-by-line Enel Green 100.00% 68.29% Anonim S¸irketi electricity generation from renewable resources Power International BV Vientos del Altiplano S Mexico City Mexico 813,702,087.00 MXN Electricity generation Line-by-line Enel Green 99.99% 68.29% de RL de Cv from renewable resources Power México S de RL de Cv Viruleiros SL Santiago de Spain 160,000.00 EUR Electricity generation Equity Enel Green 67.00% 46.24% Compostela from renewable resources Power España SL Walden LLC Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power North America Inc. Waseca Solar LLC Delaware USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% from renewable resources Distributed Solar LLC Hidroelectricidad 0.01% del Pacífico S de RL de Cv 433 AttachmentsAnnual Report 2015Company name Headquarters Country West Faribault Solar Delaware USA LLC Share capital - Currency Activity Consolidaton method USD Electricity generation Line-by-line from renewable resources % Group % holding holding 100.00% 68.29% Held by Aurora Distributed Solar LLC West Hopkinton Hydro Delaware USA - USD Electricity generation Line-by-line Enel Green 100.00% 68.29% LLC from renewable resources Power North America Inc. West Waconia Solar Delaware USA - USD Electricity generation Line-by-line Aurora 100.00% 68.29% LLC from renewable resources Distributed Solar LLC Western New York Albany USA 300.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Wind Corporation (New York) from renewable resources Power North America Inc. Willimantic Power Hartford USA 1,000.00 USD Electricity generation Line-by-line Enel Green 100.00% 68.29% Corporation (Connecticut) from renewable resources Power North America Inc. Wind Park of Koryfao Maroussi Greece 60,000.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% SA from renewable resources Power Hellas SA Wind Parks Anatolis- Maroussi Greece 1,158,188.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% Prinias SA from renewable resources Power Hellas SA Wind Parks of Bolibas Maroussi Greece 551,500.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% SA from renewable resources Power Hellas SA Wind Parks of Maroussi Greece 556,500.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% Distomos SA from renewable resources Power Hellas SA Wind Parks of Folia SA Maroussi Greece 424,000.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% from renewable resources Power Hellas SA Wind Parks of Gagari Maroussi Greece 389,000.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% SA from renewable resources Power Hellas SA Wind Parks of Goraki Maroussi Greece 551,500.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% SA from renewable resources Power Hellas SA Wind Parks of Gourles Maroussi Greece 555,000.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% SA from renewable resources Power Hellas SA Wind Parks of Kafoutsi Maroussi Greece 551,500.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% SA from renewable resources Power Hellas SA Wind Parks of Katharas Maroussi Greece 538,648.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% SA from renewable resources Power Hellas SA Wind Parks of Kerasias Maroussi Greece 475,990.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% SA from renewable resources Power Hellas SA Wind Parks of Milias Maroussi Greece 614,774.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% SA from renewable resources Power Hellas SA Wind Parks of Mitikas Maroussi Greece 442,639.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% SA Wind Parks of Paliopirgos SA Maroussi Greece 200,000.00 EUR Electricity generation Line-by-line Enel Green 80.00% 54.63% from renewable resources Power Hellas SA from renewable resources Power Hellas SA Wind Parks of Maroussi Greece 575,000.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% Petalo SA Wind Parks of Platanos SA Maroussi Greece 425,467.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% from renewable resources Power Hellas SA from renewable resources Power Hellas SA Wind Parks of Maroussi Greece 472,000.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% Skoubi SA 434 from renewable resources Power Hellas SA Annual Report 2015Company name Headquarters Country Share capital Currency Activity method Held by holding holding Consolidaton % Group % Wind Parks of Spilias Maroussi Greece 547,490.00 EUR Electricity generation Line-by-line Enel Green 100.00% 68.29% SA Wind Parks of Strouboulas SA Maroussi Greece 576,500.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% from renewable resources Power Hellas SA from renewable resources Power Hellas SA Wind Parks of Trikorfo Maroussi Greece 260,000.00 EUR Electricity generation Equity Enel Green 29.25% 19.97% SA from renewable resources Power Hellas SA Wind Parks of Vitalio Maroussi Greece 361,000.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% SA from renewable resources Power Hellas SA Wind Parks of Vourlas Maroussi Greece 554,000.00 EUR Electricity generation Equity Enel Green 30.00% 20.49% SA from renewable resources Power Hellas SA Winter’s Spawn LLC Minneapolis USA - USD Electricity generation Line-by-line Chi Minnesota 51.00% 34.83% (Minnesota) from renewable resources Wind LLC WP Bulgaria 1 Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% EOOD operation and maintenance Power Bulgaria EAD WP Bulgaria 10 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 11 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 12 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 13 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 14 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 15 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 19 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 21 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 26 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD WP Bulgaria 3 Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% EOOD operation and maintenance Power Bulgaria EAD WP Bulgaria 6 Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% EOOD operation and maintenance Power Bulgaria EAD WP Bulgaria 8 Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% EOOD operation and maintenance Power Bulgaria EAD WP Bulgaria 9 EOOD Sofia Bulgaria 5,000.00 BGN Plant construction, Line-by-line Enel Green 100.00% 68.29% operation and maintenance Power Bulgaria EAD Yacylec SA Buenos Aires Argentina 20,000,000.00 Yedesa-Cogeneración Almería Spain 234,000.00 ARS EUR SA (in liquidation) Electricity transmission Equity Enersis SA 22.22% 13.47% Cogeneration of - Enel Green 40.00% 27.61% electricity and heat Power España SL 435 AttachmentsAnnual Report 2015Corporate governance 436 Annual Report 2015437 Corporate governanceAnnual Report 2015Report on Corporate Governance and Ownership Structure The corporate governance structure of Enel SpA complies with the adequacy of the organizational structure, the internal the principles set forth in the edition of the Corporate Governan- control system and the administrative-accounting system ce Code for listed companies(1) most recently amended in July of the Company; (iii) the statutory auditing of the annual 2015, which has been adopted by the Company. Furthermore, accounts and the consolidated accounts, as well as the the aforementioned corporate governance structure is inspired independence of the statutory audit firm; and (iv) the man- by CONSOB’s recommendations on this matter and, more gene- ner in which the corporate governance rules set out in the rally, 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 de- Group is essentially aimed at creating value for the shareholders cisions concerning, among other issues – in ordinary or over the medium-long term, taking into account the social impor- extraordinary session: (i) the appointment and termination tance of the Group’s business operations and the consequent of members of the Board of Directors and the Board of need, in conducting such operations, to adequately consider all Auditors and their compensation and responsibilities; (ii) the interests involved. the approval of the financial statements and allocation of In compliance with the provisions of Italian law governing compa- net income; (iii) the purchase and sale of treasury shares; nies with listed shares, the Company’s organization is characte- (iv) stock-based compensation plans; (v) amendments of rized by: the 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 specia- > a Board of Auditors charged with monitoring: (i) complian- lized firm entered in the appropriate official register. It was en- ce with the law and the bylaws, and with the principles gaged by the Shareholders’ Meeting on the basis of a reasoned of sound administration in the performance of company proposal of the Board of Auditors. business; (ii) the financial reporting process, as well as Patrizia Grieco (P 3) Francesco Starace (CEO/GM) Alfredo Antoniozzi (3,4) Alessandro Banchi(2,4) Alberto Bianchi (3,4) Paola Girdinio (1,2) Alberto Pera (1,2) Anna Chiara Svelto (1,2) Angelo Taraborrelli (1,4) Shareholders’ Meeting Independent auditors Ernst & Young Board of Directors Board of Auditors Sergio Duca (P) Lidia D’Alessio Gennaro Mariconda Control & Risk Committee1 Nomination & Compensation Committee2 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). (1) The current edition of the Code is available on the website of Borsa Italiana (http://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/corpora- tegovernance.en.htm). 438 Annual Report 2015439 Corporate governanceAnnual Report 2015Concept design Newton 21 Rome Publishing service Newton 21 Rome Copy editing postScriptum - Rome Printing Primaprint - Viterbo 20 copies printed Printed in June 2016 INTERNAL PAGES Paper Fedrigoni Xper Gram weight 120 g/m2 Number of pages 440 COVER Paper Fedrigoni Xper Gram weight 320 g/m2 This publication is printed on FSC® certified paper Publication not for sale Edited by Communications Italy Disclaimer This Report issued in Italian has been translated into English solely for the convenience of international readers Enel Società per azioni Registered Office 137 Viale Regina Margherita, Rome Share capital €10,166,679,946 fully paid-up Tax I.D. and Companies Register of Rome: no. 00811720580 R.E.A. of Rome no. 756032 VAT Code no. 00934061003 5 1 0 2 t r o p e R l a u n n A ANNUAL REPORT 2015 enel.com 

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